Arts Organizations

Are you thinking of setting up a long term fund?

A first step is to consider where you are in your development cycle as an arts organization. Analyze where your funding currently comes from:

    Programming and events-related: ticket sales, annual subscriptions

    Grants from government, foundations

    General Fundraising:  financial support from a variety of private and corporate donors to cover annual operations, an operating deficit and current programming

Once an organization is able to meet the majority of costs from these sources, you might start to do some strategic planning around long-term funding for a variety of reasons:

    You want to start a capital campaign,

    You might want to structure a fund to provide income for an award or scholarship, to fund a chair or salary or to meet building expenses

    Income from a long-term fund could pay for a role/position in your organization; i.e., a music chair, principal dancer, theatre creative director

    Other triggers for initiating a long-term fund:

– Your organization has matured, has sustained program/audience and funding that covers most operations expenses

– Donors are coming forward to indicate a personal interest in making a long-term gift

On the other hand, if your organization is newly established and is in the initial stage of developing supporters/subscribers, all of its resources are needed to deliver programs. In this case, placing resources in a long-term fund where the capital is not available may hurt the organization.  It obviously takes time to build significant fundraising capacity to the point where a long-term fund makes sense for your organization. There are exceptions, of course, as when a particular donor is insisting on a long-term arrangement. In that case, we may be able to help you structure a flexible fund and/ or leverage a long-term gift to fundraise for present needs.

 

What's involved in establishing a long-term fund?

Long-term funds are an important tool for established arts organizations who receive financial support that is intended to support its financial sustainability. The capital is held separately from operating funds, and the organization can rely on it to generate a predictable source of income through market returns.

 

The key components of an endowment fund are:

1.    The gift itself – the cash, securities or other property transferred to the fund

2.    The intention of the donor, who transfers legal ownership of the property from him/herself to the foundation or fund trustee

3.    The object or purpose of the fundthe legal agreement must have a purpose, for example, to support the operations of XYZ Arts Org.

 

The Foundation Directors have three primary responsibilities:

1.     To hold the assets and ensure that the fund is administered and money paid out in accordance with the terms of the endowment agreement

2.    To establish an investment policy, ensure the assets are managed against that policy and monitor results

3.    Establish a payout policy for the income/returns of the fund to support the arts organizationthe legal agreement must have a purpose, for example, to support the operations of XYZ Arts Org.

 

 

 

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