Does your nonprofit organization have an endowment fund? Or have you considered establishing such a fund for your organization? If so, Building an Endowment Right from the Start is an excellent guide through the process of setting up and securing an endowment fund. The authors examine where the money comes from, where it goes and how it grows; they outline rules and guidelines for its management.

Lynda Moerschbaecher is an endowment, planned giving and marketing consultant and lawyer. Contributing authors Barbara G. Hammerman, an endowment consultant, and James C. Soft, a planned-giving consultant, frequently lecture on endowment planning.

The book begins with basic information about how nonprofits generate and spend revenue as well as a definition of endowment. Many nonprofits confuse endowments (funds to be held in perpetuity) with major gifts (funds that can be spent immediately). They may think of an endowment as a reserve fund where they can store surplus funds until they are needed. But the authors are emphatic that an endowment is not "something that the organization imposes upon itself and it is more than the 'rainy day fund'...."

A true endowment is defined as a donor-restricted fund. There may be a written agreement between the donor and the donee that establishes how the funds are to be used and may even restrict how the spendable income from the endowment is distributed. Or the donation may have been in response to a solicitation that promises to use it in such a restricted way. What many nonprofits have called endowments are referred to by the authors as quasi-endowments (or funds functioning as an endowment). These funds are established by board resolution, rather than by donor intent, and may be changed by subsequent board decisions.

The authors stress the importance of documentation in setting up an endowment fund. Before the organization starts to solicit gifts for the fund, it should have in place policies and guidelines, donor agreements, and acceptance procedures (a step-by-step process for accepting an endowment gift). The importance of the board's role in establishing these policies and procedures is also stressed.

Additional chapters deal with the legal aspects of endowment funds and the management of the funds, including accounting aspects and investments. The appendices include the text of the Uniform Management of Institutional Funds Act (1972); the AICPA Audit and Accounting Guide (a glossary of accounting terms); and sample endowment resolutions.

This relatively short book includes much helpful information for any organization considering the establishment of an endowment. Although it includes a fair amount of technical and legal information, it is for the most part very readable.

For citations to additional materials on this topic, refer to the Literature of the Nonprofit Sector Online, using the subject heading "Endowments."