Endowment Module

Norm Peacock, Assistant Director ITS Indiana University Foundation

Mary Wheeler, Kuali Project SpecialistCornell University

Kuali Endowment Module (KEM)

Based on the IU Foundation Endowment and Trust Accounting System (ETA)

The Scope of the KEM includes– transactions of the individual investments– managing the unitized investment “pools”– administering the funds that are the “owners” of

the investments

Out of Scope

• Gift Records System– fund raising activity - campaign goals and results

– donor contacts

– pledges- both conditional and unconditional

– gift payments

However, data elements that provide linkages between an external gift system and the Kuali Endowment Module

will be necessary.

Conceptual Diagram

Draft Gift / KEM / KGL Interfaces

All Gifts

Gift System

Optio

n 2

KEMInvestment PoolsDonor InstructionsInvestmentsFunds

Kuali GL

Investment Custodian

Option 1All Gifts

Invested Gifts

FFE andOther invested reserves

Non-Invested orSpendable Gifts

Investment Gift and Income Transactions

New Money Buys, Sells, Income,Gains, Losses

KualiNon-Kuali

Option 1

Option 2

LEGEND

General Requirements

• Accommodate security transactions at the individual security level or at the summary level

• Support both FASB and GASB reporting

• Capture and maintain donor restrictions and instructions for income/unspent funds

• Facilitate the management of “unitized” investment pool(s)

General Requirements

• Track “separately invested” securities, or non-pooled investments

• Maintain stewardship information for reporting to donors

• Route transactions for FYI/Approval

• Feed financial transactions to an institution’s General Ledger

KEM Features

• Investment tracking and reporting– number of shares, book, par and market values, CUSIP

number, investment category (stocks, bonds, real estate, etc.), and capital commitments.

– purchases and sales of investments; income earned, collected, accrued; management and custodial fees and commissions; and other investment related data.

– provide data to compare investment policy allocation targets to actual allocations and incorporate pending transactions (i.e. rebalancing).

– track investment commitments for limited partnerships and contributions made against these commitments.

KEM Features

• Investment participation management and reporting including unitized transactions– Investment pool data (number of units, market value per unit) for

all funds that participate in an institution's investment pool(s). – Quantify units purchased and sold, and calculate the gain or loss

on withdrawal. – Record investment income, realized gains, unrealized gains, and

fees to the various funds, either in the specific fund or in high level accumulation accounts.

– Track the net asset balance of a true endowment fund between its components of historical book value and accumulated earnings.

– Allocate either a budgeted payout to the income accounts affiliated with a principal account (based on pooled units), or actual income earned on separately invested endowment funds.

KEM Features

• Enable formula and/or actual income projections– Project the budgeted payout (based on pooled

units and an approved spending policy) – Project the anticipated actual income based on

declared dividends, bond holdings, etc. – Update current year income projections– Create spending policy reports by fund, account

#, college, dept, etc.

KEM Features

• Access to donor instructions– Capture and distribute the donor instructions

for a gift or endowment fund– link imaged document files to KEM accounts

and transactions

KEM Features

• Beneficiary disbursement process and tax reporting – For “split interest agreements” – disburse

payments to beneficiaries– Provide data for annual tax reporting– Update the actuarial calculation of the liability

for accounting adjustments.

Interface Diagram

Kuali Endowment Module (KEM) Conceptual Diagram (3/15/2006)

Inst

itutio

n F

inan

cial

In

form

atio

n S

yste

m

Transaction Module

KE

MO

usid

e K

uali

FIS

Out

side

KE

M Gift Processing Transaction

Interface

Transaction Import

Miscellaneous transactions

(spreadsheets)

Automated Investments

Income Distributions

Fee Transactions

Pool Management

Automated Disbursements and Transfers

Manual Transactions

E-DOCS(WORKFLOW)

Custodial Bank

Pool Valuation

KEM Transactions

KEM AccountData

Instructions

Donor Compliance

Ownership

GL Relationship

KEM Individual Data

Payees, Trust Beneficiaries,Account Authority,Users

Multiple Addresses and Relevant data for contact or payment

KEM Recurring Transaction Information

Automated Investments

Automated Income Distribution

Transfers and Disbursements

KEM Security and Holdings Data

Balance Data

Security TotalsKEM Account totals

CashInvestments

DailyHistorical

General Ledger Module

Scrubber PosterGeneral Ledger

Interface

GL Pending Entries

Payment Disbursement

Processing

Purchase Orders/

Accounts Payable

Accounts Receivable

Updates

Check PrintingACH file

Generation

External Pricing Service

E-Docs

Tax Reporting Service

Donor Relations Database

Kuali Chart of Accounts

Kuali Budgets

Relates to

Validates

Validates

Validates

Reporting Environment/

Data Warehouse

Actuarial Values

External SystemsBursar, Payroll,

Independent Billings etc.

Decision Support System

Imaged Documents

Student Information

System

Who is the Indiana University Foundation?

• Established in 1936– Not for Profit 501c3

• Generate private support for Indiana University (IU), a public university

• The majority of the monies generated are held and invested by the IUF for the benefit of IU.

• Financial information can be found at our website: www.iufoundation.iu.edu

The IUF Relationship with IU

• The IUF is independent of the university it serves.• Approximately 5000 individual accounts are

managed which benefit over 200 unique departments on 8 campuses.– Endowments– Expendable (Quasi) Endowments– Operating/Discretionary – Charitable Remainder Trusts and Charitable Gift

Annuities

• Invested assets under management total over $1.1 Billion dollars.

Business Functions of the IUF

• Development– Fund Raising

• Campaigns, Annual Gifts, Major Gifts, Planned Gifts

– Donor Relations• Reporting, Stewardship

• Investment Management– Cash and Non-Cash gifts

• Pooled Investments, Real Estate, Stocks, Bonds

– Charitable Trusts

• Account Administration– Account Management

• Payments from accounts, reporting

– Gift Administration

IUF Back Office Pre-1994

BROOKSIDE ASSET MANAGEMENT

ACCOUNT PORTFOLIO

LISTINGS

INVESTMENT ASSETS BOOK AND MARKET

INPUT ASSET TRANSACTIONS

INPUT MARKET VALUES

COLLEAGUE GENERAL LEDGER

CENTERPIECEMARKET

VALUATION

PRICING SERVICES

ACCOUNT TRANSACTION STATEMENTS

SPREADSHEETS

MANAGEMENT REPORTS

POOLED INCOME DISTRIBUTION

AUTOMATIC INVESTMENT

SWEEP

INPUT ACCOUNT

TRANSACTIONS

SWEEPS

SWEEPS AND DIVIDENDS

BOND DISCOUNT

AND PREMIUM

DISCOUNT AND

PREMIUM

ACCOUNTS PAYABLE

GIFT PROCESSING

CASH RECEIPTS

Operations at the IUF

• Trust Banking method of operation for 12 years.• Ability to receive deposits of cash or securities • Automated daily sweep of cash into and out of an

interest bearing (money market) fund.• Automated periodic investment of cash and money

market investments in long term investments.• Automated distribution of income• Ability to distribute income automatically or on

request. • Daily pricing of marketable securities.

IU Foundation Systems Overview

Donor DatabaseGift Processing(Both IU and IUF gifts)

Transaction ProcessingAccount Maintenance

Automated Cash Investment Automated Income Distribution

Asset ManagementInvestment Management Reports

Transaction and Balance Statements

Daily Transfer of IUF gift totals

by account

Daily Summary of Transaction

Totals (By Fund and Object Code)

Gift System

Endowment & Trust Accounting System

General LedgerBudget AccountingAccounts PayableEnterprise Funds

Fixed AssetsIUF Management Reports

General Ledger

Custodian Bank Asset

Data

Pool Pricing and Underlying Asset / Income Allocation

Database

IUF General System Requirements

• Flexible enough to change with our needs• Provide functionality to support our

business processes• Generate selected transactions

automatically• A single data source for endowment and

trust information • A fully relational database• Capable of interfacing to any gift or general

ledger system

Modular Design

ACCOUNTSECURITIES,

HOLDINGS AND CASH

TRANSACTIONS

RECURRING TRANSACTIONS

INDIVIDUAL

USER SECURITY

Accounts (Endowments and Trusts)

• All relevant account administration data– Open and close records– Ticklers– Account type– Associations with Fund and Unit

• Instructions– Transaction Restrictions

• Account Status, Agreement Documentation Status, Restrictions and authorizations

– Investment Instructions• Automated Investing, Daily and Periodic

– Fees

ACCOUNTSECURITIES,

HOLDINGS AND CASH

TRANSACTIONS

RECURRING TRANSACTIONS

INDIVIDUAL

USER SECURITY

Accounts

Accounts

Accounts

Accounts

Securities, Holdings and Cash

• Balances by Account– Current and historical– Cash– Securities

• Units, Carry Value, MarketValue, Accrued Income

• Securities Managed by the Organization– Current Values

• Units, Carry Value, Unit Value, Market Value• Security type• Interest rates and dividend per share, payment schedule

• Pooled Investment Fund Data – Current and historical unit values and distribution

amounts

ACCOUNTSECURITIES,

HOLDINGS AND CASH

TRANSACTIONS

RECURRING TRANSACTIONS

INDIVIDUAL

USER SECURITY

Balances by Account

Securities by Account

Securities Managed

Pooled Investment Funds

Transactions

• Unique transaction types– Cash, Asset and Liability

• Purchases, Sales, Deposits, Disbursements• Increase, Decrease or Transfer

– Special types• Original Gift Value Adjustment• Holding Unit Adjustment• Corporate Reorganization• Trust Asset Transfer

• Multiple entry methods– Recurring transactions– Imported Transactions

• Gift Transactions, Spreadsheets– Daily Processes

ACCOUNTSECURITIES,

HOLDINGS AND CASH

TRANSACTIONS

RECURRING TRANSACTIONS

INDIVIDUAL

USER SECURITY

Transactions

Transactions

Transactions

Recurring Transactions

• Investment Models– Cash Sweeps (Money Market Investments)– Pooled Funds

• Scheduled Transactions– Transfers– Disbursements

• Automated Processes– Interfaces– Batch

• Daily• Monthly• Annual

ACCOUNTSECURITIES,

HOLDINGS AND CASH

TRANSACTIONS

RECURRING TRANSACTIONS

INDIVIDUAL

USER SECURITY

Investment Models

Investment Models

Scheduled Transfer

Scheduled Disbursement

Automated Processes

• Interfaces– Importing Gift Transactions– Security Pricing– Exporting General Ledger Entries– Updating Database used for Web Inquiries

Daily Nightly Batch Processes

• Daily– Transaction Import– Large Batch Posting– Accrual Transactions – Accrual Calculations– Recurring Transactions– Pooled Fund Distributions– Automated Cash Investments– Cash Sweeps– Pooled Fund Control Accounts Summary Transactions– Change Reporting– Date Frequency Roll Process

Periodic Nightly Batch Processes

• Monthly– Cash Balance Archive– Holding Balance Archive– Seasonal Address Update– Fee Assessment Transaction Process

• Year-End– Update Original Gift Values

Individuals

• Payees, Account Signers, Users• Name and Address records

– Home, Business, Campus, Seasonal

• 1099 reporting– Independent Contractor,

NRA

• Bank Depository – ACH or Wire Transfer

• Associated Accounts

ACCOUNTSECURITIES,

HOLDINGS AND CASH

TRANSACTIONS

RECURRING TRANSACTIONS

INDIVIDUAL

USER SECURITY

Individuals

User Security

• Screen level– Read, Write , Exclude

• Defined Groups

ACCOUNTSECURITIES,

HOLDINGS AND CASH

TRANSACTIONS

RECURRING TRANSACTIONS

INDIVIDUAL

USER SECURITY

User Security

Investment Tracking and Reporting

• Tracking Managed Securities – Holdings by Security

• Current Position• Share Price• Income information

– Holdings by Endowment• Current and Historical• All Holders List• Holding Detail

• Securities Transactions– Purchases and Sales– Corporate Actions– Accrued Income Calculations– Income Distributions

Investment Tracking and Reporting

SECURITY

PK,FK1,FK3,U1,I2,I1 SECURITY_ID

SECURITY_DESCRIPTION SECURITY_TICKER_SYMBOL SECURITY_UNITS_HELD SECURITY_ISSUE_DATE SECURITY_MATURITY_DATE SECURITY_RATE SECURITY_DIV_RECORD_DATE SECURITY_EX_DIVIDEND_DATE SECURITY_DIV_PAY_DATE SECURITY_DIV_AMOUNT SECURITY_INCOME_CHG_DATE SECURITY_INCOME_PAY_FREQ SECURITY_INCOME_NEXT_PAY SECURITY_UNIT_VALUE SECURITY_VALUE_DATEFK2,U1 SECURITY_CLASS_CODE COMMITMENT_AMOUNT PREVIOUS_UNIT_VALUE PREVIOUS_UNIT_VALUE_DATE UNIT_VALUE_SOURCE SECURITY_CARRY_VALUE LAST_TRANSACTION_DATE FOREIGN_WITHOLDING_PCT

HOLDING_TAX_LOT

PK,I1 ACCOUNT_NUMBERPK,I1 SECURITY_IDPK REGISTRATION_CODEPK HOLDING_LOT_NUMBER

HOLDING_ACQUIRED_DATE HOLDING_UNITS HOLDING_COST HOLDING_PRIOR_ACCRUED_INC HOLDING_FOREIGN_TAX_WITHH HOLDING_MARKET_VALUE LAST_TRANSACTION_TS HOLDING_ACCRUED_INCOME_DU

CLASS_CODE1

PK,I1 SECURITY_CLASS_CODE

SECURITY_CLASS_CODE_DESC SECURITY_REPORTING_GROUP SECURITY_ACCRUAL_METHOD OBJECT_CODE SECURITY_INCOME_POST_CODE

HOLDING_HISTORY1

PK,I2 ACCOUNT_NUMBERPK SECURITY_IDPK REGISTRATION_CODEPK,I1,I2,I3 HOLDING_HISTORY_DATE

HOLDING_TOTAL_UNITS HOLDING_TOTAL_COST HOLDING_ANNUAL_INC_EST SECURITY_UNIT_VALUE HOLDING_MARKET_VALUE QTR_AVG_MARKET_VALUE

Managed Securities

Managed Securities

Current Holders

Historical Holders

Securities Transactions

TRANSACTION_SECURITY

PK,FK1 TRANSACTION_ID

SECURITY_UNITS SECURITY_ORIGINAL_COST SECURITY_PRICE_PER_SHARE SALE_SHT_TERM_GAIN_LOSS SALE_LNG_TERM_GAIN_LOSS SALE_PROCEEDS DONOR_ID REPRESENTATIVE DAILY_ACCRUAL_AMOUNT HOLDING_LOT_NUMBER OVERRIDDEN_CARRY_VALUE

TRANSACTIONS

PK,U4,U1,U2,U3,I1,I3 TRANSACTION_ID

U4,I10,I11,I1,I4 BATCH_IDU4,I10,I1,I4,I5 TRANSACTION_CREATED_DATEI9,U4,I10,I1,I4 TRANSACTION_TYPEU4,I10,I1,I4 TRANSACTION_ENTRY_STAFF_ID TRANSACTION_SUPER_STAFF_ID TRANSACTION_SOURCEI12,U3,I2 ACCOUNT_NUMBERI12,I6 TRANSACTION_POSTED_DATEI8 TRANSACTION_STATUSI12 OBJECT_CODE OGV_AMOUNT OGV_INDICATORI7 INCOME_CASH_AMOUNT PRINCIPAL_CASH_AMOUNT TRANSACTION_DESCRIPTION OLD_TAX_CODE TRANSACTION_REVERSED REVERSING_TRANSACTION_IDU1,U2 SECURITY_ID REGISTRATION_CODE OVERRIDE_EXPLANATION

SECURITY

PK,FK1,FK3,U1,I2,I1 SECURITY_ID

SECURITY_DESCRIPTION SECURITY_TICKER_SYMBOL SECURITY_UNITS_HELD SECURITY_ISSUE_DATE SECURITY_MATURITY_DATE SECURITY_RATE SECURITY_DIV_RECORD_DATE SECURITY_EX_DIVIDEND_DATE SECURITY_DIV_PAY_DATE SECURITY_DIV_AMOUNT SECURITY_INCOME_CHG_DATE SECURITY_INCOME_PAY_FREQ SECURITY_INCOME_NEXT_PAY SECURITY_UNIT_VALUE SECURITY_VALUE_DATEFK2,U1 SECURITY_CLASS_CODE COMMITMENT_AMOUNT PREVIOUS_UNIT_VALUE PREVIOUS_UNIT_VALUE_DATE UNIT_VALUE_SOURCE SECURITY_CARRY_VALUE LAST_TRANSACTION_DATE FOREIGN_WITHOLDING_PCT

HOLDING_TAX_LOT

PK,I1 ACCOUNT_NUMBERPK,I1 SECURITY_IDPK REGISTRATION_CODEPK HOLDING_LOT_NUMBER

HOLDING_ACQUIRED_DATE HOLDING_UNITS HOLDING_COST HOLDING_PRIOR_ACCRUED_INC HOLDING_FOREIGN_TAX_WITHH HOLDING_MARKET_VALUE LAST_TRANSACTION_TS HOLDING_ACCRUED_INCOME_DU

• Income Accrual Methods– Automated Cash Management – This is the accrual mechanism for “money

market” type accounts. It will calculate daily based on the holdings of each date and add the amount to the total interest due to the account holder.

– Dividend –The total dividend amount to be paid to the holder of a security based on the ex-dividend record date, units held, dividend amount and payment date. These accrual amounts will be calculated periodically, based on the ex-dividend date.

– Treasury Notes and Bonds – Daily accruals are calculated based on the number of days in the six months prior to the semiannual payment date.

– Discount Bonds – Accruals are calculated daily but will never be paid to the account holder until the security reaches maturity or is sold.

– Mortgage Pass-Through 30 –This is not a true daily accrual. The total income due is recomputed daily. It assumes that payments are made one month in arrears (30 days) on the 15th of the month.

– Mortgage Pass-Through 60 – Like the previous method except that it assumes that payments are made 2 months in arrears (60 days) on the 15th of the month.

– Time Deposits – Simple interest calculations, not compounded. Payment frequencies will vary depending upon the instrument

Accrued Income Calculations

Investment Participation Management

• Pool Control Account (Master Trust Account)

– Holder of all Pool Investment Assets• An endowment uses cash to purchase units of the pool,

increasing the principal cash asset of the control account.

• When an endowment sells units of the pool, the principal cash asset is reduced.

• Excess principal cash is transferred to a manager for investment in appropriate assets.

– Receives all investment income from the investments• Dividend and interest posted as income cash in the control

account

• Distributions to the endowments reduce income cash in the control account

Pool Control Accounts

Pooled Equity Fund

Investment Managers and Bank Custodial Accounts

Mutual Fund Index FundMulti-Strategy Equity Fund

Other Holdings Including

Real Estate Pooled Bond Fund

Accounts Holding Pooled Equity Fund

Accounts Holding Pooled Fixed Income Fund

572,704 UNITS

Accounts Holding Pooled Long-Term Fund (Income)

Accounts Holding Pooled Long-Term Fund (Principal)

Pooled Long-Term Fund (Income)

55,217,334 UNITS

4,333,684 UNITS 1,314,259 UNITS

Pooled Long-Term Fund (Principal)

651,694,378 UNITS

15,415,032 UNITS51,191,224 UNITS

2,714,442 UNITS

Manager 1 Assets at

Market Value

Manager 2 Assets at

Market Value

Manager 3 Assets at

Market Value

Manager 4 Assets at

Market Value

Manager 5 Assets at

Market Value

Manager 6 Assets at

Market Value

Bond Manager 1 Assets at

Market Value

Bond Manager 2 Assets at

Market Value

Bond Manager 2

Bond Manager 1

Manager1 Manager 2 Manager 3 Manager 4 Manager 5 Manager 6

POOLED FUND CONTROL ACCOUNTS

(MASTER TRUST ACCOUNTS)

ETA ACCOUNTS

Pooled Funds and Control Accounts

Pooled Fund Values

Pooled Fund Investment Models

Account Investment Models

Automated Purchase Transaction

Automated Sale Transaction

Investment Participation Management

Investment Participation Management

Endowment and Trust Accounting

• Account Management

• Investment Management

• Automated Functions

• Relational Database

• Multiple Reporting Options– ODBC – User-Designed Daily and On Demand Reports– Web Access

Endowment and Trust Accounting

Progress to Date

• Mapped the IUF-ETA Transaction screens to the KEM Transaction Flow

• Developed the Conceptual and Physical Data Models for the KEM, incorporating the approved enhancements

• Developed a resource estimate based on current IUF-ETA functionality and approved enhancements

Next Steps

• Begin populating physical data model with sample KEM data

• Develop basic reports

• Create functional specifications for each transaction screen

• Recruit development partners

• Establish detailed project plan

Programming scheduled to begin July 2006

Questions?

For progress updates

www.kuali.org