Is Your Nonprofit Ready for a Windfall Gift?

In the ever-evolving landscape of philanthropy, the arrival of a windfall can be both exhilarating and daunting for nonprofit organizations. Just ask the more than 2,700 nonprofits that have benefited from philanthropist MacKenzie Scott’s largess, with unrestricted grants totaling over $26.3 billion as of December 2025, according to her philanthropic website, YieldGiving.com. While this article’s focus is on such gifts that are not earmarked for specific purposes, windfalls come in many flavors, and can also include nonprofit operating surpluses, large donor advised fund donations, and the sale of property. However, no matter the form or the source, a significant bump in gifts requires a rethinking of financial strategies and governance structures.

“We have prudently managed our windfall funds over the years, which have come in the form of operating surpluses,  unrestricted planned gifts, and property sales—allowing us to grow our quasi-endowment. Having a flexible windfall policy has been a best practice, as it helps to have an endowment growth plan in advance.”

—  Steve Rich, president of Fisher College, Boston

The influx of unrestricted funds creates immediate possibilities and long-term challenges. Nonprofits must balance the excitement of new, significant resources with the discipline required to ensure these funds have a lasting, positive impact. Establishing a windfall policy in advance is designed to do just that, enabling organizations to avoid impulsive decisions and instead pursue a strategic approach, often involving the creation or expansion of quasi-endowment funds. These policies set thresholds for what constitutes a windfall and typically embodies these critical tasks:

1. Take a financial inventory of short-term and long-term needs, i.e., how monies should be spent, saved, and invested. This helps ensure that immediate priorities are addressed while also considering future sustainability.
2. Create an investment policy statement (IPS) that reflects the nonprofit’s investing goals and risk profile. Today’s IPS may highlight the outsourced chief investment officer (OCIO) model, where nonprofits collaborate with external investment professionals who oversee asset allocation, portfolio construction, and manager selection. Investment committee meetings are held to review performance, address emerging trends, and ensure that all voices are heard.
3. Establish clear procedures for managing endowment and quasi-endowment funds. This includes defining roles, responsibilities, and lines of authority among trustees, committees, and advisors.
4. Convey windfalls to stakeholders, balancing transparency with the potential impact on future fundraising. While publicizing a windfall can boost morale and signal confidence to other donors, it may also create misconceptions about the organization’s financial needs. Nonprofits must navigate these decisions, which underscore the importance of a nuanced communications plan.
5. Build a strategic endowment plan (SEP), a roadmap for endowment growth that integrates fundraising and investment strategies to help ensure long-term sustainability.

“We had a significant windfall in 2014 when we sold our building on 23rd St. for $9M. Our board in turn built quasi-endowment, which provides a key annual funding source for our mission. We also have a flexible internal policy where any future unrestricted planned gifts can be allocated to quasi-endowment.”

— Malachy Fallon, executive director at Xavier Society for the Blind, New York City

Setting up governance policies and procedures allow the nonprofit to manage and monitor their endowment and quasi-endowment programs to make sure they are invested responsibly and legally. If a nonprofit is starting an endowment program, it is imperative to build these governance policies and procedures at the onset. If it already has an endowment program, it is a chance to review and refine the current governance policies and processes. According to the CFA Institute, “The framework that connects these decision makers is the governance structure. A strong, well-articulated governance structure provides the mechanism for decision makers to function together effectively. A weak, ill-defined governance structure breeds confusion and acrimony.”¹

The CFA Institute describes the basics of a governance structure as a three-legged stool with: 1) roles and responsibilities must be understood by all stakeholders, both internal (trustees, investment advisors, etc.) and external (legal counsel, auditors, etc.); 2) clearly documented lines of authority and boundaries between supervising and reporting decision makers; and 3) accountability standards that describe how teams work together and how results are interpreted compared with the benchmark.   

The linchpin of good governance is often viewed as the mandate to maintain a fiduciary mindset. The board of trustees has the overall responsibility of the endowment program and oversees the financial operations of the organization, however, even though they typically delegate day-to-day functions, fiduciaries cannot delegate the internal responsibility.

The Association of Governing Boards of Universities and Colleges (AGB) details the three obligations of a fiduciary as follows:²

·       Duty of Care: This requires the investment committee to exercise reasonable care as they make investment decisions related to the portfolio.

·       Duty of Loyalty: A board member’s self-interest can create a potential conflict for the nonprofit. Therefore, board members must put the nonprofit first and act in the best interest of the organization.

·       Duty of Obedience: Board members must uphold the mission of the nonprofit and ensure an endowment is operating in compliance with all laws and regulations; in particular, they are required to uphold the rules for managing endowment funds as outlined in the Uniform Prudent Management of Institutional Funds Act (UPMIFA). 

One key observation from my work with nonprofits and their endowments is the importance of having a strategic endowment plan (SEP). This plan serves as a living document, memorializing the organization’s vision, goals, and strategies for growing its endowment. It brings together diverse stakeholders, unifying the organization around a shared direction, and establishes yardsticks for success.

It is important to codify these strategies in a written SEP and track monitor its progress. According to Pete Waldron, president of the Catholic Foundation of Eastern Pennsylvania, “The fastest way to grow an endowment fund is by adding new money and leveraging it against market performance. A SEP enables us to stay focused on achieving better results for our partner parishes, schools, and ministries. Our SEP includes clear benchmarks and KPIs to monitor our progress.”

Many successful nonprofits grow themselves most effectively by focusing on both their fundraising and investing strategies, hand in hand. This is crucial because, over the next decade, future portfolio returns are anticipated to be lower than historical returns, which can limit the growth of the investments from an internal performance perspective. It will be vital to look externally to grow the endowment through new gifts. Thus, the fundraising side of the program can have a great impact for endowments/foundations as a pivotal way to grow. For example, planned giving strategies are a very important way to increase endowment/foundation funds.

“Over the past few years, we sold some  of our air rights above the building and developed a windfall policy, allowing us to invest a portion for the future as well as in a new church on 57th street, which is expected to be completed in 2026."

— Todd Williams, elder and former chairman, Calvary Baptist Church,  New York City

"We were fortunate to receive a $40 million grant from Scott’s Yield Giving philanthropy in 2024. This transformative support strengthens our mission during  government cutbacks, giving us flexibility to build capacity, innovate to respond to urgent community needs, and plan for long-term sustainability."

— Deborah De Santis, president and CEO, Corporation for Supportive Housing

Receiving a windfall is a remarkable event, but it’s only the beginning of a journey, and not always a successful one. Some nonprofit windfall recipients have struggled with rapid growth or failed to sustain new initiatives once the initial funds were spent.

An organization can help turn windfalls into lasting legacies by proactively developing a windfall policy, investing in governance and education, and creating a strategic plan that includes both fundraising and investment to ensure long-term impact. Combined with an integrated approach that addresses immediate needs, builds for the future, and educates its boards and stakeholders, a potent windfall policy can help boost the thrust of the initial gift.

Download the report to learn more about how nonprofits can prepare for a significant, unrestricted gift by having a Windfall Policy and Gift Acceptance Policy in place. We believe the most successful nonprofits develop these policies in advance, which often has helped them grow their endowments much more quickly.

Learn more about our value-added approach to working with endowments and foundations.

A version of this article was published on March 3, 2026 in the Chronicle of Philanthropy. 

¹ CFA Institute, A Primer for Investment Trustees, Jeffrey V. Vailey, CFA, Jesse L. Phillips, CFA, Thomas M. Richards, CFA, 2011.

² AGB Press, “Endowment Management for Higher Education,” Nicole Wellmann Kraus, CFA, Hilda Ochoa-Brillembourg, CFA, Jay A. Yoder, CFA, 2017.

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