An endowment is a pool of money that is invested so that the income can be used to support the nonprofit. Reserve funds are more flexible. Reserves come from the accumulated surpluses of the organization over time, and can usually be designated or allocated by the board. Reserves can be spent to expand programs and run the organization, while endowment usually can't. Many large institutions, such as universities and museums, have endowments that are many times their annual budgets.
Conflict of interest is difficult to define, yet many people think they know it when they see it.
The legal definition of conflict of interest, usually set out in state laws governing nonprofit corporations, is very specific and covers relatively few situations. Most conflicts fall into a gray area where ethics and public perception are more relevant than statutes or precedents. Conflict of interest arises whenever the personal or professional interests of a board member are potentially at odds with the best interests of the nonprofit. Such transactions are perfectly acceptable if they benefit the organization and if the board made the decisions in an objective and informed manner. Even if they do not meet these standards, such transactions are usually not illegal.