Endowment Funds are funds setup for a specific purpose from which disbursements are made entirely from the accrued interest. By only disbursing the interest, the fund's principal remains intact, effectively allowing the fund to exist in perpetuity once it is fully endowed. In some instances, minimal disbursements can be made from an endowment fund before it reaches its full endowment level.
How to Setup an Endowment Fund
The following steps are a general outline of steps to follow to create an endowment fund. These steps are only a guideline and not meant as an a comprehensive list for all endowments and all situations. The process can take a relatively long time to complete, but it is important to take the time necessary to set the endowment up in the way that is best for your situation. Set a deadline for each phase to ensure progress continues to be made toward the ultimate goal, but if during the process you determine you need more time to fully complete a step, don't rush through it. After all, the endowment will be around forever, so it is important to make the right decisions when setting it up.
Set the vision
Ask yourself the following questions:
- To what/whom do I want to disburse this money?
- Why is this cause deserving of this money?
- Will this cause be around long enough to validate the need for an endowment versus year-by-year direct funding? (If the cause may only be in existence for a few years, creating an endowment is probably not the right avenue to support it.)
- Approximately how much money is envisioned to be disbursed each year? (You don't need an exact amount, but an estimate is necessary to determine how large the endowment will need to be to support it each year on the fund's interest)
Get Buy-In and Refine the Vision
After you've put thought through the high level details of your Endowment, you then need to gain more buy-in. You likely won't handle all of the organization of the fund yourself and likely won't fund the entire endowment by yourself. With that in mind, it's important before the fund is setup to ensure you will have the support needed to make it successful. Make a list of at least 10 people you think will be interested in your idea. Depending on how large you estimated the endowment will need to be, you may want to make a larger list. These people will hopefully provide critical input in the planning stages as well as financial support down the road. Setup meetings (phone or in person) with the prospective supporters to discuss the high-level endowment idea and get their feedback. Make sure to capture all of their comments, both good and bad. These meetings will help determine if you have enough support to move forward with setting up the endowment fund or if the support for the endowment is not there at the current time. If the support isn't there at the current time, don't throw away the research you've done; it may be worth revisiting in another year or two once your support base or general circumstances have changed.
Setup the Endowment Fund
Once you have gained buy-in and refined the vision of the fund, the next step is to plan the organizational and logistical details of the fund. It is a good idea to do this with the help of others. Take a few of the most interested people from your buy-in phase and ask if they would like to be involved on the organizational side of the endowment. Make sure to have enough people involved to get multiple viewpoints and help with all of the tasks that need to be completed, but not so many people that the level of input creates group deadlock. You may want to officially designate this group as a Board of Trustees for the fund whom will be charged collectively with making all decisions for the endowment going forward.
As a group, do some homework and research different options of where to house the fund (i.e., where the money will be held). There are many organizations that specialize in this type of money management, but the two most worthwhile options to consider are endowing it through your college/university or through the Phi Sigma Pi Foundation. Ask yourself questions such as the following:
- Is there a minimum balance needed to start the fund?
- Is the fund required to reach a certain size in a certain amount of time?
- Is there a minimum level that must be reached before any disbursements can be made?
- Is a certain level of interest guaranteed?
- What fees are charged for fund management costs?
- How much flexibility is there to the rules, terms, and disbursement methods of the fund?
- What happens to the money in the fund if it needs to close for any reason (e.g. cause no longer exists, doesn't reach a minimum balance, etc)
Designate certain members to perform the research by the agreed upon date and to provide the information via email or setup a conference call to discuss as a group and make a decision.
Once a decision is made as to where to house the fund, the next step will be filling out the necessary paperwork. Make sure to have the entire Board of Trustees or group involved in this process review the paperwork and create a charter for the endowment. Consider also having a lawyer review all paperwork before signing.
Market and Manage the Fund
Once the endowment fund is officially chartered, you have reached a huge milestone that is the result of a lot of hard work; however, your work is not done! Now you need to do ensure that the endowment you worked so hard to create is successful. Report back to everyone you initially contacted during the buy-in phase whom expressed interest or a commitment in supporting the endowment and give them the details of the fund. Make sure you clearly explain the purpose of the fund (as there may have been minor changes to the plan as you worked your way through the process of refining the fund's vision) and provide details on how to donate to the fund. Make it as easy as possible for people to donate.
Also consider ways to market the endowment to those who may not be familiar with it at all yet. Here are a few ideas that your Board of Trustees may want to expand your foundation of support:
- Create a website. Buy a good domain name that is easy for people to recognize and remember. If possible, create the website in a way that people can make donations directly through it.
- Send an email blast announcing the endowment to everyone who may be interested in the endowment (e.g. your chapter, region, etc)
- Make personal phone calls
- Create an announcement/periodic newsletter to distribute via mail or e-mail.
- Make an announcement at appropriate events such as Founder's Day, large Alumni events, etc.
National Level Endowment Funds
The following are examples of National Endowment Funds.
The Subrosa Fund was established during the November 19th, 1999 National Council meeting (Motion #96) to help Brothers in need due to natural disasters, accidents, or extenuating financial hardship. The name of the fund is taken from The Ritual. The term literally translates to "under the rose" and signifies a sense of secrecy. As such, the details of the amounts and recipients of this fund are not shared with the membership at large.
Lamp of Knowledge Fund
The Lamp of Knowledge Fund was established in 2007 and formally chartered into existence during Grand Chapter that year. The purpose is to increase member participation in leadership training, national events and philanthropic activities. Initial uses of the fund include funding a membership recruitment incentive plan that pays National Convention registration costs for Chapters that meet certain recruitment goals as well as provide grants for Phi Sigma Pi alumni who join the Teach For America corps.
Chapter Level Endowment Funds
The following are examples of Chapter Endowment Funds.
Alpha Rho Chapter
Main article: Alpha Rho Chapter Endowment Fund
The Alpha Rho Chapter Endowment Fund was chartered on October 27, 2007 through the Phi Sigma Pi Foundation. The intent of the endowment is to fund scholarships and eventually other programming for Alpha Rho Chapter. The initial usage of the funds is as follows:
- 4/16/07 Memorial Scholarship
- Erin N. Peterson New Brother Grant
For more information: Alpha Rho Endowment Website