>It had always been my assumption that using federal grant funds for
>endowments was specifically disallowed (in addition to the more general
>provisions regarding income earned from advance payments and such).  Does
>anyone know if this is true, and if so, where such language appears?

 There seems to be 2 issues in this question: 1) related to endowments
& 2) relate to program income.  Restrictions on use of program income are
generally specified by the specific provisions of the award or the general
terms/conditions of the agency in question.  A-21 in J.22.b. specifies that
"costs of organized fund raising, including financial campaigns, endowment
drives, solicitation of gits and bequests, and similar expenses incurred
solely to raise capital or obtain contributions, are unallowable."
Endowments are accumulated capital assets; hence, contributions are
basically fund transfers and not a result of an expense.  Federal sponsored
projects reimburse expenses; not fund transfers.  The only exceptions I am
aware of are Federal programs that provide for accumulation of endowment
funds' like the NEH endowment program & the Dept. Education program that
assists targeted, smaller institutions in becoming financially stable.
Therefore, the answer seems clear by extension from A-21 & the fact that no
expense is involved in building an endowment.

Terry A. May, Ph.D.                       Voice:    602-523-6788
  Director of Research Administration     FAX:      602-523-1075
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