Transcript Gifts & Endowments - University of Pennsylvania

Gifts & Endowments
ABA Presentation
April 21, 2004
Question: Which items has the
University NOT received as gifts?
A. Teeth
B. Gas station
C. Stud horse
D. Napoleon’s hair
Answer

It’s a trick. We have received them all.
What is a gift?
A gift is a voluntary transfer of cash,
securities or property from a donor to the
University.
 The University makes no commitment of
resources or services in return for these
gifts, other than a promise to use the gift
as the donor wishes.

Types of gifts

Unrestricted gifts: gifts where the donor
has placed no restrictions. The
University can use the gifts for current
operations.

Example – Annual Giving to a School/Center
Types of Gifts

Restricted Gifts: a gift where the donor has
placed limitations or conditions on how or
when the gift can be used.

Examples



Operating – provide short term support for a lecture series
Capital – construct a building, renovate a classroom
Endowment – establish a professorship, provide
scholarship
Gift Receipts
180
160
140
120
100
Millions
80
60
40
20
0
Operating Gifts
Capital Gifts
Endowments
FY'99
FY'01
Years
FY'03
What is not a gift?

Funds given in exchange for goods or
services rendered is not a gift.
Examples:
 Tuition
 Tickets to an Annenberg Center production
Grants are not gifts

Grants qualify as
payment for services
rendered.
Sponsored Research
700
600
500
Millions 400
300
200
100
0
Revenues
Awards
FY'99
FY'01
years
FY'03
What is a grant?

A grant needs to meet just one of the
following criteria:
The project commits the University to a
specific line of scholarly inquiry, typically
documented by a statement of work.
 A specific commitment is made regarding
the level of personnel effort, deliverables, or
milestones.

What is a grant?
Project activities are budgeted, and the
award includes conditions for specific
formal fiscal reports and/or invoicing.
 The project requires that unexpended
funds be returned to the funding source
at the end of the project period.
 The agreement provides for the
disposition of either tangible or intangible
property which may result from the
project.

Grants

When in doubt, call:
Office of Research Services
215.898.7293
or
Investment Services
215.898.9644
What is an Endowment?
An Endowment is a “permanent fund of
property or money bestowed upon an
institution or a person, the income of
which is used to serve the specific
purpose for which the gift was intended.”
-Dictionary of Business Terms
True Endowment

A gift where the donor has stipulated that
the principal will remain intact forever, in
perpetuity. The donor wishes only the
income to be spent to provide support for
a specific program.

Permanently Restricted Fund
Term Endowment

A gift where the donor has designated
the gift as an endowment, but has given
the University the right to invade
principal upon the passage of time or the
occurrence of an event. Sometimes
known as a wasting endowment.

Temporarily Restricted Fund
Funds Functioning as Endowment

Refers to gifts or sums of money that the
Trustees of the University, rather than
the donors, have determined will be
invested as an endowment.

Unrestricted Fund
Investment of Endowments
The endowment is invested in
Associated Investment Fund (AIF), which
is a pooled investment vehicle much like
a mutual fund.
 The University’s AIF investments are
managed by the Office of Investments.

AIF as of June 30, 2003
AIF is invested in:
 Domestic and
international equities
 Fixed income & high
yield securities
 Real estate
 Other investments
AIF Asset Allocation 6/30/03
Fixed
Inco me
20.0%
P rivate
Equity
2.8%
Do mestic
Equity
36.8%
Real Estate
4.3%
High Yield
5.0%
A bso lute
Return
14.4%
Int'l Equity
16.7%
AIF Performance & Income
Distribution

AIF performance is computed and
reported on a total return basis.

This includes both appreciation and income
earned.
Income and gains are distributed
monthly.
 One month lag to general ledger.


Example: July’s income is posted in August.
What is Spending Rule?

Spending rule provides guaranteed
income available for spending during the
fiscal year.

Current spending rule formula is:
4.7% of AIF’s market value.
(Actual rate set by the Budget Office
annually)
Goals of the Endowment
Purpose of investment is to preserve and
grow the endowment’s principal.
 Hedge against inflation.
 To generate income to provide financial
support today and in the future.

University Endowment as of June 30, 2003

$3.547 Billion at
June 30, 2003.
 Endowment income
provides for 3.7% of
the University’s
operating budget.
ENDOWMENT BY PURPOSE
Undergrad/Grad
Financial Aid *
17.3%
Other
3.2%
Research
4.3%
Health Care
15.0%
Acad. Support
1.5%
* Includes graduate stipends.
Instruction
58.7%
Budgeting Endowment Income
During the normal budget preparation
cycle, the Budget Office will load the
estimated endowment income into the
Pillar files.
 However, if a new gift is received
between budget periods, income
estimates will need to be increased for
the additional income generated by the
investment of the new gift.

Important Items to Remember
Review the fund’s trust sheet.
 Monitor expenditures on a regular basis.

Ensure expenses are appropriate.
 Follow University policies and procedures.

Most Important Item to Remember

The University has a fiduciary
responsibility to ensure that the donor’s
wishes are met.
Endowment & Gift Training

For more information on gifts &
endowments:
Financial Training is offering
“Endowment & Gift Training”
Check out the web site
www.finance.upenn.edu/ftd
Financing Training

The training materials are online @
www.finance.upenn.edu/ftd
look under documentation
Investment Services
Contact us @:

Email: [email protected]

Web: www.finance.upenn.edu/treasurer/investments

Phone: 215.898.9644
Special thanks to Brent Parker
For all his hard work that went into the
financial training materials, which we
shamelessly “borrowed” when creating
this presentation.