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No Strings Attached: An Examination of Board-Designated Endowments in Nonprofit Organizations
Journal article   Peer reviewed

No Strings Attached: An Examination of Board-Designated Endowments in Nonprofit Organizations

Andrew R. Finley, Curtis M. Hall and Teresa Harrison
Nonprofit and voluntary sector quarterly, Forthcoming
09 May 2026
DOI: https://doi.org/10.1177/08997640261442189
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Abstract

nonprofit governance endowments nonprofit spending executive compensation
We examine whether having at least a portion of an endowment free from donor restrictions (i.e., a board-designated endowment [“BDE”]) affects endowment objectives related to intergenerational equity, rainy-day funding, or accumulation. Our results provide some evidence consistent with restricted endowments serving accumulation or rainy-day funding objectives. Holding at least some funds in a BDE does not appear to influence the attainment of these objectives. Moreover, we find no evidence that a BDE incrementally affects a nonprofit organization’s (“NPO”) sensitivity of spending on programs, administration, or capital expenditures to operating revenue. Finally, we also do not find any evidence that BDEs alleviate agency conflicts associated with unrestricted net assets with respect to spending on programs or CEO compensation. While BDEs have unique features that should facilitate greater flexibility than donor-restricted endowments and greater board oversight than unrestricted net assets held outside an endowment, our results suggest they do not produce different outcomes in spending.

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