The Endowment vs. The Piggy Bank
An insider's look at how 'forever gifts' are used to plug today's budget gaps, and what leaders and donors must do to protect an organization's future.
A woman donated $250,000 to her local PBS station. She thought her gift would be a permanent endowment to underwrite investigative reporting in perpetuity. It was earmarked for that.
Instead, it went into the general budget. Payroll and the power bill.
The quiet truth about endowments is that they’re only as good as the organizations that steward them.
Endowments are financial time machines. They’re supposed to deliver a steady income year after year while the principal investment remains untouched. With a 5–6% draw, this woman’s $250,000 endowment would have generated $12,000 annually. A meaningful sum. Enough to cover real projects and ambitious reporting.
In practice, her money became part of the general budget. Lines of credit that could be tapped and erased with no repercussions. “Forever funds” turned into piggy banks.
I’ve seen it happen in more than one nonprofit boardroom. Someone in development announces a big gift. There are applause and congratulations. Then the finance director steps up and lays out the reality: underwriting is soft, membership is flat, and that shiny new endowment just happens to be the solution to a very different problem.
From Mission to Maintenance
Endowments weren’t designed for this sort of survival mode. The first ones were set up to fund excellence.
Medieval monasteries lived on rents from donated land. Oxford and Cambridge kept the principal intact, drawing a modest income and spending the rest on teaching and research. Endowed professorships, scholarships, research centers—these were all meant to drive the organization past the basics, to excellence and beyond.
These days, endowments look more like hedge funds. Harvard parks billions in private equity, hedge funds, and other alternative investments. Most nonprofits now budget for a steady 5–6% draw on endowments, no matter what the returns actually are.
The idea has become less preservation and more extraction. Which means the purpose has changed as well. Dollars set aside for enhancement are too often treated as general operating money.
When Boards Treat Endowments Like ATMs
Of course, the problem isn’t just investment style. It’s governance.
I once attended a meeting where a board member said, “An endowment draw is a loan to the organization that will be repaid.”
It wasn’t malicious or ill-intentioned. Just complete misunderstanding of how endowments work. This is how some boards see it: an ATM they can dip into whenever times get tight.
This confusion is dangerous. Fiduciary duty means following donor intent and stewarding funds with care.
I’ve sat on boards that create artificial barriers to spending endowment money when it should flow freely. I’ve also sat on boards that casually approve operational transfers when they shouldn’t.
In either case, the end result is the same: endowment dollars being put to work in the budget instead of toward the mission.
Public Media’s Temptation
Public media exists in a state of constant revenue fluctuation. Corporate underwriting rises and falls. Government funding ebbs and flows with the political winds. Membership cycles through booms and busts.
For leaders living with this volatility, the endowment can feel like a safe, steady place.
“We’re not touching the principal, so what’s the harm?” they tell themselves.
The math is unforgiving. If your spending policy is 5% and your investments only return 4%, you are not just spending the income; you are actively liquidating 1% of the principal each year. Even if returns match the draw, inflation silently eats away at the fund's future buying power.
More important: every endowment dollar spent on operations is a dollar not spent on building capacity.
Endowment draws that pay for current salaries don’t expand coverage, seed innovation, or enhance mission. They keep the lights on. And once that dependency is in place, it’s nearly impossible to break.
The Transparency Black Hole
Here’s the other problem: nobody outside knows.
Nonprofits must report their total endowment size on Form 990s, but not much else. Donors can’t see the spending policy. The public can’t see how endowment funds are allocated. Major contributors rarely know if and how their gifts will be used.
This opacity enables mission drift. Behind closed doors, enhancement gifts become subsidy money and no one is the wiser.
What Leaders Can Do
If you’re fighting to hold the line against operational endowment draws, structure matters.
Make raids inconvenient with deliberate, documented processes.
Set up separate committees. Separate meetings. Clear policies.
Educate the board. Most missteps come from ignorance, not malice. Outside experts can reset expectations.
Embrace transparency. Stewardship reports showing exactly how endowment income is used change behavior fast.
It’s harder to justify paying the electric bill with donor money when you know you’ll have to explain that decision back to the donor.
What Donors Can Do
Donors have power here too. Before you make a major gift, ask:
What’s your endowment spending policy?
How much of your endowment income goes to operations versus new initiatives?
Who makes decisions on how income is used, and how are those decisions recorded?
If an organization answers openly and completely, they’re probably managing well. If an organization stonewalls or deflects, they've already given you their answer.
The Real Stakes
This isn’t an accounting problem. It’s an accountability problem.
Endowments were meant to support growth and mission, not plug gaps in operating budgets. When nonprofits draw on them for short-term survival, they’re trading long-term strength for short-term relief.
And when this happens in journalism, the cost isn’t just financial. It’s trust.
If we want endowments to work the way donors intended, we need more sunlight, more discipline, and board members willing to treat forever money like… forever.
Have you seen this happen in an organization you care about? Share your experience in the comments.
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