Endowment spending and accountability procedures

Primer on endowments

Common terms

Endowment levels

Process for establishing

Sample agreement

Endowments and 
Guidelines for Their Use
(site under construction)

Endowment funds are those designated to be retained and invested for income-producing purposes. Income from endowments can be restricted or unrestricted, based on donor direction. Endowment funds are managed and invested by the University of Texas Investment Management Company (UTIMCO). Endowment income is distributed quarterly to UTMB operating accounts. Once received at UTMB, the funds are available for expenditure by endowment managers.

The University of Texas Medical Branch considers the process of naming individuals to endowed or named positions a high institutional priority. The members of the faculty who are named to such positions represent the highest academic, research, and service standards.

Principles

• First and foremost, income from UTMB endowments will be used in accordance with, and in the spirit of, the contributor’s wishes. All endowments require a written gift agreement signed by the contributor that details the purposes and restrictions for expenditures.

• Generally, endowment funds established to support chairs, professorships, fellowships, and other UTMB faculty and administrator positions should be used to support the academic work of the faculty member or administrator occupying the endowed position, or activities of the department, program or school where the endowment holder is assigned. Appropriate uses of endowment income funds could include, but are not limited to: salary (for self or staff), equipment, professional travel (for UTMB employees only) and development, student support, administrative overhead, or other expenses necessary to support the holder’s scholarly activities, consultants, clinical work, curriculum development, publications, or recruitment expenses. Each Dean or the President has the discretion to require that a portion of the income from an endowed position be used to supplement the holder’s salary.

• Using endowment funds to support internal or external sponsorships (e.g. to “buy” tables at events) or to make “gifts” to internal or external charities (President’s Cabinet memberships) is not appropriate. It is also inappropriate to utilize endowment income for purely social events (unrelated to the endowment’s purpose), such as office parties, club memberships, or other activities that do not have academic purposes.

• Unless otherwise allowable in the gift agreement, the following represents a list of routinely non-allowable expenditures from endowment funds:

  Business Entertainment, Community Service, Contributions-Institutional, Employee Coffee & Soft Drinks, Employee or Employee Retirement Celebration, Hospitality, Membership Dues (Private Club, Institutional, Texas Associations), Non-Employee Expenses, Parking Fees (Employee, Faculty, Patients or Other), Parking Tokens, Private Club Dues, Professional Fees, Purchase of Motor Vehicles, Special Accounting Transactions, Travel and Travel Non-Employee, and Works of Art

  Exceptions and special requests require written justification submitted to and approved by the Dean.

• Generally, endowed funds established to support students can be used for scholarships (tuition, books, housing, fees) or to fund other programs or expenses that support student development and training (travel, equipment, meetings, publications, projects). The contributor cannot designate the specific faculty member, student or other beneficiary of the income from the fund. The awarding of scholarships must be managed and determined by the Dean or their designee.

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Endowment Spending and Accountability Procedures

The endowment holder, within the parameters of this policy, is responsible for determining the use of endowment income.

The holders of all endowed positions may be appointed to a position for as many as five years. At the end of the appointment, the position will be reviewed by the Dean, President, or designee and the current holder may be reappointed to the position or another holder many be identified. A Dean or the President may reassign endowed positions before the end of an appointment when appropriate.

Endowment managers have a responsibility to utilize endowment income and not allow distributed income to accumulate excessively. Endowment income may accumulate as fund balance if these funds are being sequestered for a specific purpose (i.e. a vacant endowed position or plans to accumulate funds for a major expenditure such as equipment) and then only after communication with the Dean or President and the endowment benefactor. UTMB has created a standard and schedule for excessive accumulation of endowment operating accounts.

Operating fund balance is:

>=$50,000 and >=15% of the Market Value

>=$25,000 <=$49,999 and >=30% of the Market Value

<=$24,999 and >=50% of the Market Value

A spending plan detailing the purpose of retaining such a balance and the future plan for expending these funds is required for any account that qualifies as excessive and requires sign-off by the appropriate Dean or the President. A sample plan has been developed for use in detailing the expenditures of three-year’s accumulated income. Likewise, endowed scholarship income should be spent or reinvested to ensure that the maximum number of students are benefiting from scholarship endowments.

On an annual basis or as otherwise scheduled, two reports will be provided to endowment benefactors (if they or their heirs are living):

1. Financial report regarding the growth of the endowment (generated by the Office of University Advancement “OUA”)

2. Stewardship report regarding the use of the endowment income (generated by the endowment manager or endowment holder and coordinated through OUA). Endowment funds may be withheld from endowment managers and/or holders of endowed positions who are not in compliance with institutional endowment compliance guidelines.

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A Primer on Endowments

Endowment funds are received from a contributor with the restriction that the principal not be expended. Endowments are set up to last forever and require the contributor to sign a legally binding written agreement that details the purpose of the endowment and any restrictions on the expenditures from the endowment income. Endowment funds are invested and the income from the investments is distributed to individual endowment income accounts (operating accounts) to support scholarships, teaching and research programs.

The U. T. Board of Regents delegates investment management responsibility of endowment funds to UTIMCO, a 501(c) 3 investment management corporation dedicated solely to the management of investment assets controlled by the University of Texas System, subject to compliance with approved investment policies. UTIMCO invests the endowment funds in the U. T. System Long Term Fund ("LTF"), an internal mutual fund for the pooled investment of over 5,000 privately raised endowments and other long-term funds of the 15 component institutions for the U. T. System. Each endowment purchases units at the LTF's market value per unit on a quarterly buy-in date. Cash distributions are paid quarterly, on a per unit basis, directly to the component institutions. Distributions from the LTF to the individual endowment income accounts support scholarships, teaching and research programs across the U.T. System.

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Some common terms used in endowments:

Quasi-endowment – an endowment established not by a contributor but by the institution through the transfer of institutional funds. Unlike permanent endowments, quasi-endowments can be returned to the institution. Otherwise, permanent and quasi-endowments are exactly the same and are equally valuable to the institution.

Book value or corpus value – the monetary amount actually contributed to the endowment. The amount of the book value is used to determine whether the endowment is designated as a professorship, distinguished professorship, chair, etc.

Market value – the current value of the LTF units purchased by the endowment. Distributions from the endowment are based on a percentage of the market value.

Operating income – monies distributed from the endowment to the account for spending. Distributions are made every quarter. Approximately 4.5-5% of the market value of an endowment is distributed to the endowment income account at UTMB.

Operating balance or fund balance –income that has accumulated in an operating account, is uncommitted and, otherwise, available for expenditure.

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Endowment Levels

The minimum gift size for endowments are as follows:

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Process for establishing endowments

1. The Assistant Vice President for Development (AVP) in the Office of University Advancement (OUA) is the campus representative at 772-5719 for information about potential contributions or questions about funding opportunities at UTMB. The AVP is responsible for assigning a Director of Development (DOD) to work with a prospective contributor about their interest in giving and to create a gift agreement if necessary (sample attached). Components of a gift agreement include a written statement of the contributor intentions and other requirements surrounding the use of distributed funds from their contribution, name of endowment, amount of payment and/or pledge schedule, type of endowment, contributor signature and date.

2. Gift agreements may be drafted by the DOD or in collaboration with the Endowment Compliance Officer (ECO). Requests for draft gift agreement review by the Office of Estates and Trusts at the University of Texas System (UTS) are coordinated by the ECO and should be received from the director of development at least one week prior to submitting the final version of the gift agreement to a prospective contributor. The ECO is responsible for securing the approval of a draft gift agreement by the UT System representative and forwarding the approved version to the DOD for presentation to the prospective contributor.

3. If amendments are recommended by UTS, the revised draft agreement is returned to the director of development for another review.

4. The DOD is responsible for submitting a gift agreement to the endowment contributor for signature.

5. If a contribution results, the DOD is responsible for forwarding the signed gift agreement, contribution (where appropriate) and a brief biographical sketch of the contributor and person(s) honored by the gift agreement to Advancement Services in OUA.

6. OUA is responsible for Notifying the recipient of the funding Working with the department or area to receive the funds

• to identify an account number where funds are currently held for first gift (if previous gifts have been made) or to receive the PeopleSoft account load form for a new endowment account number

C. Reviewing all materials and preparing the on-line submission to the Office of Estates and Trusts at the University of Texas System for approval.

7. Financial Management is responsible for generating new accounts for the endowment corpus (endowment contribution) and for the wire transfer of all endowment contributions to UTS.

1. UTS notifies the President’s Office and OUA once a new endowment has been officially accepted. The ECO has the ability to review the status of an endowment submission and is responsible for working with UTS to assure a timely acceptance.

9. Advancement Services is responsible for notifying the department or area about the details of the contribution and the parameters of the gift agreement as established by the contributor(s). The account signatory(ies) and the holder of an endowment academic position (where applicable) receive the following materials to support a new endowment:

a. UTMB endowment compliance plan,

b. Gift agreement, biographical sketch and any other documents that support and clarify the intention of the contributor,

c. PeopleSoft account load form,

d. Guidelines for requesting budget,

e. Stewardship requirements and schedule for reporting to contributor(s),

f. Guidelines for unacceptable expenditures and

g. Responsibilities of signatory(ies) and holder of an academic position (where applicable).

 
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(Gift only)

SAMPLE ENDOWMENT AGREEMENT

I/We,                                   , hereby give to the Board of Regents of The University of Texas System for the use and benefit of The University of Texas at                           the following gift(s):

(Please describe)

Said gift(s) shall be used to create the       (Endowment Name)       for the  (college/department)      as a permanent endowment.  Funds distributed from the endowment shall be used    (Statement of Use)   .*

  Said endowment shall never become a part of the Permanent University Fund, the Available University Fund or the General Fund of the State of Texas, and shall never be subject to appropriation by the legislature of the State of Texas.  These funds and all future additions to the endowment, made by myself/ourselves or others, including the Board of Regents or The University of Texas at ______________ administration, shall be subject to the provisions of this instrument and shall be classified as permanent endowment funds.  If in the opinion of the Board of Regents of The University of Texas System, future circumstances change so that the purposes for which the endowment is established become illegal, impractical, or no longer able to be carried out to meet the needs of The University of Texas at _________, said Board of Regents may designate an alternative use for the endowment payout to further the objective of The University, in the spirit of my/our original purpose.