The recent announcements of the Roanoke Cultural Endowment heard on WVTF Radio IQ refer to an initiative designed to provide for the long-term viability of nonprofit arts and cultural organizations.
An endowment fund is a donation fund set up by a nonprofit organization for the long-term support of that organization. An endowment donation is made with the expectation that the amount donated will be invested and the investment income available for spending by the organization. The fund is managed according to an endowment policy statement established by the trustees of the organization.
The policy statement gives investment guidelines and sets up a spending formula for withdrawing part of the investment income, typically 4% or 5% of the averaged asset value. The remaining income and any capital gains should cause the endowment fund to increase each year.
A problem arises when people who do not appreciate the long-term value of an endowment fund take over management of the organization and convince the trustees to change the endowment policy statement to permit withdrawal of excessive assets.
Changing the policy statement to take funds from the endowment has occasionally been done to cover outstanding debts when restructuring operations to reduce expenditures could have been done to preserve the endowment. Last year I had a bad experience with a cultural organization that considered their endowment a source of easy money to pay off mounting debts.
The possible mistreatment of endowment funds held by individual nonprofit organizations underscores the value of the concept of the Roanoke Cultural Endowment. This nascent endowment fund, endorsed by the city council, plans to award three-year operational grants to Roanoke arts and cultural organizations. The grant awards will begin when the endowment is fully funded, expected in 2025. The Roanoke Cultural Endowment, having a dedicated board and executive director, seems a safe investment for endowment donations toward long-term support of arts and cultural organizations in the Roanoke valley.