Issues in Nonprofit Finance Research: Surplus, Endowment, and Endowment Portfolios

As the first systematic attempt to identify the issues involved in the use of large data sets to examine nonprofit surpluses and endowments, this paper provides suggestions for how best to ensure that the data are consistent and useful. We introduce five definitions of nonprofit surplus (the analogue of profit) and identify when researchers should use one in preference to the other. The distinctions are especially important when analyzing endowed organizations because surpluses affect the amount and rate of accumulation of endowment assets. Conversely, an endowment affects how managers and analysts should calculate surplus. Information on IRS 990 reports is incomplete, so we explain how to construct a pro forma endowment portfolio and endowment spending from available data for the purpose of calculating operating surplus of endowed organizations. We argue that researchers doing statistical analyses with large data bases should distinguish between endowed organizations and those without endowments because ...