Updated February 20121

Endowment Accounting

Growing Our Future

Updated February 20122

What is the balance in my endowment?

A simple question that does not have a simple answer

Each endowment has at least three answers to this question:– The book value– The market value– The available payout value

Updated February 20123

The book value

Also referred to as Corpus or Principal Equal to the original gift amount Only changes if additional gifts are made, spending

occurs from corpus (not income), or in some cases, if payout is reinvested

Has important legal and accounting implications under Uniform Prudent Management of Institutional Funds Act of 2007 (UPMIFA)

Updated February 20124

The market value

What the corpus is worth today Includes both the book (corpus) value and all

accumulated income and/or losses– GW uses total return on investments; there is no

difference between interest/dividend income and capital gains and losses

Payout reduces the market value, not the corpus

Updated February 20125

The available payout value

Board of Trustees authorizes a payout rate every May for the following fiscal year

Payout is like a dividend from a mutual fund– Each month the payout is distributed from the

investment pool (held at BNY Mellon) to GW’s operating cash

– Once distributed, the payout no longer participates in earnings, even if it is not spent

Updated February 20126

Spending the payout

Some departments spend previous years’ payout Some departments spend current year payout Payout will increase as new gifts are received and/or

payout is reinvested into corpus We encourage schools and departments to spend

the payout or reinvest it

Updated February 20127

Spending the payout

For some endowments the payout is automatically transferred each month to the department

– Professorships– Discretionary funds– General University support

Most scholarship endowments are drawn through Banner by the Offices of Financial Aid and Graduate Student Support

For some endowments, the Budget office will draw funds as needed

Updated February 20128

Spending the payout

Endowment spending must be approved by Treasury Management as follows:

– Send the request form to Treasury Management, who will prepare a check request

Most prizes and awards are done this way Stipends usually are done this way

– Spend out of departmental C or R funds, and send the request form to Treasury Management for reimbursement

Visiting scholar, travel, and special events are done this way

Updated February 20129

Spending the payout

When completing your request, be sure to include:– Copies of supporting documentation

These will not be returned – please do not submit originals

– Signatures for approval– Check requests require the payee’s Social Security Number

for tax purposes– Do not include personal information, such as Social

Security Numbers, credit card numbers, home addresses, etc. on R and C fund reimbursement requests

Updated February 201210

Sample Endowment Accounting Flow – The Green Fund

Initiating the endowment:– Recording the gift– Establishing the endowment– Investing in the pool

Participating in pool earnings and receiving payout

Spending payout

Updated February 201211

Initiating the endowment

In January a $100,000 gift was received from Mr. Green to endow an annual scholarship for eligible GW accounting students

Development deposited the gift and sent the Memorandum of Understanding (MOU) and any other donor correspondence and agreements to Treasury Management (only after gift was deposited). Since coded as an endowment, it fed to the Endowment Tracking System (ETS) to the clearing account EQ60000

Updated February 201212

Treasury analyzed the terms of the endowment and set it up in ETS, specifying the net asset class of the corpus, and of the income. Treasury then prepared a “numbered memo” directing the Comptroller’s office to transfer the funds from EQ60000 to the final numbered account set up for that endowment.

The Comptroller’s Office made a journal entry to transfer the funds to the new endowment account and updated the Banner/Oracle/ETS mapping table for the new fund

Towards the end of February, after calculating the January 31 value of the total pool investments, the endowment accountant bought $100,000 worth of units (shares) in the pool for the Green endowment. In this case, $100,000 bought 1,000 units.

Initiating the endowment

Updated February 201213

Earnings and Payout

Once a month, after all the investment reports for the previous month have been finalized, the endowment accountant credits each endowment with its share of the investment income– The Green endowment received $1,000 as its share of

income in March (for the first time, since it purchased its shares in February)

– Also in March, the Green endowment was credited with monthly payout of $250 (@$3 per share/12 months)

Updated February 201214

Spending the payout

In March, an accounting student applied for endowment funds– The administrator of the endowment granted the student

$200 towards the cost of books for the current semester; A form was sent to Treasury Management, requesting payment.

– Treasury verified that the purchase of books was a permissible expense in accordance with the endowment documents, and that the Green endowment had sufficient unspent payout to cover the request

– Treasury prepared a payment request, and in due course, Accounts Payable issued a check to the student.

Updated February 201215

Pop Quiz

What is the corpus of the Green endowment?

What is the market value of the Green endowment?

What is the unspent payout of the Green endowment?

Updated February 201216

Answers

The corpus is $100,000. Thank you very much Mr. Green!

Updated February 201217

Answers

The market value at March 31 is $100,750

$100,000 original gift

1,000 income earned

(250)payout distributed

$100,750 market value

Updated February 201218

Answers

The unspent payout balance at March 31 is $50

$250 payout allocated

(200)spent on eligible expenses

$ 50 balance of unspent payout

Updated February 201219

The Endowment Tracking System

Endowments are captured on the General Ledger at a high level

All endowments are tracked at the individual level in ETS (the sub-ledger)

Reports are produced each quarter and distributed via the MyGWU Portal

Access to ETS is limited

Updated February 201220

The Endowment Tracking System

Monthly reports include:– Description Report– Gift Report– Corpus Report– Payout Rollforward Report– Payout Drawdown Report

Updated February 201221

Files and Documentation

All Treasury documents are currently stored in Documentum/GW Documents

For access, contact Jennifer Hinkle at x6-1910 or hinklej@gwu.edu.

G:\GROUPS\endowment\Endowment manuals and documentation\Endowment manuals and documentation\Procedures - master file\Endowment Accounting Revised Feb 12.ppt