Final answer:
A university would account for funds received from an external donor for a specific purpose by classifying them as restricted net assets, with their use limited to purchasing library books. The revenue from these investments is also restricted, and a dedicated committee manages it to ensure it is used as per the donor's intent.
Step-by-step explanation:
When a university receives funds from an external donor that is meant to be retained and invested, with earnings restricted to purchasing library books, the accounting treatment involves recognizing the funds as restricted net assets. These assets are reported as such on the university's balance sheet. The revenue generated from these investments would also be considered restricted, with its use limited to the acquisition of library resources.
Restricted funds and their earnings are critical for supporting the university's mission and goals, such as enhancing university libraries or funding certain research projects, such as the search for brown dwarfs mentioned in your example. Dedicated committees are tasked with managing these funds and making spending decisions aligned with the donor's intent, ensuring accountability and adherence to financial regulations, as suggested by the constitutional excerpt about public money expenditures.
Engaging in programs like the Rebus Textbook Success Program illustrates the practical utilizations of such endowments, highlighting their importance in creating open-access educational materials, which contribute to the sustainability and educational quality of the institution.