There are three main classifications of endowments: permanently restricted, unrestricted, and quasi endowments. Each offers different advantages to both donors and organizations. A permanently restricted endowment is one whose administration is strictly defined by the donor. Such endowments are appealing to those who are in general agreement with the goals of an organization but want to include certain restrictions to better align with their personal philanthropic goals in perpetuity. The principle investment can be augmented throughout the life of the fund, but the disbursements for scholarships are well defined and based on capital gains.
Historically, unrestricted endowments have been the most common type used by non-profits. Unlike restricted funds, the administration parameters are developed by the governing board of the foundation instead of the individual donor. However, similar to permanently restricted endowments, disbursements for scholarships are well defined and are based on capital gains of the principle. Typically, both are irrevocable and are administered in perpetuity – offering a sense of “relative immortality” for donors, ensuring that their philanthropic wishes are permanently maintained.
Quasi endowments offer the greatest degree of flexibility for non-profit organizations to accomplish their mission. As the name suggests, they are not “true” endowments because both the principle and capital gains can be spent at the discretion of the governing board. Although there is much greater flexibility, quasi-endowment funds are always utilized in accordance with the by-laws and stated mission of the organization. At present, The Star Chapter Foundation employs a quasi-endowment to fund operations and strategically plan for the future. As the principal grows, the funds will be transitioned to a more traditional unrestricted endowment to support the mission of the foundation in perpetuity. Reaching our goal will allow us to provide ten $20,000 scholarships every year to deserving students, and we invite you to partner with us on this journey to change lives forever!