From time to time, I see references made to the fact that our organization has an endowment and, frequently, those references reflect a fundamental misunderstanding of how endowments work and the nature of our Board’s fiduciary responsibilities with regard to our endowment. I would like to provide some plain talk about those issues and try to dispel some confusion that has, at times, resulted in unwarranted criticism of our organization.
The Richmond SPCA’s endowment began in the late 1940’s when our greatest leader of the first half of the twentieth century, Ellen Glasgow, passed away and left the majority of her estate to our organization. Miss Glasgow, a Pulitzer prize winning novelist and intellectual light of her time, left us both a modest amount of money and the rights to her great works of literature. The royalties that flowed from those copyrights were very helpful to this organization for a number of years although they have now dropped off to essentially nothing. Miss Glasgow’s legacy allowed us to begin an endowment to which many other generous people have also left bequests in their wills in the decades since her death. The intention of these kind people has been to provide our organization with a lasting financial safety net that would provide fiscal stability for the long term.
Our Finance Committee decided several years ago to have our endowment managed and invested as a part of the Richmond Fund by the very capable team at Spider Management of the University of Richmond. The funds are invested as pool with those of other Richmond area endowments and we have no say in the particular investments that are chosen. Those decisions are made by Rob Blandford and his brilliant Spider Management team who have a superb track record of informed decision making and preservation of capital.
Endowments, by their nature, are intended to be used as a lasting source of income support for an organization – not as the sole source of operating revenue nor to be used up for current capital projects. The principal funds, which are to be preserved over time so as to ensure a continued source of income for the future, are referred to as the “corpus.” It is the well recognized duty and responsibility of the fiduciaries of an endowment, in this case our Board of Directors and its Finance Committee, to make sure that the corpus is not only preserved but is also increased to a reasonable extent so that it will be sufficient to continue to generate income for the organization as inflation causes expenses to rise over time. The widely accepted rule of thumb is that it is prudent to never draw down from an endowment in any one year more than between 3 and 5% of the market value of the corpus. This rule has always been adhered to by the Richmond SPCA. Do the math on this and you will realize that a corpus that sounds like a big number does not generate all that large an amount of actual useable annual income for the organization. The financial discipline to limit the amount drawn down annually results in the corpus growing modestly as years pass so that it continues to provide a source of funding for the organization into the future and pushes the organization to also work to raise current contributions to provide needed support for current operations. Using it all or most of the corpus up in the present to deal with current issues or to fulfill short term desires would not be prudent and would not honor the intent of our donors who wanted to ensure that the Richmond SPCA would endure into the future.
When I arrived at the Richmond SPCA about 15 years ago, this organization lived almost entirely off of the income generated by its endowment and did not raise much in annual donations. That limited income greatly restricted the scope and nature of the services and programs that we could provide. It was clear to me that we needed to grow in our programs and services and, to do that, we would need to both preserve our endowment as a safety net for our future and grow our ability to raise contributed income annually that would allow us to do more for animals in the present. Currently, the yearly draw that we make from our endowment, which is never more than 5% in any year, provides less than a third of our annual revenue needs to support our programs and services for the animals of our community. The rest we must raise from annual donations, workplace giving, foundation grants and events. We receive no government support whatsoever and never have.
Sometimes I hear people refer to the amount of our endowment and suggest that we should use up all of that money on some current effort or project that they think is important. I share with our Board members a firm belief that we are stewards of this wonderful organization and that means that we must not only make sure that it does important work now to protect and save animals but also that it will be in a position to continue to do so in future years long after our own time as stewards has passed. Had our earlier leaders like Ellen Glasgow spent all of the organization’s funds on things during their own era, then we would not be able to provide the much needed care and protection for the animals who depend on us today. The Richmond SPCA has reached 121 years of dedicated service to protect animals because we have been courageous and energetic in the current fulfillment of our mission as well as fiscally prudent and responsible so as to make sure that the mission continues to be fulfilled after we are gone.
Robin Robertson Starr is the chief executive officer of the Richmond SPCA. To read her biography or that of our other bloggers, please click here. Before posting a comment, please review our comment guidelines. Please note that our comment policy requires a first and last name to be used as your screen name.