Endowment Management Policy

Purpose

The University  receives Endowment funding from Donors for a variety of purposes including student awards, scholarships, bursaries, and program enrichment.  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 trust and Endowment funds are established, administered and disbursed.  

Definitions

For the purposes of this Policy the following definitions apply:

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

“Endowed Fund” means a principal sum, set aside permanently and invested by the University with only the income (all or a portion thereof) used to support specific programs or projects, often based on Donor direction. 

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

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

“Stabilization Fund” means the fund established to smooth the year over year to smooth the year over year fluctuations in earnings, as well as provide a reserve to be used when the Endowment fund does not earn sufficient income to cover the approved spending amounts.

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 Chief Financial Officer, 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 original Endowment funds as possible.  

General

1. Endowment funds are established when a Donor(s) makes a contribution of $25,000 or more. Under exceptional circumstances this limit may be waived by the Chief Financial Officer (CFO) and Vice President, External Relations.  In accordance with the Gift Acceptance Policy, a written agreement with the Donor(s) stipulates the purpose and terms of the gift(s).
2. Funds are invested as a single pool in order to optimize net return and the diversification of risk.  However, for Donor reporting purposes, each Endowment Fund is accounted for individually.
3. Endowment assets are managed by the University’s external investment managers in accordance with the Statement of Investment Policies and Asset Class Management Procedures.

Preservation of Capital

1. In order to avoid a reduction over time in spending in real terms, due to the effects of inflation, a portion of the total net investment return will be added to the Endowment.
2. An Endowment investment objective will be to earn, over time, a rate of return at least equal to the total of the annual rate of increase of the Statistics Canada Consumer Price Index (CPI) for Ontario as at the preceding December 31^st, plus spending and the costs of investing and administering the funds.  Coupled with this investment objective is a spending or disbursement Policy that limits disbursements to an estimated long-term real rate of investment return (total investment return less inflation).  

Spending

1. A spending level will be authorized by a resolution of the Board of Governors in accordance with the Endowment Management Procedures.  

Stabilization Fund

1. The Stabilization Fund will collect earned income, consisting of interest and dividends, from the Endowment on an ongoing basis and will be managed using the authorized short-term instruments outlined in the Statement of Investment Policy and Asset Class Management Procedures.
2. The Stabilization Fund will not exceed 5% of the inflation adjusted cost of the Endowment and any excess earnings will be returned to the principle Endowment account. 
3. Whenever funds in the Stabilization Fund are insufficient to support committed spending there will be, after approval by the Board of Governors:
   1. A delay in spending;
   2. Execution of unrealized gains; or
   3. Expense(s) paid from operating funds.

Reporting

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

Monitoring and Review

This Policy will be reviewed as necessary and at least every three years. The Chief Financial Officer, 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 Acceptance Procedures

Signing Authority Policy

Signing Authority Registry and Approval Procedures

Planned Giving Program Guidelines