Endowment Management Procedures

Purpose

The purpose of these Procedures is to ensure the prudent administration of Donor and Board Endowed funds and to provide guidelines for the calculation and distribution of the annual amount available for spending.

Definitions

For the purposes of these Procedures the following definitions apply:

“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

These Procedures apply to all University Endowed Funds and related Endowed Fund Agreements, unless specifically exempted by the Audit & Finance Committee of the Board of Governors.

The Vice-President Administration, or successor thereof, is the Policy Owner and is responsible for overseeing the implementation, administration and interpretation of these Procedures.

Procedures

Duties and Responsibilities

1. University Advancement is responsible for the following, in accordance with the Gift Acceptance Policy and Procedures:

   1. Communicating with Donors to ensure the donation is of an appropriate size to generate sufficient annual investment return to meet the Endowed Fund objectives and that it complies with the minimum threshold as approved within the Endowment Management Policy to establish new named Endowed Fund.
   2. Preparing the Gift Agreement or other instrument establishing the Endowed Fund and ensure Donor(s) understands and agrees to the terms and conditions of the Gift Agreement.
   3. Assisting Donors with the transfer of any share donations.
   4. Confirming that accepted donations to existing Endowed Funds are in compliance with the pre-existing terms and conditions.
   5. Issuing charitable tax receipts in accordance with Canada Revenue Agency policy and guidelines.
   6. Maintaining the Donor database.
   7. Providing a copy of the Endowed Gift Agreement to Finance to enable Finance to appropriately administer the fund within the financial system.
   8. In consultation with the Office of the Registrar and/or appropriate faculty and staff, setting the specific terms of reference for a scholarship/student award or area of purpose, and subsequently communicating with Donors as to the names of award recipients and/or the availability of funds to support the award. For all Endowed Funds, the terms of reference should include the name of the fund; purpose; intended distribution; other relevant historical information.
   9. In conjunction with Finance, preparing and distributing Endowed Fund

      stewardship reports, on an annual basis.

2. Finance is responsible for:

   1. Establishing a unique account for each Endowed Fund in the financial
   2. Accounting for investments and allocating investment earnings in accordance with the Endowment Management Policy and these Procedures, as may be amended from time to time.
   3. Communicating with the external investment manager, and reporting on status of investments and related issues to the Audit and Finance Committee.
   4. Maintaining financial records that track for each Endowed Fund the capital contributions, accumulated capital preservation and stabilization, and the balance available for disbursement.
   5. Ensuring the annual spending from the Endowment does not exceed funds available.

   6. Providing direction to the Investment Manager to meet the Spending cash requirements including crystallization of unrealized gains when appropriate.

3. Office of the Registrar is responsible for:

   1. Understanding and complying with the terms and conditions specified in the Endowed Fund Agreement, or other instrument establishing an Endowed Fund, and all applicable University policies and procedures.
   2. Reporting any circumstances that have resulted in the inability to meet the terms and conditions of the Endowed Fund Agreement to Advancement.
   3. Communicating the availability of student awards and other relevant information to the student body.
   4. Disbursing the award to the selected recipient in accordance with the terms of the Endowed Fund Gift Agreement.
   5. Providing a listing of student award recipients, each year, to University Advancement.

Allocation of Investment Returns

1. Each Endowed Fund account will track
   1. Capital: original and subsequent contributions, plus capital preservation
   2. Spending: allocation and amounts spent, and
   3. Stabilization Fund: share of total net investment return after allocations for capital preservation and spending.
2. The net return available for disbursement is calculated on a total return basis and is comprised of interest, dividends, and the pooled fund distribution of realized and unrealized capital gains/losses net of investment manager, custodial, and other administrative fees. 
3. The annual investment return as at March 31st is allocated to each Endowed Fund Stabilization account in proportion to the total Endowment Fund balance. On an annual basis an allocation will be made from the Stabilization Fund for Spending and for Capital Preservation.
4. In the case of funds endowed during a fiscal year, the total annual investment return allocation will be prorated to the number of months in the fiscal year the funds were endowed.

Spending

1. The Spending level will be recommended to the Board of Governors for approval by the Strategy and Planning Committee on the recommendation of the Vice-President, Administration. The spending level will be reviewed annually on the basis of the long- term investment return experience of the Endowment.
2. Spending level for each Endowed Fund is calculated using a four-year rolling average of the inflation adjusted capital value of the Endowment.  The spending level enables investment return to be used to support the Endowment commitments over the long term.

Disbursement

1. A Disbursement Committee will be convened with membership from Finance, Advancement, and the Office of the Registrar. The Disbursement Committee provides recommendations on the annual individual disbursements to the Vice-President, Administration. 
   
   The Disbursement Committee’s recommendations will consider the spending level; prior year approved funding that was not distributed; requirements of each Endowed Fund as per their Gift Agreement; and the status of the Stabilization Fund.  The Committee will consider and recommend, when appropriate, permanent increases to individual Endowed Funds for award amount and/or number of awards.  Any changes to amount or number of awards will be made in consultation with the applicable Gift Agreement. 
   
   Should the Stabilization Fund be insufficient to meet the spending level plus capital protection, the Committee will make recommendations for alternatives requiring Board and/or Management approvals.
2. All Endowed Fund cash outflows required for disbursement purposes are to be met, first, from the realized annual net investment returns.  If realized investment income is insufficient to fund the required awards, Management has the authority to crystalize unrealized capital gains to fulfil this mandate.
3. The cash required to meet approved disbursement spending will be transferred from the Endowment investment to the Advancement cash account.

Monitoring and review

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

Relevant legislation

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Related policies, procedures & documents

Endowment Management Policy
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

Planned Giving Program Guidelines