Endowment Guidelines

Overview

• Endowments are donations of money or property to the University, referred to as Gifts in Workday. 
• To preserve the purchasing power of endowment funds and at the same time support the purposes of the endowments, endowment contributions are capitalized and invested, with a spending amount (calculated using a spending rate applied to the moving average of the preceding three December 31 market values) made available for use during the year.
• The sum of the capital account and the stabilization account make up the market value of the endowment funds. 
• Deficits are not allowed in endowment accounts per Policy FM5. Any deficits occurring will need to be settled by the end of the fiscal year.

Endowment accounts under the University are structured with three components:

1. The capital account which represents the initial capital contribution and any succeeding donations or capitalizations of income and inflation into the account.  Funds held in the capital account are held in perpetuity.
2. Spending account which represents the amount available for spending in accordance with the endowment’s purpose or terms of reference (ToR).  The amount available includes the current year’s spending allocation plus any carry-forward spending amounts from prior years.
3. Stabilization account which tracks the health of the endowment. This account houses the changes in the market value of the endowment due to inflation from its original capital value, investment returns and losses, other fees like overhead/internal charges, and the spending allocation. 

Endowment Accounting

As per the 2023 Endowment update, due to strong investment returns in previous years, many established endowments had built up substantial cushions allowing them to maintain a spending rate of 4.0% while newer endowments that did not have this cushion were set at 3.5% and will remain at this rate until it is determined that a higher spending rate is sustainable.