Which of the following statements is true regarding endowment funds?

Endowment funds are designed to provide a reliable source of income for organizations, such as universities or charities, while preserving the principal amount of the donations over time. The primary characteristic of endowment funds is that the principal, often referred to as the corpus, is typically required to be maintained indefinitely. This ensures that the fund can generate income through investments that supports the organization's mission in perpetuity.

The income generated from the invested principal can be used for various operational costs and programs, but the principal itself is preserved, which underpins the long-term sustainability of the fund. This principle of preservation is crucial as it not only secures the future financial health of the organization but also honors the original donor's intent to support the cause perpetually.

In contrast, other statements about endowment funds either misrepresent the nature of these funds or fail to recognize the typical restrictions associated with them. For example, using the principal freely or encouraging immediate spending of donations goes against the foundational purpose of fostering long-term financial health through careful management of the principal amount.