True endowment funds (also known as permanent endowment funds) are resources with respect to which a donor has stipulated, as a condition of the gift, that the gift is to be maintained inviolate and in perpetuity. A true endowment is to be invested for the purpose of producing present and future income that may, also by donor stipulation, be expended or reinvested with the original gift. The principal or corpus of the true endowment must be maintained intact. Income that may be expended according to the donor’s stipulation may be unrestricted or restricted as to the purpose for which it is expended, the time it may be expended, or both. Income that may not be expended but rather added to the principal or corpus in accordance with the donor’s stipulation assumes, or takes on, the same restrictions as the original gift.
Source: NACUBO Accounting Tutorial – Endowment Definitions
- A true endowment can only be created by donor stipulation
- Evidenced by a gift agreement or by bequest
- Invested in the unitized pool (although some older endowments may not be)