The Logic of Building an Endowment

Chart: Where Oregon Food Bank’s money is invested

Table: Oregon Food Bank’s endowment at a glance

Database: How endowment investments fared at 210 nonprofit groups

Articles: All of the advice and commentary from this special supplement on endowments

Supplement in print: Order print copies of the Endowments supplements from August 2005 and May 2004

The mission of the Oregon Food Bank is to eliminate hunger — and to put itself out of business. But each year it gets further and further away from that goal.

The Portland food bank served 850,000 people in Oregon and Clark County, Wash., last year, nearly twice as many as in 1999. The growing demand for its services has led to discussion among board members about how aggressively the organization should work at building its small endowment, which will top $500,000 for the first time this year.

With demand for food-bank services on the rise in Portland and elsewhere around the country, one line of reasoning is that nearly all financial resources gathered by food banks should immediately flow back into the communities they serve. But officials at the Oregon Food Bank, and at some other food banks around the country, also see logic in formally setting aside money for any hard times that might arise, and to diversifying its sources of revenue.

“One of the arguments I’ve been making is that we’ve got to realize the food bank will be here forever,” says Don Wrenni, a Portland investment adviser who serves on the food bank’s board. “If you don’t look to the future, you’re giving your organization a death knell.”

The Oregon Food Bank has compromised. It is encouraging older donors to consider leaving assets to the organization through bequests, and in each of the past two years it has funneled $100,000 from its operating reserve into the endowment. But last year it decided to hold off on a proposed campaign aimed at building its 10-year-old endowment, after a feasibility study found that donors were not likely to give in big enough numbers to make such a drive succeed.

“The study found that our first focus should be to really develop a strong major-gifts program,” says Rachel Bristolnmi, the food bank’s executive director and a 22-year veteran of the organization. “That will lead us to more endowment gifts over time.”

The Oregon Food Bank gained its present form in 1988, when two Portland-area food banks merged. It started its endowment in 1995, by tapping $50,000 from its reserve fund.

Charity officials use the image of a wagon wheel to describe its operations, with the food bank in the middle, 20 regional food banks as the spokes, and 870 organizations on the rim handling the deliveries to 850,000 people. Last year the Oregon Food Bank delivered 39 million pounds of food.

The food bank has nearly doubled the number of people it serves over the past five years, thanks to a new $7.7-million warehouse that opened in December 2001. The 119,000-square-foot building also has made it possible for the food bank to bring in thousands more volunteers each year. Last year more than 10,000 volunteers helped the organization repackage food for delivery.

Giving more volunteers firsthand exposure to the food bank’s operations was one of the reasons charity officials wanted a new building. A market survey had found that nearly 90 percent of Oregon residents were familiar with the food bank, but few people could accurately describe its operations.

“They envisioned a couple of little old ladies with a pickup truck getting bread from the grocery stores,” Ms. Bristol says.

The food bank now holds a gala event in the warehouse each year, at a cost of $5,000 for a table of eight. It also invites corporations and other nonprofit groups to gather in the building’s 20,000 square feet of meeting rooms. The year after the building opened, roughly 100 corporations held management-committee meetings, took tours, and then participated in volunteer projects at the warehouse.

“The building is our footprint,” says Lisa Wiebe, the food bank’s development director. “When people see that, they know hunger is an issue.”

One reason for building the endowment now is that times are good for the Oregon Food Bank. The new building focused attention on the food bank’s services, and so did statistics from the U.S. Department of Agriculture that found that Oregon, from 1995 to 2001, had the highest number of households in the nation that were having trouble providing food for all members of the family. Private contributions raised through direct mail and events like the annual Safeway Waterfront Blues Festival, which is produced by the food bank, generate about 85 percent of the organization’s nearly $8-million budget.

But the organization’s building is no longer so new, and from 2001 to 2003, Oregon dropped to No. 8 on the Agriculture Department’s list. (According to the latest federal statistics, 12.9 percent of Oregon’s households reported difficulty providing food for the family at least once during the year.) That drop is a good thing, obviously, for the people of Oregon, but food-bank executives fear that wealthy individuals and elected officials may soon lose their zeal for the battle against hunger.

“This may not be the hottest issue in the state of Oregon for very long,” Ms. Bristol says. “Issues wax and wane in the public view.”

Ms. Bristol and the food bank’s board hope to eventually accumulate as much as $10-million in the endowment, though they concede that hitting that mark may take a decade or more.

The Oregon Food Bank is part of America’s Second Harvest, a network of more than 200 food banks and food-rescue networks around the country. Officials at the national organization say they have never surveyed members about whether they have endowments, but interviews with a handful of food-bank directors suggest that the proportion that do have endowments is probably well under 50 percent.

The Capital Area Food Bank of Texas, in Austin, started building an endowment four years ago, and it is now up to $1.8-million. The principal has primarily come from operating reserves left over at the end of each fiscal year.

Judy Carter, the food bank’s executive director, and the chair of the Board of Directors of America’s Second Harvest, formerly worked for arts organizations, where endowments are common. She says that a food bank arguably has an even greater need for an endowment than an arts group, given the fixed costs in warehouses and truck fleets that food banks must bear.

“If we were operating hand to mouth, we would need every dime from that endowment right now to pay for the unanticipated expense of high diesel fuel,” Ms. Carter says.

The North Texas Food Bank, in Dallas, has decided to spend down much of its $4-million reserve account rather than turn it into a formal endowment. Jan Pruitt, the food bank’s chief executive officer, said the organization determined that it would need $2.5-million to keep itself afloat for a year even in the most dire fund-raising environment. It viewed anything over that amount as an unnecessary cushion, and so it used $1.5-million to buy the building that it had been renting for years.

Ms. Pruitt, who heads a council at America’s Second Harvest that focuses on the network’s operations, says studies of local poverty suggest that the North Texas Food Bank is meeting at most 50 percent of the community’s need, so it plans to plow any reserve in excess of its 12-month cushion right back into operations.

“While we’re in that mode, of still being a little behind in meeting the need, to put a lot of effort toward building an endowment is just not on our plate right now,” Ms. Pruitt says.

That line of thinking probably explains some of the donor ambivalence to the now-abandoned idea of an endowment campaign for the Oregon Food Bank. With Oregon still high on the list of states that have a large percentage of people living in hunger, why would the food bank want to sock away money for the future?

Officials at the Oregon Food Bank understand that concern but also want to secure the organization’s long-term viability. Their odds of adding to the endowment are good even without a formal campaign. The food bank has a donor list of 58,000 people, and the average age of donors is 57. Fund raisers are encouraging donors to write the food bank into their wills or consider purchasing charitable-gift annuities, which allow donors to receive fixed annual payments in exchange for a gift.

“You never know exactly what you’ve got until someday an attorney calls and says, ‘Oh, by the way, this person left you such and such in their will,’” says Mr. Wrenn, the board member. “You can’t plan for that. All you can do is work for it.

WHERE OREGON FOOD BANK’S MONEY IS INVESTED Cash: 2% Inflation-hedge investments: 10% Absolute-return investments: 12% International equities: 17% Fixed income: 21% Domestic equities: 38% Total: $460,575 SOURCE: Oregon Food Bank

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