An endowment is assets that have been given to a nonprofit entity, either to fund its capital construction needs to or pay for its ongoing operations. The assets in an endowment do not have to be cash - they may be property or securities, for example. A large endowment is critical for creating a solid financial structure for a nonprofit. With a large endowment, a nonprofit is at less risk when there is a financial downturn.

The typical endowment is designed to be permanent, so that the original asset cannot be touched, but any interest or dividends earned from it can be used by the beneficiary. The reverse is an unrestricted endowment, where assets can be used by the entity at any time.

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Nonprofit Accounting