By Todd Cohen

Help, Inc. Center Against Violence near Greensboro, N.C., scrambles year-round to secure grants it needs to cover its $550,000 budget. “It’s a constant worry,” said Cynthia Pugh, executive director.

To kick-start a long-term source of income for financially strapped nonprofits like the center, the Community Foundation of Greater Greensboro last year launched an endowment-building initiative. The foundation agreed to give $10,000 to each of five nonprofits -- including the center -- if each raised at least $20,000 in endowed funds from new sources within a year. In November, the foundation made the same offer to five more nonprofits.

The goal, said Patrick Weiner, the foundation’s vice president for donor services and development, is not simply to stage a one-time fundraising drive but to stimulate creation of a long-term financial strategy.

With funding shrinking and demand for services growing because of the slumping economy, nonprofits face rising pressure to find new sources of income -- and many are creating endowments and placing a new emphasis on planned giving programs. “Having an endowment fund can provide a secure base of resources that can partially alleviate the need for raising annual funds,” Weiner said.

At the same time, donors are turning philanthropic strategies such as planned giving and endowments that are critical for nonprofits bearing the brunt of tough economic times, said Virginia Esposito, president of the National Center for Family Philanthropy (NCFP) in Washington, D.C. “What they can count on,” she said, “is that donors and their families have put money aside that they can count on, in good times and bad, to be available to them as they carry on their charitable work.”

Weiner said setting up an endowment can help a nonprofit move toward long-term financial planning, while creating “a sense of permanence that strengthens an organization in the eyes of its donors.” And, the process of planning for an endowment “can serve as a catalyst for organizational change, and get the board to where it works more efficiently together,” he said.

Holly Welch, vice president for development and legal affairs at the Foundation for the Carolinas in Charlotte, N.C., said the ailing economy should prompt nonprofits without endowments or planned giving programs to begin planning for them. She said nonprofits also should prepare for the huge transfer of wealth between generations that Boston College researchers expect will generate at least $6 trillion for charity during the next 50 years.

“You need to jump on the wealth-transfer train,” she said. “The only way to get on that train is to have a seat to put your bequests and gifts in.”

A growing number of community foundations are helping nonprofits launch endowments and planned-giving programs. The Greater Kansas City Community Foundation provides nonprofits with planned giving materials for donors and professional advisers, helps nonprofits search for development officers and offers workshops on topics ranging from strategic planning to giving techniques, said Laura McKnight, senior vice president for development.

Nonprofits, she said, should integrate planned giving into their overall development strategy. “A lot of these organizations are good at annual giving,” she said. “But how can they infuse more complex giving into how they’re working with donors? Many haven’t had the time to deepen their relationship with their donors.”

Starting an endowment takes time, and nonprofits should move carefully, the experts said. A nonprofit typically is ready to begin an endowment or planned giving program if it has operated for 10 years, meets its budget, has a stable board and staff, and has built reserves equal to at least one-fourth of its budget, said Welch.

To shore up its budget to prepare for planned giving, she said, nonprofits should cut or control expenses, team up with other groups, look for donated goods or services, and solicit help to strengthen internal operations.

Another key step, said Weiner, is for the nonprofit’s staff to educate its board about the need for an endowment and the investment in staff or collaborations required to help launch it.

Nonprofits also must address policy questions ranging from who will be authorized to solicit gifts to the types of gifts they will solicit and how they will be invested, he said.

Another critical issue is management and board oversight of the endowment, said John Griswold, executive director of the Commonwealth Institute in Wilton, Conn., which tracks endowments.

A growing number of foundations, operating charities and colleges and universities are contracting with outside firms to invest their endowment assets, said Griswold, whose organization is the research and publication arm of the Commonfund Group, which manages nearly $30 billion in assets for 1,600 educational institutions, foundations, hospitals and operating charities.

While nonprofit boards retain fiduciary responsibility for their endowments, he said, they and their staffs often lack financial expertise.

“The task of the board and its investment committee should be to oversee outsourced managers,” whose tasks should range from helping the board develop and set investment policies to tracking market trends and measuring the performance of their investments against the market, he said.

Boards also should include experienced investment or financial-services professionals, he said.

Donors face key questions in setting up endowments, said NCFP’s Esposito, which recently published a guide to creating family foundations.

Those questions include defining the endowment’s mission, deciding how long it should exist, shaping its leadership and selecting a charitable vehicle. “There’s a lot more awareness on the donors’ part of all the options they have for giving,” Exposito said.