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What Is a Permanent Fund?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 03 April 2014
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    Conjecture Corporation
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A permanent fund is a type of financial fund that is utilized to collect and disburse proceeds to individuals or other entities that are members of the fund on an ongoing basis. Funds of this type are normally referred to as permanent, as the regular disbursals continue until either the recipient passes away or the source of the funding is discontinued on a permanent basis. The permanent fund approach is often used as a type of government fund that provides ongoing support of some type to endowments or facilities that are maintained by that government, using funding that is generated from specified sources, funneled through the fund, and disbursed according to the provisions found in the fund’s founding documents.

In some cases, a permanent fund may be established as a means of financing a particular civic project that is maintained by a municipality or other government entity. One example would be the maintenance and continued operation of a city-owned cemetery. In this situation, funds collected through taxes or other means may be allocated to the permanent fund for upkeep on the facility. In turn, the administrators of the fund will utilize those monies for specific purposes related to the maintenance of the cemetery, based on the provisions found in the endowment established for that project. When structured properly, citizens have access to records that show exactly how the funds are received and disbursed, aiding in keeping the project fully accountable to local residents.

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A permanent fund may be used to aid in the ongoing operation of just about any type of government-operated endeavor. In many nations, funding that helps to keep public libraries open and available to the public is routed through this type of fund. In like manner, parks and similar recreational facilities owned by a city or town may receive funding via this type of arrangement. This approach may even be used to make direct disbursements to citizens within a given geographical jurisdiction, such as a state, province, or parish if there is some type of ongoing program that requires the jurisdictional government to make these types of disbursements. For example, if the jurisdiction were rich in oil reserves, the permanent fund may serve as the clearinghouse for disbursing regular payments generated by collections of revenues on the sale of the oil to those taxpayers living within the jurisdiction.

One of the chief benefits of the permanent fund is the high level of accountability that this approach can bring to a number of different projects. The structure of the fund normally requires document trails that support each transaction, and also allow for regular government audits of the fund’s activity. This approach helps to reduce the opportunity for funds to be mishandled in what is sometimes known as crony capitalism, and ensure that the disbursements do reach recipients that are entitled to benefit from the existence of the permanent fund.

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