Ten nonprofits serving young people in Detroit are receiving an unusual, lasting gift as part of a campaign started by Lisa Ford and her husband, Bill Ford, the executive chairman of Ford Motor Co.
The Fords, along with The Children’s Foundation, announced plans Tuesday to raise at least $10 million to establish permanent endowments for 10 city nonprofits, in addition to Ford’s investment in renovating Michigan Central Station, a long-vacant train station in Detroit.
“Creating endowments for these ten organizations that serve young people is really a way of saying, ‘These organizations that serve tens of thousands of children every day should be here for as long as that train station exists,’” said Andrew Stein, president and CEO of The Children’s Foundation, based in Detroit and created in part from the proceeds from the 2011 sale of the Children’s Hospital of Michigan.
Endowments are funds that a nonprofit can invest and the annual financial returns from those investments can go to the nonprofit’s budget. They are usually associated with large hospitals and universities – with Harvard University’s endowment reportedly exceeding $50 billion – rather than small community nonprofits. Detroit-area nonprofits can apply in June, when Michigan Central Station reopens and 10 selected organizations will receive $500,000 each to launch an endowment.
The Children’s Foundation will manage the nonprofits’ donations and provide them with guidance and technical support for two years. The campaign will also match $500,000 that the nonprofits themselves raise, meaning each of them could potentially get $1.5 million to start an endowment.
Lisa Ford said the idea for creating endowments for youth nonprofits came from their commitment to supporting a robust and vibrant future for the city and the automotive industry.
“I was just blown away by these people who had ideas and deep feelings about how we could help kids in Detroit,” she said, explaining that part of the satisfaction of the campaign was bringing in other donors. “The whole idea of Michigan Central is collaboration and inclusivity. So it wasn’t something we wanted to do ourselves. We never thought about it that way.”
Ford was also inspired by the success of another fundraiser she led in September to benefit another Detroit children’s organization, The Children’s Center. That has put the campaign on a tight schedule to raise $10 million by June, which she says has actually been a boon in some ways.
“While that shocked many people. It also gave us the opportunity to say, ‘We need an answer now,’” she said.
Endowments are relatively rare among nonprofits, with only just over 10% reporting to the Internal Revenue Service that they have one. Research by Todd Ely, an associate professor at the University of Colorado Denver, and his co-authors has found that larger, older nonprofits and certain types such as universities, hospitals, land trusts and arts institutions are more likely to have endowments. They give organizations a stronger sense of financial credibility, Ely said, although they are not a panacea for all financial problems.
“You just have an organization that the donors know is not going anywhere, and it feels like a pretty safe bet to support compared to a lot of other nonprofits that may be operating more on a shoestring budget,” Ely said.
The main debate over donations centers on whether the assets are more useful now or in the future, with some arguing that philanthropic dollars should be used as quickly as possible. Others see giving as a vehicle for generational equity, putting the power to direct funds in the hands of the nonprofit and its future leaders.
Different types of donations also offer different considerations. Meadow Didier, consulting director of the Nonprofit Finance Fund, recommends a type of endowment that would allow the nonprofit’s boards and leaders to access the principal amount of the endowment when needed. A quasi-endowment, also called a board-designated reserve fund, gives nonprofit leaders more flexibility than a permanent endowment, she said, though she commended any donor who thinks about the long-term financial health of nonprofits .
Stein of The Children’s Foundation said the campaign is seeking input from community and foundation leaders in designing the application process and selection criteria, and that they plan to use a broad definition for the types of services eligible organizations can provide.
The foundation will convene a community panel to select the nonprofits, Stein said, emphasizing that the decision will not be made in a boardroom at Ford or by the foundation.
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