| Applies to: | Original Policy Date: | Date of Last Review: | Approved By: |
|---|---|---|---|
| All Florida Tech Employees | 2/20/2024 | 2/20/2024 | Dr. John Nicklow, President |
Policy Owner: VP Finance/CFO.
Policy Purpose
It is the policy of Florida Institute of Technology (the University) to adopt and adhere to all laws and standards that are designed to ensure the proper stewardship of contributions and endowment funds. Except as modified by the terms in this document, the University’s endowments will be managed and operated in accordance with the Uniform Prudent Management of Institutional Funds Act, hereinafter referred to as “UPMIFA”, as adopted and in effect in the State of Florida. UPMIFA provides guidance on investment decisions and endowment expenditures for nonprofit and charitable organizations. Expendable gifts and endowed funds are an important part of the University’s operations and play an integral role in helping the University achieve its goals. The donor-restrictions on gifts and endowed funds impose upon the University contractual, legal, and ethical obligations, as well as financial and management reporting responsibilities.
Policy Scope
This policy, combined with two other policies, guide the stewardship of the University’s expendable gifts and endowed funds. The office of Philanthropy has a Gift Acceptance, Management and Disposition (GAMD) policy and the University’s Board of Trustees has an Investment Policy Statement (IPS). All gifts received, whether expendable or for an endowment, shall comply with the GAMD. The investment of the endowment funds shall be in accordance with the IPS; and endowment earnings shall be spent in accordance with the spending policy within the IPS. The Investment Committee of the Board of Trustees, within the broad framework of policy set by the Board of Trustees, shall have direct responsibility for the oversight and management of the endowment funds and for the establishment of investment policies and procedures.
Policy Statement
UPMIFA provides guidance on investment decisions and endowment expenditures for nonprofit and charitable organizations.
Procedures/Guidelines
Refer to Sections “Stewardship of Endowed Funds” and “Stewardship of Expendable Contributions”.
Definitions
An endowment is an established fund of cash, securities, or other assets set aside in perpetuity to provide long-term funding for a specific purpose.
Responsibilities
- President, or his/her designee
- Vice President for Philanthropy
- General Counsel
- Vice President for Finance and Administration and CFO
- Provost and Chief Academic Officer
Stewardship of Endowed Funds
True Endowment
True endowments are created by a donor with the stipulation, as a condition of the gift instrument (or other directive), that the initial investment (principal) is to be maintained and invested in perpetuity to produce income, investment growth, or both. The principal of a true endowment is held in perpetuity, and the earnings from the invested assets are allocated and spent per the donor’s specifications and this policy. The value of the original gift and any other amounts stipulated by the donor to be maintained in perpetuity shall be classified as permanently restricted funds and referred to as the corpus value.
True endowments can be undesignated as endowment with the approval of the donor, a court order, or, in certain circumstances, with the notice and/or consent of the Florida Attorney General. The Board of Trustees shall have the power to modify any restriction or condition imposed by a donor on the investment or distribution of assets if, in the sole judgment of the Board of Trustees, such restriction or condition becomes illegal, unnecessary, uneconomical, impossible to perform, or inconsistent with the mission of the University, and such modification would more effectively serve the mission of the University, taking into consideration the wishes of the donor. In the unlikely event that this becomes necessary, the donor(s) will be notified and provided 30 days to object to any such modification. The absence of any explicit objection to such modification will be deemed “approved” on the date following 60 days from the date of notice. If a donor explicitly objects to the modification, the University will notify the Attorney General of the State of Florida in accordance with UPMIFA guidelines.
Term Endowment
A term endowment is created when a donor specifies that the funds must be held and invested until the passage of a specified time or the occurrence of a specified event. In rare circumstances, if Florida Tech is unable to spend donor-restricted contributions in the near-term, then it may consider the long-term investment of these funds into a board-designated term endowment fund.
Funds Functioning as Endowment (FFEs or Quasi Endowments): Florida Tech, at the sole discretion of its Board of Trustees, may earmark a portion of the University’s currently available net assets as board-designated endowment funds, or funds functioning as an endowment. These endowments can be dissolved at any time at the sole discretion of the Florida Tech Board of Trustees. These funds function like an endowment, but without legal or donor restriction to hold the funds permanently.
Minimum Endowment Amount
This policy aims to ensure that the work required in managing and reporting endowments is not overly encumbered by numerous smaller funds. The minimum amount to establish a new donor designated, or true endowment fund, is $25,000. Exceptions to this may be recommended to the President by the VP of Philanthropy to achieve the long-term goals of the University, provided that the spending goal for the endowment, as articulated in the IPS, is met.
Growth Endowments
In accordance with the GAMD policy, an endowment may be established with an initial gift of less than the minimum endowment amount if there is a reasonable expectation that the minimum amount will be reached within a five-year period. This expectation could come from a donor pledge or from a fundraising campaign as in the case of memorial endowments contributed to by many donors. During the period between establishment and achieving the minimum endowment amount, all investment earnings (losses) will be added to the endowment corpus, except if directed otherwise by the donor(s). If the corpus does not reach the minimum of $25,000 within the five-year period, the VP of Philanthropy will work with the donor(s) to resolve the issue, typically by either giving the endowment more time to activate or agreeing to undesignated the fund as an endowment and transition it to an expendable gift.
Endowment Investment Pool
The endowment funds will be invested in a common investment portfolio (the endowment pool) and managed by the Investment Committee of the Board of Trustees, in accordance with the IPS. Individual endowment funds will be placed in the endowment pool and investment earnings and losses will be allocated based on the individual endowment’s purchased units of the total portfolio, based on a market value per unit (MVU) calculated periodically, or on a dollarized value of each endowment, represented by each endowment’s proportionate interest in the endowment pool. When an endowment is established with a gift of a non-liquid, non-earning asset (e.g., real estate), that endowment gift will not be part of the endowment investment pool until that asset is sold.
Spending Distribution
The amount of net assets of the endowments within the endowment pool shall be reduced when the governing board appropriates for expenditures funds from the investment portfolio. Upon appropriation for expenditure, appropriated funds shall be released from their restrictions if the funds are used in accordance with the donor’s stipulations in the gift instrument (or other documents), according to FASB guidance. If purpose or time restriction on true or term endowments have not been fulfilled, those funds shall remain in the endowment pool and shall not be distributed for expenditure or be held for future expenditures outside of the endowment pool.
The Board of Trustees will approve spending distributions for each endowment fund from the endowment pool on an annual basis as part of its annual budget process. Such distributions will be consistent with terms of this policy, the IPS, and the relevant gift document.
Endowment Gift Acceptance: The Office of Philanthropy is responsible for accepting gifts and pledges. The GAMD policy defines the steps that must be taken to accept an endowment gift. Prior to soliciting or accepting any gift that establishes an endowment fund, the University must understand the proposed terms of the endowment fund and the restrictions on spending and use and have confidence that the University will be able to administer and expend the endowed funds in accordance with the terms and restrictions imposed by the donor. A gift instrument, such as a memorandum of understanding (MOU), or executed will, must include provisions identified in the GAMD policy.
Financial Reporting
All endowments must be set up in the University’s enterprise resource planning (ERP) system, which is the University’s official system of record for financial transactions. The Office of Philanthropy will forward to the Controller’s office a request to establish an endowed fund and provide the executed gift instrument, as defined by the University’s GAMD policy, to establish an endowment. The Controller’s office shall not establish an endowment fund without the appropriate documentation, as defined in the GAMD policy.
Calculation of Endowment Payout
New endowment funds must be received and invested in the endowment pool prior to 12/17 of any calendar year, to be included in the endowment payout calculation for the next fiscal year. For example, endowment gifts received and deposited on or prior to 12/17 of the then current calendar year, will be included in the payout calculation for the next fiscal year (fiscal year begun 7/1). According to best practice, Florida Tech shall establish operational policies and procedures that govern the endowment pool, including, but not limited to, policies and procedures for:
- Methods and frequency of moving money into and out of the endowment pool
- Determining which funds are eligible for investment in the endowment pool
- Setting and allocating administrative fees
- Permitting or prohibiting loans from the endowment pool
- Recording and tracking the use of the endowment spending distribution
- Withdrawing the endowment spending distribution from the endowment pool
- Returning unused donor-restricted endowment distributions to the endowment pool
- Handling spending formula exceptions
Budgeting Endowment Payouts
Annually, after the end of each calendar year, the accounting office shall calculate the amount to be appropriated from endowment funds for the upcoming fiscal year based on the calculation of endowment payout per the IPS. The payout of the endowment funds shall be included in the University’s annual operating budget. The University’s budget office, in collaboration and consultation with the University’s executive management, shall budget the payout of endowed funds in accordance with the underlying stipulations imposed by the donor and the University’s Endowment Policy. Upon appropriation for expenditure, the restriction(s) on the funds will expire and the funds will be released from their donor restrictions. If donor stipulations cannot be met, those funds shall remain in the endowment pool until those purpose restrictions have been satisfied as determined by the President, or, if distributed, returned to the endowment pool based on the operational policies and procedures established by the University. Funds appropriated for expenditure shall not remain in the University’s unrestricted net assets to be budgeted in future fiscal years.
Charging Expenses to the Endowment
The University’s Accounting office will work with the executive management and the Office of Philanthropy to ensure that the expenditure of endowment funds appropriated for expenditure complies with the terms of the gift instrument, applicable legal and accounting standards, and University policies. The University’s Chief Financial Officer will certify and represent annually that the payout of all endowed funds has been released from restrictions according to the donor’s designation.
Stewardship of Expendable Contributions
Outright Gifts
Outright gifts are gifts offered to the University by an individual, corporation, or foundation and include the following:
- Cash, cash equivalent (gifts-in-kind), and/or a written cash pledge to be paid over a period of time
- Stocks: publicly traded, closely held, restricted, or other types of stock
- Bonds
- Mutual Funds
- Real Estate: gifts are accepted on a case-by-case basis
Expenditure of Contributions
The University shall recognize the expiration of a donor-imposed restriction on a contribution in the period in which the restriction expires. A restriction shall be considered to have expired when the donor stipulated time has elapsed, when the donor stipulated purpose has been fulfilled, or both. If two or more restrictions on a contribution exist, the University shall recognize the expiration of those restrictions in the period in which the last remaining restriction has expired. Donor gifts without time restrictions will be considered to
Donor funds will generally be expended prior to the University’s unrestricted funds in order to meet donor expectations. If an expense is incurred for a purpose for which both donor restricted funds and the University’s unrestricted funds are available, donor restricted funds will be applied first to meet that expense and the donor-imposed restriction will be considered to be fulfilled, unless the expense is for a purpose that is directly attributable to another specific external source of revenue, such as a sponsored exchange agreement or a conditional award from a government agency, private foundation, or others.
Financial Reporting
All expendable gifts must be recorded in the University’s ERP system, which is the University’s official system of record for financial transactions. The Office of Philanthropy shall establish a new gift in the University’s ERP system, including the appropriate financial work tags once an executed gift instrument is received, as defined by the University’s GAMD policy. New gifts shall not be recorded without the appropriate documentation, as defined in the GAMD policy. All new gifts entered by the Office of Philanthropy shall require review and approval by the University’s Accounting Office.
Budgeting Expendable Gifts
Gifts that are anticipated may be budgeted and spent in advance. For example, this includes gifts that are raised annually for specific purposes and gifts for which an established history of giving has been observed. Budgeting for anticipated gifts will be done annually through the University’s budget development process. If anticipated gifts are not received within the current fiscal year, the University, at its sole discretion, may cover the funds from net income without restriction so that operations will not be disrupted. Gifts may also be budgeted on an ad hoc basis during the year as unexpected needs arise, such as for emergency relief efforts. Contributions from donors should, as a matter of best practice, be recognized and expended in the fiscal year in which they are received.
Charging Expenses to Expendable Gifts
The Accounting Office will work with the executive management and the Office of Philanthropy to ensure that the expenditure of gift funds complies with the terms of the gift instrument, applicable legal and accounting standards, and the University’s policies and procedures. The Accounting Office will complete an annual audit at the end of each fiscal year to ensure that all contributions have been appropriately released from their restrictions.