University Resources, Operations and Policies

Schools/Departments:

  • Office of Finance and Administration
  •  

    Accounting for Endowments


    Policy Statement

    It is the policy of Adelphi University to adopt and adhere to standards that are designed to ensure the proper management, administration and compliance of restricted endowment funds.


    Reason for Policy

    The purpose of this endowment policy is to set forth principles and procedures that are designed to ensure the University complies with its responsibility to properly manage and administer its endowment funds.

    The primary objectives of the management and administration of endowment funds are to:

    • Ensure that all endowment gifts are properly recorded on the books and records of the University (General Ledger).
    • Ensure that the income from endowment funds is spent in accordance with the donor’s intent.
    • Ensure that the endowment spending policy approved by the Board of Trustees is properly calculated and allocated to each fund.

    Who Is Governed by this Policy

    Staff


    Policy

    Endowment Funds consist of True and Quasi-endowment Funds:

    • True Endowment is created with a gift in which the donor’s intent is to preserve the principal in perpetuity and be invested for the purpose of producing present and future income which may be either expended or added to principal.
    • Quasi-Endowment (funds functioning as endowment) are designated funds that retain the spirit of long-term investment and principal preservation, yet permit more flexibility as financial planning tools. Quasi-endowment funds are designated by the Board of Trustees and permit principal and income to be expended. Since these funds are internally designated, rather than externally restricted, the Board of Trustees has the right to decide at any time to expend the principal. All withdrawals from the Quasi-endowment fund require approval by the Board of Trustees.

    Endowment Fund Procedures

    I. A specified endowment fund may be established upon receipt of appropriate documentation. For example, a memorandum of understanding, signed by the Office of University Advancement, donor and other parties (if appropriate).
    II. An endowment fund is established to provide financial support for a purpose that represents an integral part of the Development program.
    III. All inquiries regarding establishing an endowment should be directed to the Advancement management for initial discussion.
    IV. Guidelines on Charitable Gifts and Solicitation and Acceptance of Charitable Gifts, should be included when the Office of University Advancement provides information on establishing an endowment.
    V. Contributions accepted in support of an endowment will be considered part of the principal of the fund. Unless specifically stated in the memorandum of understanding, principal will not be invaded. The income generated by the investment of the fund will be available for the particular use and support of the endowment.
    VI. The investment of endowment funds will be at the direction of the Board of Trustees through the Finance & Investment Committee.

    Endowment Fund Naming Opportunities

    I. Endowment funds are established with a minimum initial gift of $10,000 and may bear the name of the principal donor or such individual as designated by the principal donor.
    II. The Board of Trustees may designate the name of the endowment when the endowment fund has no principal donor.
    III. Endowment funds may be established through a testamentary bequest, trust agreement or an outright cash gift. (An endowment fund established through an outright gift will be documented to designate the particular terms and conditions which will apply to the principal donor and Adelphi University with respect to the use of the funds contributed to the particular endowment). (See number 1 above).
    IV. It is recognized that in rare instances the need for the established endowment fund may cease to exist, in which event the following procedure will be substantially adhered to:

    1. Notify the principal donor, if still available, that the Board of Trustees of Adelphi University has determined that the particular endowment fund can no longer serve the purpose originally intended.
    2. Have the principal donor select such other form of endowment, which may then be available for immediate implementation by Adelphi University.
    3. The use of the original endowment fund will be transferred to the selected endowment and shall bear the name of the original principal donor.
    4. If for any reason the original donor is unavailable or should there be no agreement as to the disposition of the endowment fund as originally contemplated, then in that event said fund shall be transferred to be used for Adelphi University purposes as the Board of Trustees of Adelphi University may determine.

    Endowment Income Spending

    Endowment income is generally spent on Scholarships, Lectures, Chairs or other purposes. To ensure that all income distributions are used for purposes consistent with donor intentions, the following procedures are in place:

    • Scholarships – the Office of Student Financial Services is responsible for awarding out the funds for endowed scholarship based on donor intent.
    • All other Uses – the Grants Accountant will review and approve all expenditures (other than scholarships) to ensure compliance with donor intent.

    Spending Policy

    The University’s annual operating needs are financed partially by distributions from the Endowment Fund. The University’s endowment spending policy is predicated on
    the following principles:

    • Preservation of Capital – the endowment’s purchasing power, at a minimum, must be preserved in perpetuity. Therefore, the Endowment will be invested in a diversified asset portfolio that is expected to produce an average annual total return that at least equals inflation plus endowment spending without assuming undue risk.
    • Intergenerational Equity – A balance must be maintained between the needs of today and those of tomorrow to ensure endowment spending for current and future generations is equitable.
    • Stability – To provide a measure of predictability in year-to-year distributions, and to mitigate the short-term volatility inherent in the financial markets.

    Annual spending from the Total Endowment Portfolio

    In the context of these principles, annual spending from the total endowment Portfolio will be targeted at 4.5% of its average market values as of August 31 each year, over the trailing 5-year period. The Endowment Portfolio will make quarterly distributions based on its stated spending policy.

    Pooled Endowment Assets

    New endowment gifts and pledge payments are invested in the University’s Endowment Portfolio at the end of each quarter. Income will be allocated to each fund based on the number of shares in the Endowment Investment Pool. The income allocation will be calculated each September for distribution of that year’s income. Each new gift will buy into the “pool” based on the market value per share at the end of the fiscal year in which the gift was received. Gifts and additions to the endowed fund will be converted to shares (units) as of the first day of the fiscal year (September 1) based on the market value of the prior year-end (August 31). Gifts will begin receiving shares in the Endowment Pool in the first fiscal year after the gift is received.

    Endowments Underwater

    At the end of each fiscal year, those endowment funds where the market value of the fund is below the fund’s historic dollar value, will be considered “underwater”. The fund will not be allowed to spend any of the next fiscal year’s income allocation, up to the amount of the deficiency. In this case, the income for the “underwater” funds will be reinvested back into the Endowment Fund principal balance. When the fund’s market value is greater than the historic dollar value, then the fund can begin spending its income allocation.

    Reporting

    The Office of University Advancement will send acknowledgments out to each donor upon receipt of the donation. Activity Reports are also sent to donors of endowed funds upon the donor’s request. Activity Reports provide detailed information about individual endowments and typically include:

    • Title of the endowment fund
    • Fund Summary – a detailed explanation about the endowed fund’s purpose
    • Award recipients, if applicable
    • Financial Summary – states the original gift, subsequent gifts and market value as of the close of the previous fiscal year
    • Income Activity – states the amount of funds available for spending at the beginning of the fiscal year; income earned by the fund, calculated according to the University’s spending policy; and amounts spent or distributed during the fiscal year.
    • Endowment Summary – provides rates of return and market values on the University’s total true and quasi-endowment.

    Definitions

    This policy does not have definitions associated with it at this time. Upon periodic policy review this area will be evaluated to determine if additional information is needed to supplement the policy.


    Forms

    This policy does not have forms associated with it at this time. Upon periodic policy review this area will be evaluated to determine if additional information is needed to supplement the policy.


    Related Information

    Financial and Administrative Reference Guide (FARG)


    Contact

    Robert DeCarlo
    p – 516.877.3184
    e – decarlo@adelphi.edu


    Document History

    • Last Reviewed Date: October 19, 2017
    • Last Revised Date: October 19, 2017
    • Policy Origination Date: Not known              

    Who Approved This Policy

    Robert DeCarlo, Chief Financial Officer

     
     
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