NVC - Second Issue: Financial Endowment

Financial endowment: Are we ready for the next leap?

A financial endowment is a transfer of money or property donated to an institution, with the stipulation that it be invested, and the principal remain intact. This allows for the donation to have a much greater impact over a long period of time than if it were spent all at once.

I have the impression that if this endeavor has given enough due consideration by all alumni will provide a more formal and organized channel of financial assistance to NVAC. An endowment fund with tax shelter status and being professionally managed by Alumni designated fund manager will be fiscally managed and project more transparency than ad hoc transfer of donations to NVAC routine needs. Endowment funds if properly managed are the financial instrument that can sustain long term development of educational institutions such as NVAC.

A time will come when an Alumnus will donate a property to NVAC (who knows?) and the mechanism of doing it is more complicated than we perceived specially if the property is outside of the Philippines- this is the solution. Tax deductible donations? This is the solution. Just imagine that some of us are paying more than $12,000 as federal tax per year when deductibles can provide some cushion effect to this government extraction. We should find a way how to establish this kind of avenue to ensure future development of our institution. This option also provide protection for our donated assets plus the impression of accountability is appropriately practiced. Most of us wants to participate but receipts that can be tax deductible is a real help in times of recession.

College and university endowments in the United State can be over one billion dollars at many of the richest universities. However, each educational institutions typically has numerous endowments, each of which are frequently restricted to funding very specific areas of the college. The most common examples are endowed professorships (also known as named chairs), and endowed scholarship or fellowships. At colleges, typically 5% of the endowment's assets are spent every year, with any excess earnings reinvested to augment the endowment and to compensate for inflation and recessions in future years.

Restricted endowments. Endowment revenue can be restricted by donors in numerous ways. Professorships and endowed scholarship/fellowships are the most common restriction on large donations to an endowment.

Endowed professorships. An endowed professorship (or endowed chair) is a position permanently paid for with the revenue from an endowment fund specifically set up for that purpose. Typically, the position is designated to be in a certain department. The donor is allowed to name the position, which typically takes the format: First-name Last-name professorship of Department-name. Endowed professorships aid the university by providing a faculty member who does not have to be paid entirely out of the operating budget, allowing the college to either reduce its student-to-faculty ratio, and other institutional evaluations, or direct money that would otherwise have been spent on salaries toward other college needs.

Endowed scholarship/fellowship. An endowed scholarship is tuition (and possibly other cost) assistance that is permanently paid for with the revenue of an endowment fund specifically set up for that purpose. It can be either merit-based or need-based (which is only awarded to those where the college expense would cause their family financial hardship) depending on NVAC policy or donor preferences. Some colleges will facilitate donors meeting the students they are helping. Given the cost of college, finance is frequently a factor when students decide where to go to college. By offering them money, colleges are sometimes able to lure students away from other universities. The amount that must be donated to start an endowed scholarship can vary greatly.

Dr. Ephraim Palmero, MD