Establishing Endowment Funds – A Case Study: Canada Cultural investment Fund

Endowment funds are “often referred to as the future lifeblood of any charity…providing for the long- term financial success of the organization, they are also a buffer in times of financial and/or fundraising reversals.”(20)

While the value of healthy reserve or endowment funds was acknowledged by private land conservation organizations, the consultations highlighted questions and challenges on the path to achieving long- term financial security, such as:

donors preferring to give to private land conservation organization activities such as acquisition rather than a restricted fund
some organizations preferring to manage a general restricted fund for fee simple lands and conservation agreements to maintain slightly greater flexibility in the use of funds
where an endowment fund is specific to one property, if the return on investment generates more funds than needed for stewardship of the property, the use of such funds on higher priority stewardship needs on other properties would be prevented
stewardship funds may serve a dual role as legal defence funds creating competing priorities— establishing separate funds requires significant effort
increasing land values increase the challenge of achieving endowment fund goals
the terms of endowment funds can be too restrictive, extremely difficult to amend and don’t account for the changing context that private land conservation organizations are working within
growing reserve funds to anticipate potential risks could mean locking up too much funding unnecessarily when it is needed for more immediate stewardship or other activities

While financial support from funders, including governments, to assist non-governmental organizations in establishing and growing endowment funds is not common, there are examples of both one-time and ongoing programs that allow such organizations to do so. One example is the Endowment Incentives component of the Canada Cultural Investment Fund that enables arts and heritage organizations to grow their endowment funds. It is the only matching endowment program offered by the federal government.

The private land conservation community proposed a few options that could help strengthen the capacity of their sector to raise stewardship funds. An example at the provincial level is the Alberta Land Trust Grant Program that accepts as an eligible expense investment in a “Stewardship Endowment to ensure the continued protection and maintenance of the property.”(21) This option should be considered by other provinces and levels of government. Funding programs focused on securing conservation lands to achieve protected and conserved area targets, for example, could permit investment in stewardship endowments as an eligible expense under their granted projects. Even if these funds need to be matched by another source, it provides the private land conservation organization with a mechanism to raise dollars explicitly for stewardship endowments. The creation of municipal/regional tax-based conservation funds could also focus on providing a 1:1 match for the acquisition and stewardship of privately held land with high ecological value. In the southern Canadian landscape, these parcels play an increasingly critical role in habitat protection and climate resilience now and will continue to do so in the future.

As noted in the report introduction, the private land conservation sector is not alone in terms of stewardship of significant capital assets and having the responsibility to steward these assets over the long term. In the time available for the preparation of this report, it was not possible to thoroughly research the nature and extent of support provided to various charitable sectors to enable the establishment of endowment funds sufficient to provide for the long-term stewardship of the capital assets of those sectors. It is clear, though, that support is provided in other sectors such as health care and education for the stewardship of assets, often through direct investment in capital infrastructure. With respect to the establishment of endowment funds as a means to provide for long-term stewardship of capital assets, there was opportunity to examine the Canada Cultural Investment Fund, which was designed to help arts and heritage organizations to establish and grow endowment funds to support core operations, achieve financial stability and sustain the stewardship of assets.

The arts and culture sector represents 9.4%, or 8,084 organizations, of Canada’s total number of charities, in comparison to 2% represented by environmental charities. Overall, 7% of charitable giving by Canadians goes to the arts and culture sector and 5% to environment. Based on 2015 data, the average revenue from all levels of government to the arts and culture sector was 51% of its total average revenue, while total average revenue from government to environmental charities was 31% of total average revenue.(22)

The arts and culture sector was provided a significant opportunity in 2001 when the Government of Canada launched the Tomorrow Starts Today program that committed $560 million to arts, cultural and heritage programs over three years(23) through three new programs:

Canada Arts Presentation Fund
Canada Cultural Spaces Fund
Canada Cultural Investment Fund

While the programs delivered through this funding, including the Canada Arts Training Fund that preceded the Tomorrow Starts Today investment, have evolved since then, they continue to provide stability and sustainability as well as bringing a focus on equity, diversity and inclusion to the sector today.

20. Charity Village (2007), Endowment Funds: An Overview

21. Government of Alberta, Alberta Land Trust Grant Program

22. See Appendix III

23. The Globe and Mail (2004), Arts funding program renewed for 2005-2006