This law outlines how the endowment can receive and manage funds, such as charitable donations and state loans. It specifies that funds received must be invested to generate income, and the principal amount from donations must not be spent. Only investment returns can be used for expenses. Ten percent of certain funds must be granted to state agencies for coastal and ocean protection within two years. Investments must comply with the Nonprofit Public Benefit Corporation Law, and the endowment's accounts are audited annually by independent accountants. Financial transactions can also be audited by the California State Auditor’s Office. Recipients of grants or loans must maintain detailed financial records, though fixed-price contract recipients are exempt from certain record-keeping requirements. Both the endowment and state auditor have rights to access necessary financial records for auditing purposes.

This law says that any endowment funds must be managed in a way that follows three main rules. First, they should be invested with the same care as a wise investor, aiming for reasonable long-term returns. Second, all financial activities must adhere to widely accepted accounting practices. Finally, investment strategies should align with specific investment and fund management laws in the Probate Code, ensuring responsible and consistent handling of funds.

If an endowment closes, is dissolved, goes bankrupt, or doesn't fulfill its financial responsibilities, any funds it holds will go back to the state or another approved public agency or nonprofit.