Healthy endowments aim to grow through new gifts. One of the challenges of attracting those gifts is that your prospective donors, like many people, may not think of endowments as truly perpetual things but more like reserve funds that could be tapped in an emergency. The thought that one’s life savings could be frittered away plugging budget shortfalls isn’t very appealing. Donors prefer to make a lasting difference.
One of the easiest ways to inspire donor confidence is by including the word perpetual in your fund’s name. “Perpetual Endowment Fund,” on a handout for example, makes the right first impression and answers an important question before it’s even asked. It will also help those in governance roles remember to be good stewards. It’s just harder to spend down a fund carrying the label perpetual. So make sure it’s always used, even when the fund is only referenced as a single line item on a report. And don’t let your Treasurer shorten it.
Even if a fund carries a donor-imposed restriction for use as endowment, perpetual is still useful as a constant reminder of the legal and fiduciary obligations to preserve its spending power. Those obligations are spelled out by UPMIFA, the Uniform Prudent Management of Institutional Funds Act(s) which have been adopted in 49 US states (see upmifa.org for details). If there are any perceived ambiguities about the intent of a donor, the inclusion of perpetual in the gift instrument could eliminate them. Now some may see this as a disadvantage because it could restrict the organization’s flexibility in using the funds. But if that’s a concern, you may be better off calling your fund a reserve fund or, better, splitting off enough into a reserve fund that the remaining endowment fund can be embraced and promoted as a perpetual affair, honestly and with no hesitation. Healthy endowments need to be affirmed by all stakeholders without reservation.