Endowment Funds

Endowment Funds and Spending Policy

 

DEFINITIONS:

Endowments are those funds, which donors have given with some stipulation as to the use of the principal of the gift. There are three types of endowment funds.

Permanent Endowment Funds:

Funds where the donor has stipulated that the gift is to be maintained inviolate and in perpetuity, with only the income from this gift to be expended.

Term endowment Funds:

Same as permanent endowment, except that by the terms of the instrument of gift, the gift principal might be released from inviolability to permit all or part to be expended.

Quasi-Endowment Funds:

Funds, which the Board of Trustees of the University, rather than a donor, has determined, are to be retained and invested with only the income available to be expended.

POLICY:

The University of Miami’s policy for endowment funds is twofold. It covers investments and spending as follows:

A. Investment Policy

To invest all funds in the Growth Pool unless specifically restricted from so doing by the donors or by the Investments Committee of the Board of Trustees.

B. Endowment Spending Policy

For accounts invested in the Growth Pool:

To distribute annually five percent of the three-year moving average market value of the Growth Pool.

For all other endowment accounts:

To distribute only interest and dividends.

Effective for endowments opened after November 1, 2002:

Generally, a new endowment must be opened on the University’s financial records system before December 31 in order for that endowment to be activated for spending for the next fiscal year. In addition, no distribution will be made from an endowment until its funding reaches the level stipulated by its “class” (as detailed in University Advancement Policy F70) by December 31 of the previous fiscal year. Further, the following “classes” of endowments will have an additional delay of one year in starting distributions: University Chair, Endowed Chair, and Endowed Professorship.


Frequently Asked Questions (FAQs).

 

How do I open a permanent or term endowment?

Send a request with all related documents to the Associate Controller, Endowments and Investments, for processing. Written documentation showing donor intent to establish an endowment must be included. Examples of acceptable documentation: signed endowment gift agreement, letter from donor requesting his/her donation be used to establish an endowment, letter from the University to donor explaining that his/her donation will be used to establish an endowment as per donor's instructions. Whenever possible, a donor's signature should be requested as concurrence with University action. In situations where prospective donors are solicited for endowment gifts, such as fundraising campaigns or memorial gifts, fundraising materials such as letters, pamphlets  or brochures explicitly stating that the gifts are being solicited for endowment have to be provided, both to donors and to the Controller's office. Internal correspondence is not sufficient to set up a permanent or term endowment. Endowment Funds (E005). See University Advancement Endowment Gift  Policy (F70) for endowment gift minimums and classes.

 

I have $100,000 in a non-interest bearing University account. How do I get interest on these funds?

You can set up a quasi endowment ($50,000 minimum required). See Quasi Endowment  Funds (E010) for details of documentation and approvals required. After all required approvals are obtained, the funds are transferred into the new quasi endowment and invested in the University's Growth Pool. However, be aware that investments in quasi endowments are intended to be long-term as the Growth Pool is subject to market fluctuations. There are limitations as to transfers of principal for the first five years.

 

Sometimes our department receives gifts, not restricted by donors for endowment that we would like to place in one of our existing permanent or term endowments to build them up. Can we do this?

OR   We have an existing quasi endowment that we would like to convert to a permanent endowment to ensure that these funds will be available for future generations. Can we do this?

No, only funds restricted for endowment by donors can be deposited in permanent or term endowments. In reply to the first question, you have two options:

  1. If the department has an existing quasi endowment that conforms to the restrictions on the gift, the gift can be deposited to the quasi.
  2. If not, the only option is to open a new quasi endowment. See above for details on how to do this.

 

How can I get the account balance in my endowment fund?  How do I know the amount of income that has/will be distributed for spending from my endowment?

Once a year (in July) the Associate Controller sends out reports to all signers of Growth Pool endowment funds showing, for each endowment, the market value of endowment principal at June 1 and the spending distribution for that fiscal year. The spending distribution is based on June 1 balances, so if there are any deposits or withdrawals from endowment corpus, the amount distributed will be adjusted during the fiscal year. In addition, in February of each year, the Associate Controller sends out updates which include December 31st market values and projected spending distributions for the next fiscal year. For any other updates during the fiscal year, both for endowment principal market values and spending distribution updates, please contact the Associate Controller. The Growth Pool's performance and asset allocation is included in the Annual Report of the University, see the Endowment Essay for one, three and five year performance for the most recent fiscal year end.