Being Precise on Endowments

To the Editor:

Your article on endowments (“Making Dollars and Sense,” December 11) offers a comprehensive view of the issues, challenges, and rewards of building an endowment. On a few points, however, I found the phrasing to be somewhat imprecise, thus possibly creating inaccurate impressions among readers unfamiliar with the subject.

The article stated that “a percentage of the investment earnings is available for the nonprofit organization’s use.” In fact, most foundations and endowments distribute a percentage of the market value of their invested funds at the end of their fiscal year (or a rolling average of market values at the last two or three fiscal-year ends). This could lead to a very different result than the calculation your wording suggests.

The article refers to “5 percent of the value of the endowment” with respect to distributable dollars, but then says that is “available to pay for expenses.” This suggests that endowment income is used to pay for the expenses of running the organization (i.e., overhead), when the thrust of the article is that endowment income is a means to enhance or expand the organizations programs and services.

Neither of these passages is incorrect per se; rather, the wording is such that they could be misleading.

Alan Axelrod
Assistant Director of Planned Giving
University of Rhode Island
Kingston, R.I.