What is a Permanent Endowment?

A permanent endowment is a fund that has been established to provide a long-term source of income, usually for a non-profit entity. The intent is for the funds to be held in perpetuity, where only the income from the funds can be used. The underlying funds are typically the result of a grant or gift. It is possible that the underlying funds can be spent, with the express approval of the donor.

Example of a Permanent Endowment

The Museum of Flight receives a $3 million donation from a wealthy donor, who wants this money to be a permanent endowment. This means that the museum cannot spend the donation, but can use any income generated from it. Accordingly, the museum’s finance director invests the donation, which generates $150,000 of income in its first year. The museum’s board of directors authorizes the use of the $150,000 in investment income to pay for an exhibit about the early years of flight. The result of this endowment is that the initial donation is retained in an investment fund, which provides the museum with income that can be used to pay for a variety of programs, as selected by the board of directors.