Endowment Management Policy

Purpose

Ontario Tech University receives endowment funding from Donors for purposes including student awards, scholarships, bursaries, and program enrichment.  The Board may also make allocations at its discretion to existing endowment funds or to establish new Board restricted endowment funds. The University is charged with investing endowment funds in order to maximize the benefit to both current and future beneficiaries. The purpose of this Policy is to outline the objectives and principles by which the University’s endowment funds are established, administered and disbursed. 

Definitions

“Capital Preservation” means protecting the earnings power of the original Endowed Fund by capitalizing a cumulative amount equal to the annual rate of increase of the Consumer Price Index (CPI) Canada.

“Donor” means a person, foundation, or organization that makes a Gift that is eligible for a donation receipt.

 “Endowed Fund” means a principal or capital sum and subsequent capital contributions, set aside permanently and invested by the University with only the income (all or a portion thereof) disbursed to support specific programs or projects, often based on donor direction in accordance with the Endowment Fund Agreement or terms of reference for the Endowed Fund.

“Endowment” means the total value of the University’s Endowed Funds.  The Endowment is the sum of individual Endowed Funds, each representing the original value of the donation and additions made for inflation and other capitalized amounts as directed.

“Endowed Fund Agreement” or “Gift Agreement” means a document establishing the Endowed Fund and describing the name, purpose, funding and administration of an Endowed Fund, normally signed by the Donor and the University.

“Gift” means a voluntary transfer of cash and/or in-kind, from individuals, industry, foundations, and other sources to the University for either unrestricted or restricted utilization in the operation of the University. Gifts are made without expectation of tangible return; no consideration to the Donor or anyone designated by the Donor may result from these contributions. Gifts may be monetary or non-monetary (e.g. securities, real property).

“Stabilization Fund” means the fund established to smooth the year over year fluctuations in earnings by providing a reserve to be used when the Endowment Fund does not earn sufficient income to cover approved annual spending amounts. The Stabilization Fund holds cumulative net investment returns above those allocated for spending and capital preservation.

Scope and authority

This Policy applies to all University Endowed Funds and related Endowment Fund Agreements, unless specifically exempted by the Audit & Finance Committee of the Board of Governors.

The Audit & Finance Committee, through the office of the Vice-President Administration, or successor thereof, is the Policy Owner and is responsible for overseeing the implementation, administration and interpretation of this Policy.

Policy

The objective of the Endowment Management Policy is to allow annual spending requirements to be met while preserving as much of the purchasing power of the Endowment as possible.

General

1. Individual Endowed Funds are established when a donor(s) makes a commitment to contribute a minimum of $25,000 to the Endowment. Under exceptional circumstances, this limit may be waived by the Vice President, Administration and Vice President, Advancement.  In accordance with the Gift Acceptance Policy, a written agreement with the Donor(s) stipulates the purpose and terms of the gift(s).  Donors may make contributions of any amount to established Endowed Funds.
2. Endowed Funds are invested on a pooled basis in order to optimize net return and the diversification of risk.   Net return is the total gains and losses from the endowment pool after deducting investment and administrative fees. Total gains and losses include interest income, dividend income, and realized and unrealized capital gains and losses.
3. Endowed Funds are managed by the University’s external investment manager(s) in accordance with the Statement of Investment Policies and Asset Class Management Procedures (“Investment Policy”).
4. Annually the net return is allocated to the Endowed Funds to support Spending; Capital Preservation; and Stabilization.

Capital Preservation

1. To preserve the purchasing power of the Endowed Fund, a portion of the total net investment return equivalent to the preceding year’s Consumer Price Index (CPI) Canada, will be set aside and allocated annually to the Endowed Fund capital.

Spending

1. An annual spending level will be authorized by a resolution of the Board of Governors. In recognition of the reliance the University community places on the annual spending to support student awards, bursaries and scholarships, the Board strives to maintain the stability of the spending level year over year.

Stabilization Fund

1. The Stabilization Fund will not exceed 15% of the Endowed Fund.   Annually, when a stabilization fund reaches the 15% maximum, excess balances will be considered for capitalization into the Endowed Fund or for one-time disbursement for the purposes of the Endowed Fund.
2. Should the Stabilization Fund be insufficient to support committed spending and capital preservation there may be, after approval by the Board of Governors:
   1. A delay in spending; or
   2. Suspension of the capital preservation; or
   3. Encroachment on capital where permitted by the Endowment Fund Agreement.

Reporting

1. An annual Endowment Report will be presented to the Strategy and Planning Committee and the Audit and Finance Committee. This report will highlight additions, earnings, disbursements, and the net position of the Endowment and the Stabilization Fund.

Monitoring and Review

This Policy will be reviewed as necessary and at least every three years. The Vice-President, Administration, or successor thereof, is responsible to monitor and review this Policy.

Relevant Legislation

Income Tax Act, RSC, 1985, c. 1 (5^th supp.)

Related Policies, Procedures & Documents

Endowment Management Procedures
Statement of Investment Policy
Asset Class Management Procedures
Naming of Physical University Assets Policy
Gift Acceptance Policy
Gift Registry Procedures
Signing Authority Policy
Expenditure Signing Authority Procedures