As the formal definition cited above implies, the term “endowment” refers to a sun of money that is invested to produce income while avoiding invasion of principal. A permanent endowment, then, is a sum of money that is invested to produce income forever. This has implications for the financial management of the foundation, which must assure maintenance of the buying power of the original gift.

Traditionally, community foundation draw their blood from permanently endowed funds. It is this focus on permanent endowment that sets a community foundation apart from traditional community based philanthropic activities. Providing the critical vehicle through which donors can give back to their communities and serving as grant maker to meet ever-changing community needs are tow critical components of a community foundation’s mission.

Permanently endowment funds enable the community foundation to have a stable source of revenue to meet the needs of the future. Because the foundation has this secure source of income to support its administrative and programmatic functions, it is not subject to the whims of the donor-of-the-moment and enjoys independence as it goes about the business of meeting community needs without undo concern for avoiding controversy.

In addition to its flexibility and breadth of programmatic interest, the focus on building permanent endowment is the critical difference between a community foundation and other local nonprofit organizations. This places it in a non-competitive position with those other nonprofits.

Because an endowment has to be significant size before it produces appreciable levels of income, their is an unmistakable time dimension inherent in endowment building. The stability that a community foundation brings to the nonprofit arena; its flexibility in its ability to accept gifts and establish funds that satisfy the charitable needs of donors; its efficiency and effective financial stewardship-all these factors combine to make it an essential partner in community based philanthropy.