Gifts

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Gifts Endowments

• ABA Presentation
• April 21, 2004

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Question Which items has the University NOT
received as gifts?

• A. Teeth
• B. Gas station
• C. Stud horse
• D. Napoleons hair

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Answer

• Its a trick. We have received them all.

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What is a gift?

• A gift is a voluntary transfer of cash,
  securities or property from a donor to the
  University.
• The University makes no commitment of resources
  or services in return for these gifts, other than
  a promise to use the gift as the donor wishes.

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Types of gifts

• Unrestricted gifts gifts where the donor has
  placed no restrictions. The University can use
  the gifts for current operations.
• Example Annual Giving to a School/Center

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Types of Gifts

• Restricted Gifts a gift where the donor has
  placed limitations or conditions on how or when
  the gift can be used.
• Examples
• Operating provide short term support for a
  lecture series
• Capital construct a building, renovate a
  classroom
• Endowment establish a professorship, provide
  scholarship

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Gift Receipts
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What is not a gift?

• Funds given in exchange for goods or services
  rendered is not a gift.
• Examples
• Tuition
• Tickets to an Annenberg Center production

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Grants are not gifts

• Grants qualify as payment for services rendered.

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What is a grant?

• A grant needs to meet just one of the following
  criteria
• The project commits the University to a specific
  line of scholarly inquiry, typically documented
  by a statement of work.
• A specific commitment is made regarding the level
  of personnel effort, deliverables, or milestones.

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What is a grant?

• Project activities are budgeted, and the award
  includes conditions for specific formal fiscal
  reports and/or invoicing.
• The project requires that unexpended funds be
  returned to the funding source at the end of the
  project period.
• The agreement provides for the disposition of
  either tangible or intangible property which may
  result from the project.

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Grants

• When in doubt, call
• Office of Research Services
• 215.898.7293
• or
• Investment Services
• 215.898.9644

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What is an Endowment?

• An Endowment is a permanent fund of property or
  money bestowed upon an institution or a person,
  the income of which is used to serve the specific
  purpose for which the gift was intended.
• -Dictionary of Business Terms

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True Endowment

• A gift where the donor has stipulated that the
  principal will remain intact forever, in
  perpetuity. The donor wishes only the income to
  be spent to provide support for a specific
  program.
• Permanently Restricted Fund

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Term Endowment

• A gift where the donor has designated the gift as
  an endowment, but has given the University the
  right to invade principal upon the passage of
  time or the occurrence of an event. Sometimes
  known as a wasting endowment.
• Temporarily Restricted Fund

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Funds Functioning as Endowment

• Refers to gifts or sums of money that the
  Trustees of the University, rather than the
  donors, have determined will be invested as an
  endowment.
• Unrestricted Fund

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Investment of Endowments

• The endowment is invested in Associated
  Investment Fund (AIF), which is a pooled
  investment vehicle much like a mutual fund.
• The Universitys AIF investments are managed by
  the Office of Investments.

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AIF as of June 30, 2003

• AIF is invested in
• Domestic and
• international equities
• Fixed income high
• yield securities
• Real estate
• Other investments

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AIF Performance Income Distribution

• AIF performance is computed and reported on a
  total return basis.
• This includes both appreciation and income
  earned.
• Income and gains are distributed monthly.
• One month lag to general ledger.
• Example Julys income is posted in August.

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What is Spending Rule?

• Spending rule provides guaranteed income
  available for spending during the fiscal year.
• Current spending rule formula is
• 4.7 of AIFs market value.
• (Actual rate set by the Budget Office
  annually)

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Goals of the Endowment

• Purpose of investment is to preserve and grow the
  endowments principal.
• Hedge against inflation.
• To generate income to provide financial support
  today and in the future.

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University Endowment as of June 30, 2003

• 3.547 Billion atJune 30, 2003.
• Endowment income provides for 3.7 of the
  Universitysoperating budget.

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Budgeting Endowment Income

• During the normal budget preparation cycle, the
  Budget Office will load the estimated endowment
  income into the Pillar files.
• However, if a new gift is received between budget
  periods, income estimates will need to be
  increased for the additional income generated by
  the investment of the new gift.

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Important Items to Remember

• Review the funds trust sheet.
• Monitor expenditures on a regular basis.
• Ensure expenses are appropriate.
• Follow University policies and procedures.

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Most Important Item to Remember

• The University has a fiduciary responsibility to
  ensure that the donors wishes are met.

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Endowment Gift Training

• For more information on gifts endowments
• Financial Training is offering
• Endowment Gift Training
• Check out the web site
• www.finance.upenn.edu/ftd

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Financing Training

• The training materials are online _at_
• www.finance.upenn.edu/ftd
• look under documentation

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Investment Services

• Contact us _at_
• Email Trustadm_at_pobox.upenn.edu
• Web www.finance.upenn.edu/treasurer/investments
• Phone [phone]

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Special thanks to Brent Parker

• For all his hard work that went into the
  financial training materials, which we
  shamelessly borrowed when creating
• this presentation.