Transcript The University of Georgia Foundation

University of Georgia
External Affairs Division
Office of Financial Services
Spending Budgets
Arch Foundation for the University of Georgia
The University of Georgia Foundation
October 26, 2010
Spending Budgets
Policies and Procedures
• Available online:
Arch Foundation www.uga.edu/archfoundation
UGA Foundation www.externalaffairs.uga.edu/ugaf
• Policy Section 7.3 (both Foundations)
• Endowment Guide / FAQ
Spending Budgets
Policies and Procedures
• Georgia law requires a spending policy for endowments.
• July 1, 2008, the Foundations adopted the State of Georgia’s
Uniform Prudent Management of Institutional Funds Act
(UPMIFA).
• UPMIFA requires the preservation of the fair value of
the original gift as of the gift date of the donor restricted
endowment funds absent explicit donor stipulations to
the contrary.
• The Foundations will protect your endowment by
monitoring spending.
Spending Budgets
Policies and Procedures
• The Foundations adopted a new spending budget method in
January 2010.
• The new method attempts to:
• Reduce the spending volatility.
• Include predetermined inflation factor.
• Will target a spend rate - currently 4%.
• Maintain the purchasing power of endowment assets.
Spending Budgets
Spending Budget Formula
Current year spending budget (annual funding):
(80% x ((1+CPI) x prior year spending budget)) +
(20% x (4% x endowment market value*)) =
Spending Calculation.
Spending Budget = lesser of
(1) Spending Calculation, or
(2) Available Investment Return.
* Based on value as of December 31.
Spending Budgets
Spending Budget Formula - Example
Fund XYZ:
Endowment Market Value = $50,000
Prior year spending budget = $2,000
Available Investment Return = $1,500
CPI = 2%
(80% x ((1+2%) x 2000 )) + (20% x (4% x 50000)) =
$2,032 = Spending Calculation
Spending Budget = $1,500 (lesser of $2032 vs $1500)
Spending Budgets
Timeline for Fiscal Year 2012
February 2011:
• Foundation investment committees determine Spending
Rate for next fiscal year (FY12).
March 2011:
• Spending budgets calculation based on December 31 data.
• FY12 Spending budgets available on IFAS dashboards.
April 2011:
• Begin dollar cost average funding of spending budgets for
FY12.
Spending Budgets
Timeline for Fiscal Year 2012
August 2011:
• FY11 final spending budget reports available.
• FY12 spending budget reports available.
• Spending budget will be fully funded and held as cash.
• Funds with cash balances greater than two years
spending will not be liquidated.
• Excess cash balances greater than two years spending
will be reinvested automatically.
• Cash balances can be reinvested more frequently at
request of VP / Dean / Director.
Spending Budgets
Requirements before Spending from
Endowments
• Fund agreement is signed.
• Endowment minimum is met.
• Invested for at least twelve months.
• Calculation based on December 31 market value for all
funds with twelve months of data.
• A second calculation based on June 30 market value for
new funds that have reached the twelve months of data.
Spending Budgets
Funding Available for Endowments
• Investment Returns
• Gift Allocation
• Represents any gifts or transfers to support current spending,
not intended for investment in the endowment.
• UGAF Allocation
• Represents one-time funding for current spending as
requested by the Provost.
Spending Budgets
Current Spending Budget Report
Spending Budgets
Current Spending Budget Report
Spending Budgets
Projections
• Projections are a tool for long-term endowment spending.
• Each fund should be reviewed individually.
• Based on best assumptions available to the Foundations.
• Will be distributed at least bi-annually for each endowment.
Spending Budgets
Projection Template Assumptions
Spending Budgets
Projection Template Example #1
Spending Budgets
Projection Template Example #2
Spending Budgets
Projection Template Example #3
Spending Budgets
Projection Template Example #4
Spending Budgets
Endowed Giving
Spending Budgets
IFAS Access and Training
• Access forms for both Foundations are on their respective
websites.
• Future training dates:
• November 18.
• Register through UGA Training and Development.
Spending Budgets
Contact Us
Jenny Dutton:
• (706) 542-6458
• [email protected]
Ryan Hitchins
• (706) 583-0758
• [email protected]