Endowment Fund as a form of supporting educational...

Endowment Fund as a form of support for educational institutions

The US universities are paying great attention to the work of collecting donations. The number of employees involved in attracting donations is often calculated by hundreds of people working with corporate donors, charitable foundations, large donors, individuals, etc. This specialization allows you to focus on the target group of donors and get high results. In the United States, graduation of endowments is used by the total amount of accumulated funds: on "mega", "very large", "large", "average", "small", "very small". According to this classification, the group of "mega-endowments" include those funds whose size exceeds $ 5 billion. Only 20 US universities have mega endowments. Data on the volumes of the largest endowment funds of American universities are presented in Table. 2.7.

Table 2.7

20 largest endowment funds of US universities for 2012-2013.

No.

п/п

Description

University

State

Size of endowment funds, thousands of US dollars

2013

2012

1.

Harvard University

Massachusetts

32 334 293

30,435,375

2.

Yale University

Connecticut

20,780,000

19 345 000

3.

University of Texas System

Texas

20,448,313

18,263,850

4.

Stanford Univeisity

California

18,688,868

17,035,804

5.

Princeton Univeisity

New Jersey

18,200,433

16,954,128

6.

Massachusetts Institute of Technology

Massachusetts

11 005 932

10 308 274

7.

Texas Λ & amp; M University System and Foundations

Texas

8,732,010

7 638 555

8.

University of Michigan

Michigan

8,382,311

7,691,042

9.

Columbia University

New York

8,197,880

7,654,152

10.

Northwestern University

Illinois

7,883,323

7,118,595

11.

University of Pennsylvania

Pennsylvania

7,741,396

6,754,658

12.

University of Notre Dame

Indiana

6,856,301

6,329,866

13.

University of Chicago

Illinois

6,668,974

6,570,875

14.

University of California

California

6,377,379

5,962,906

15.

Duke University

North Carolina

6,040,973

5,555,196

16.

Emory University

Georgia

5,816,046

5,461,158

17.

Washington University in St. Petersburg Louis

Missouri

5,651,860

5 225 992

18.

Cornell University

New York

5,272,228

4,946,954

19.

University of Virginia

Virginia

5,166,660

4,788,852

20.

Rice University

Texas

4,836,728

4,418,595

According to the annual report Voluntary support of education (2012), the total amount of donations collected by US universities in 2012 was $ 31 billion, of which a little less than a third ($ 9.15 billion, or 29%) came from various funds (see Figure 2.1).

Distribution of donations to US universities by donor category for 2012

Fig. 2.1. Distribution of donations to US universities by donor category for 2012

In the Individuals not Graduates category include:

- the parents of graduates;

- other relatives of graduates (grandfathers, grandmothers);

- other individuals who are not relatives of graduates.

Generalized data on the amount of donations collected by American universities in 2011-2012 are presented in Table. 2.8.

Table 2.8

Volumes of donations collected by US universities in 2011-2012, $ mln

Donor Categories

2011

2012

volume

%

volume

%

Individuals - graduates

7800

25.7

7700

24.8

Individuals who are not graduates

5650

18.6

5825

18.8

Corporations

5020

16.6

5250

16.9

Funds (charities, etc.)

8675

28.6

9150

29.5

Religious Organizations

305

1.0

275

0.9

Other Organizations

2850

9.4

2800

9.0

Total

30 300

100.0

31 000

100.0

Attracted donations are used to finance research, develop the material and technical base of universities, provide material assistance to gifted students, establish new research departments and professorships. The necessary expenses for the formation and support of professorial positions can be uniquely determined, and the recipients are easily personalized, their real scientific achievements can be subjected to an independent expert assessment.

Example

In the Massachusetts of the Institute of Technology, $ 3 million is needed to maintain the existing professorship position, and the opening of a new one will require $ 5 million of endowment fund funds. According to the policy of MIT, for 3-5 years the professor's position will bear the name of the donor.

The interest in creating professorial positions is mutually beneficial. Universities are interested in attracting funding from independent sources, and donors are in the possibility of constantly mentioning their name.

In Table. 2.9 provides information on American universities - leaders in the volume of collected donations in fiscal year 2013.

Table 2.9

Top 10 US universities in terms of collected donations in 2013

No.

п/п

The name of the university

State

Amount of donations, USD million

1.

Stanford University

California

931.57

2.

Harvard University

Massachusetts

792.26

3.

University of Southern California

California

674.51

4.

Columbia Univeisity

New York

646.66

5.

Johns Hopkins University

Maryland

518.57

6.

University of Pennsylvania

Pennsylvania

506.61

7.

Cornell University

New York

474.96

8.

New York University

New York

449.34

9.

Yale University

Connecticut

444.17

10.

Duke University

North Carolina

423.66

The best university but collecting donations was Stanford University , collected more than $ 931 million in 2013, charitable aid, improving the result of 2011 by 31%. In 2011, Stanford University completed a five-year campaign The Stanford Challenge , during which it was possible to collect the planned $ 4.3 billion

The practice of "counter financing", or mentigg (from English matching - coordination, alignment). The bottom line is that the donating donor will donate 1 ruble to the non-profit organization, and the benefactor participating in the counter financing will increase the donation according to the announced participation ratio (for example, "1: 1") and, as a result, will donate an additional 1 rub. Thus, a non-profit organization receives a doubled amount - 2 rubles.

Counterpart funding, matching ( matched f unding - co-financing) - requirement for organizations receiving state (municipal) subsidies, to attract a certain share of financing from private funds, other state (municipal) sources, business organizations or charitable foundations.

In many countries, counter-financing programs are successful. In the event that a non-profit organization manages to attract donations from individuals and legal entities, the state, participating in counter financing, increases the amount of funds raised according to the established ratios. The most common is the "1: 1" scheme.

Example

In New Zealand, the A Partnerships for Excellence program was launched, aimed at creating university leaders using the "1: 1" ratio.

In the UK, a three-year program was completed, during which small universities that had not paid close attention to their development received incentives to attract donations and form endowment funds. A similar result is noted in Hong Kong. The Matching grants scheme, launched in 2003, covers all the universities of the Hong Kong Special Administrative Region (Hong Kong) of the People's Republic of China. For universities in Hong Kong, the maximum and minimum amount of donations that the institution must collect is established in order for additional counter funding to be made.

It should be noted that in American universities not all collected donations are sent to endowment funds. Most of the charitable assistance has a strictly designated purpose and corresponding restrictions on use. For example, according to the decision of the university, a fund functioning as an endowment (quasi-endowment, discussed above) can be formed.

Foreign experience shows that with the help of endowment donors make large donations to non-profit organizations than in the case of annual donations. Even an insignificant donation can influence the future fate of a non-profit organization, as it joins a significant pool of collected funds. You can call it the effect of the lever.

Define the advantages and disadvantages of forming a non-profit organization of its own endowment fund (Table 2.10).

Table 2.10

Advantages and disadvantages of an endowment fund for a non-profit organization

Advantages

Disadvantages

An additional source of funding for a non-profit organization

Costs for the formation of the target capital, management and augmentation

The possibility of long-term use

The positive effect of creating a target capital is not immediately apparent

Ability to increase received donations through effective management

The need for hiring highly qualified specialists in various fields (taxation, investment, fundraising)

Improving the financial stability of a non-profit organization

Requirement for separate accounting, depending on the book value of the property - annual audit

Improving the transparency of the activities of a non-profit organization

The need for internal organizational transformation

Strengthening ties and contacts with donors, strengthening feedback to the outside world

Establishing strong channels of interaction with donors requires additional costs (temporary, material, etc.)

In terms of education, the following specific advantages of using endowment funds can be highlighted:

- attracting private investment in education, because endowment funds are a mechanism of public-private partnership;

- tax benefits in relation to the amount of donations;

- a large number of donation programs, allowing you to choose the forms most convenient for the donor organization;

- the possibility of creating personal scholarships, charitable programs and endowment funds that provide financial support to students;

- depending on the amount of donations - the opportunity to acquire the status of "socially responsible company" by financing an educational institution;

- for the educational institution - the possibility of financing a wide range of directions: construction/reconstruction of facilities, innovative activities, encouragement of students, grants to faculty, purchase of necessary equipment and teaching materials, etc.

- a convenient mechanism for collecting donations and controlling the use of endowment funds;

- a transparent and more understandable structure for donors;

- due to the formation and effective use of the endowment, an educational institution can improve its professional status.

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