Explaining Endowment Funds for NGOs: a guide for you to create yours

Endowment Funds are financial instruments aimed at the long term, created from donations. These mechanisms help ensure financial sustainability for non-profit organizations, because the donation money is invested and converted into periodic income. 

This income is very important, as it ensures a certain level of resources to fund its main projects focused on health, education, inequality, etc. for many years. 

The main reason for establishing an endowment fund is this: a more hopeful future! But there are other advantages. Check out:

Advantages of creating an Endowment Fund

Research shows that almost half of the Civil Society Organizations opened in the last decade closed due to lack of financial reserves and administrative difficulties. It turns out that the main difficulty for these institutions is the lack of ongoing financiers for their projects. 

Therefore, creating a financial reserve is very important for NGOs, whether focusing on the short term (Reserve Fund) or the long term (Patrimonial Fund). 

Endowment Funds are mechanisms that have their own legislation providing legal support and security (both for the organization and its donors) for this long-term financial reserve. At Endowments of Brazil, a Sitawi partner, all funds are operated in accordance with applicable regulations (Law 13800/19), ensuring a high level of Compliance in operations.

Opening an Endowment Fund with Endowments do Brasil still has a big difference: an initial contribution is not necessary. This way, even with few financial resources, your NGO can plan for a more financially sustainable future. 

But do you know what the process of creating an Endowment is like?

How the process of creating an Endowment Fund for an NGO works

We take as an example a third sector organization that has seasonality in collecting donations, which creates financial instability and risk in maintaining all its projects, but which is certain that its actions will continue in the future.

  1. The institution contacts Endowments do Brasil and signals its desire to create an Endowment Fund, and the value of the initial contribution to the fund (if any).
  2. Endowments do Brasil creates a personalized Endowment Fund with lower costs of opening and managing its own OGFP, meeting the needs of the NGO.
  3. The institution includes fundraising for its Endowment Fund within its fundraising strategy and actions.
  4. Endowments do Brasil takes care of formalizing contributions to the Heritage Fund, which go to an exclusive current account.
  5. Endowments do Brasil, with support from Sitawi Finanças do Bem, manages the fund's financial management, seeking financial returns above inflation and in the long term.
  6. The income is reinvested, increasing the main contribution. 
  7. Every six months, a fee is charged for managing this fund.
  8. Once the fund reaches the minimum required value, disbursements may be made periodically to the institution. 
  9. The NGO now has a long-term financial reserve that will promote the longevity of its strategic projects. 

Double expertise: Sitawi + Endowments from Brazil

The Endowment Fund mechanism combines the structure and high level of compliance of Endowments do Brasil to manage safe Endowment Funds with Sitawi's over 15 years of experience in proposing innovative financial solutions for third sector organizations. In this way, the funds arising from the partnership have a high level of transparency and legal compliance, seeking solid financial results so that third sector organizations continue to generate positive socio-environmental impact.

An example of this success is the Casa Chama Patrimonial Fund, focused on the transgender cause. Find out by clicking here.

Are you interested in opening an Endowment Fund for your NGO? Get in touch with Endowments do Brasil!

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