At this year’s World Championships I was talking to a team on Archimedes that had set up an endowment for their sponsorship, fundraising, grant etc dollars. I cannot remember for the life of me who this team was. They might have had a giant inflatable Bucky atop their pit but I can’t be certain. If this was your team…I’d love to know more about this. From how you set it up to its day to day management. If this wasn’t your team but you know who it is, please let me know so I can reach out to them directly about this.
If you’re still reading and aren’t this team nor know this team but have set up an endowment on your own team I’d love to hear about it.
Thanks!!
Edit: The donation in question would likely be anywhere from $20,000 to $40,000. Since we are not currently struggling financially as a team I thought it wise to look into other options for this money than just sticking it our account at the local bank.
I can’t speak to your specific case but in general there are many local Community Foundations (mine is https://www.berriencommunity.org/). They make it easy but they do take their administrative fee out of the account. They accept the funds at any time from any source and payout the gains and preserve the principal.
Endowments have very specific rules about how much you can take out a year and in some cases how you can spend the money. They generally work best when you have a large donation to start them. You really need to talk to an accountant or other financial professional to find out the reality of it in your state.
An excellent idea and I’ll dare inject my opinion of an FRC team endowment that an external advisor might not consider. [I have a personal endowment to award scholarships to college-bound students in need of financial help.]
A very good point. For example 4% is a typical annual withdrawal so I would need to donate $100,000 to create an annual $4000 scholarship or two $2000 scholarships starting in a year from the initial donation (add $4000 to the $100,000 for an immediate payout). Do those sort of numbers work for you? Maybe not since most teams are essentially living hand-to-mouth. If a team has a good fund-raising year, then save a little for next year that might be leaner.
The definition of endowment includes in perpetuity. Yes, that is forever. Is it any where near realistic to think your team will last forever? I doubt my team will and there are plenty of organizations including FRC teams that depend on a single motivated leader and when that leader leaves the organization is in trouble.
Part of the rules as mentioned include what charity will get your endowment when your organization ceases to exist.
“Endowment” can just be a short way of saying “we don’t touch the principal, instead operational expenditures are funded by the interest on our investments.”
It’s OK to think this way without having a plan to live forever!
For example, if I have $2000 in a brokerage account earning 10%, and every year use the earnings to buy (1) Kraken X60 motor, then I can say my Kraken motors are endowed!
You are absolutely correct; I might have tried too hard to temper the OP’s expectations. Still, the forever is true and is handled neatly by “what charity gets the money when you cease to exist?”
There was no background provided by OP and an endowment likely won’t help with financial struggles. If the team is flush with cash now, then it could impose some permanent financial discipline on coaches.
We are not struggling financial but we also aren’t doing the Scrooge McDuck dive into a pool of gold coins. Meaning we will be just fine as is with out this donation. Which is why I want to explore options other than just sticking it in the bank.
You also need to consider what authorized person(s) will have access to the account(s). And a method of changing them when needed. A little legal help might be wise.
FYI
My wife, when she worked at the Development Office at Yale, had to track down a surviving family member to get permission to reallocate an endowed scholarship to a new field because the original field of study no longer existed. They take this very seriously even hundreds of years later.
We were on Archimedes, our associated nonprofit has an endowment…but we don’t have a giant Bucky on top of our pit. Oh well. Anyway, our nonprofit set up the endowment a year or so ago. I can’t say how much is in it, but we’ve made a very nice return on our investment. A significant portion of income goes to the endowment. I believe that we just met with a financial advisor and set it up. Sorry that I’m not able to provide too many details. I would highly recommend it though!
Note a good rule of thumb for an endowment is that it can only distribute about 5% of its assets each year if you want the endowment to continue indefinitely. So e.g. if you want $5K/year distributed for perpetuity, the endowment needs to have $100K invested. You can build this up over time via contributions to the endowment, but of course if you can get a major donor to direct donate to the endowment, even better!
Most teams operate without endowments, instead using annual donations as their operating fund, but used properly, an endowment can definitely improve financial stability of a team.
We were on Hopper, and we are indeed from Wisconsin (but there was no giant Bucky Badger). Our team has worked with one of our school’s alumni to set up an endowed fund through our local community foundation. The foundation invests the money on our team’s behalf. Our goal is to reach $500,000 in contributions over the next 5 years, and we are about 1/5 of the way there. We will not touch the money until we hit $500K, and then we will only use the interest, which should be about $25K each year. We are from a small town with a high poverty rate and not a lot of industry, so although our community has been very generous in supporting the team, we see this as a way to free up some of our current annual sponsors to support other community needs in the future.
You were talking with my students from FRC 360 The Revolution from Tacoma, Washington.
In 2017, we were fortunate to receive a very generous challenge grant from one of our supporters to help establish the Bellarmine Prep Robotics Endowment. As a private school with a benefactor trust, we have a clear structure for how the endowment operates, and it’s important to clarify some common misconceptions.
First, the endowment’s principal balance is strictly protected and cannot be used for direct spending. The annual disbursements from the endowment are based on a set percentage of that principal, and regardless of how well the stock market performs, we only receive the agreed-upon distribution amount each year. This ensures that the endowment remains sustainable and continues to support our robotics program over the long term.
In the first year alone, we successfully raised over $50,000, and our alumni continue to contribute, helping to grow the fund and secure the future of Bellarmine Prep Robotics. The continued generosity of our community is critical to the program’s success, and we are deeply grateful for the support that makes this possible.
A few additional words of note: Judges sometimes misunderstand that the principal funds raised are not accessible for immediate use. This is not a savings account. We budget a set amount each year, but if the market underperforms, we may not receive the expected funds. It’s important to recognize that the endowment’s purpose is to provide long-term sustainability, not to serve as an immediate funding source.