kuali endowment module (kem) november 14, 2007 norman peacock indiana university foundation cecilia...
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Kuali Endowment Module (KEM)November 14, 2007
Norman PeacockIndiana University Foundation
Cecilia EsguerraUniversity of Arizona
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KEM Presentation Agenda
• Why Endowments• Project Background and Scope• KEM Features and Functionality• High-level Review of KEM Modular Design• KEM Subject Matter Experts (SME) and
Comparison of Institutions• Progress to date and Next Steps
Note: Reference and additional materials available in the back of presentation handout.
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Why Endowments?
• 2006 NACUBO Endowment Study– 765 respondents– Over $340 Billion total value
• Dismissing the top 2 (Harvard and Yale) still have over $290 Billion.
• Remaining respondents ranged from less than $500,000 to $14 Billion in assets
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“American colleges and universities raised an estimated $28-billion in private donations in the 2006 fiscal year -- $2.4-billion, or 9.4-percent, more than in 2005, according to a report released on Wednesday by the Council for Aid to Education. The significant jump, the biggest one-year increase since 2000, was the result of larger donations from alumni and other individual donors, many of whom were solicited through numerous major fund-raising campaigns.
According to the report, which describes results from the council's annual "Voluntary Support of Education" survey, alumni and other individual donors gave just more than half of the total amount raised. Alumni donations were up 18.3 percent from 2005, and giving by non-alumni individuals rose by 14 percent”
The Chronicle of Higher Education , February 22,2007
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Why Endowments?
• FASB/GASB Accounting and Financial Reporting Standards– Financial Accounting Standards Board (FASB)
Private sector commercial and not-for-profit entities
– Governmental Accounting Standards Board (GASB)State and local governmental entities, including public colleges and universities
– Areas of difference• Revenue recognition• Valuation• Display• Disclosures
Financial Accounting Foundation
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Why Endowments?
• UMIFA/UPMIFA– Provides statutory guidelines for the management,
investment and expenditure of endowment funds.– UMIFA (1972) also established the prudent use of
appreciation or the value of the endowment principal over and above the original contributed funds.
– UPMIFA (2006) establishes a prudent standard for spending as well as improves the protection of donor intent with respect to expenditures from the endowment.
National Conference of Commissioners on Uniform State LawsKEM - 6
Why Endowments?
Project Background • The endowment management system is
outside the original scope of the Kuali Financial System (KFS).
• Committee of interested partners reviewed existing applications
• Based on the IU Foundation Endowment and Trust Accounting System (ETA)
• Determined to be a stand-alone system (could be implemented without Kuali Financial System)
• Plan to begin development in 2008KEM - 7
UofA Systems Overview
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Endowment System Overview
Donor DatabaseGift Processing
Transaction ProcessingAccount Maintenance
Automated Cash Investment Automated Income Distribution
Asset ManagementInvestment Management Reporting
Donor StatementsTransaction and Balance Statements
Daily Transfer of gift totals by account
Daily Summary of Transaction
Totals
Gift System
Endowment System
General LedgerBudget AccountingAccounts PayableEnterprise Funds
Fixed AssetsFinancial Management Reports
General Ledger
Custodian Bank Asset
Data
Pool Pricing and Underlying Asset / Income Allocation
Database
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Kuali Endowment Module
The Scope of the KEM includes– Investment tracking and basic reporting– Investment participation management and
standard reporting– Budgeted payout and income projections– Access to donor instructions– Searchable data elements– Beneficiary disbursement process and tax
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Kuali Endowment Module
What’s Out-of-Scope?– Gift Records System
• fund raising activity - campaign goals and results• donor contacts• pledges- both conditional and unconditional• gift payments
– Pool Valuation• market value of pool assets• underlying asset distribution
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KEM Features and Functionality
• KUALI Features– Kuali standard architecture– Web-based technology utilizing electronic
documents– Integrated workflow for transaction generation
and approval– Flexible, robust data structures– Organizationally defined custom attributes
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• Productivity Features– Consolidates endowment management functions
in a single application– Defined interfaces to external systems– Enhanced decision-making through attached files
or documents and links to imaged documents– Searchable database for ad hoc reporting– Group and report endowments based on user-
defined criteria
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KEM Features and Functionality
• System Features– Stand-alone application– Flexible configuration to support FASB and/or
GASB reporting.– Supports UMIFA requirement to track underwater
endowments– Supports donor due diligence and stewardship– Includes a ticklers to serve as task reminders– Automated and recurring transactions
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KEM Features and Functionality
• Asset Management Features– Automated tracking and management of assets both at a high level
and at a detailed endowment level
– Track separately invested securities as well as pooled investments.
– User-defined methods of investment automation
– Flexible gain/loss calculations (FIFO, LIFO or Average Balance) and the opportunity to maintain holdings in individual tax lots.
– Accommodates calculations for payouts and distributions of income and management fees
– Flexible distribution payout (e.g.: to multiple spending accounts)
KEM Features and Functionality
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KEM Modular Design
KEMIDSECURITIES,
HOLDINGS AND CASH
TRANSACTIONS
RECURRING TRANSACTIONS
INDIVIDUAL
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KEMID (Endowments)
• All relevant KEMID administration data– Open and close records– Ticklers– KEMID type– Associations with Fund and Unit
• Instructions– Transaction Restrictions
• KEMID Status, Agreement Documentation Status, Restrictions and authorizations
– Investment Instructions• Automated Investing, Daily and Periodic
– Fees
KEMIDSECURITIES,
HOLDINGS AND CASH
TRANSACTIONS
RECURRING TRANSACTIONS
INDIVIDUAL
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Sample KEMID Maintenance Screen
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Securities, Holdings and Cash• Balances by KEMID
– 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
KEMIDSECURITIES,
HOLDINGS AND CASH
TRANSACTIONS
RECURRING TRANSACTIONS
INDIVIDUAL
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Investment Participation Management
• Pool Control KEMID (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 KEMID.• 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
KEMID• Distributions to the endowments reduce income cash in the
control KEMID
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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
KEMIDSECURITIES,
HOLDINGS AND CASH
TRANSACTIONS
RECURRING TRANSACTIONS
INDIVIDUAL
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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
KEMIDSECURITIES,
HOLDINGS AND CASH
TRANSACTIONS
RECURRING TRANSACTIONS
INDIVIDUAL
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Sample Transfer Transaction
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Recurring Transactions
• Investment Models– Cash Sweeps (Money Market Investments)– Pooled Funds
• Scheduled Transactions– Transfers– Disbursements
• Automated Processes– Interfaces– Batch
• Daily
• Monthly
• Annual
KEMIDSECURITIES,
HOLDINGS AND CASH
TRANSACTIONS
RECURRING TRANSACTIONS
INDIVIDUAL
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Individuals
• Payees, KEMID Signers, Users
• Name and Address records– Home, Business, Campus, Seasonal
• 1099 reporting– Independent Contractor, NRA
• Bank Depository – ACH or Wire Transfer
• Associated KEMIDsKEM - 25
KEMIDSECURITIES,
HOLDINGS AND CASH
TRANSACTIONS
RECURRING TRANSACTIONS
INDIVIDUAL
Automated Processes
• Scheduled processing– Nightly– Monthly– Year-end
• Possible Interfaces to KEM– Imaged Document System– Importing Gift Transactions– Marketable Security Pricing– Exporting General Ledger Entries– Updating a Data Store for inquiries and ad hoc reporting
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KEM Subject Matter Experts
Norman Peacock, Lead SME, Indiana University Foundation
– Cornell University - Gail Thayer, Kim Yeoh, Ming Bengtsson
– Indiana University - Bill Buskirk, Joan Hagen, Amoret Heise
– Michigan State University - Nancy Carter
– NACUBO - David Lyons
– San Joaquin Delta College - Shelley Pierce
– University of Arizona - Mike Treiber, Cecilia Esguerra, Marlene Moldenhauer
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Endowments Comparison Among Participating Institutions
Institution Mkt. Value as of 6/30/06
# Accounts
# Campus
IntegratedSystem?
Cornell University
$4.4 Billion 6,528 2 No, though GL manages shares
Indiana University
$174 Million
375 8 No
Indiana University Foundation
$1.4 Billion 5,200 8 Yes, but needs enhancements
Michigan State University
$1 Billion 1,850 1 No
San Joaquin Delta College
$1.7 Million
5 1 No
University of Arizona
$200 Million
670 2 NoKEM - 28
Progress to Date
• Established Project Scope• Developed the conceptual model for KEM• Developed the physical data model for
KEMID (aka KEM Account)• Developed a resource estimate based on
current IUF-ETA functionality and approved enhancements
• Defined KEM standard or basic reports
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Next Steps (In Process)
• Identify Development partners
• Map IUF-ETA screens to KEM eDocs
• Create functional specifications for each eDoc
• Complete KEM physical data model
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Thank you!
Questions?
For progress updates
http://www.kuali.org/KEM - 31
Additional References
KEM Presentation
Supporting Materials
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KEM Scope
• Investment tracking and basic 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.
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KEM Scope• Investment participation management and standard
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.
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KEM Scope
• Budgeted payout and income projection– Project the budgeted payout (based on pooled units
and an approved spending policy) – Project the anticipated income based on declared
dividends, bond holdings, etc. – Update current year income projections– Create spending policy reports by fund, KEMID,
college, dept, etc.
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KEM Scope
• 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
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KEM Scope
• Beneficiary disbursement process and tax reporting – Disburse payments to beneficiaries (including
“split interest agreements”) – Provide data for annual tax reporting
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KEM Interface DiagramKuali 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
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Baseline System of KEM
• Endowment Trust Accounting (ETA) System used by Indiana University Foundation is the baseline system of KEM.
• ETA will be “kuali-fied” – look-and-feel will be Kuali but core design and functionality will be based on ETA.
• A few ETA screens available on the next few pages…
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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
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ETA 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 KEM - 41
Account Detail Screen
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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 KEM - 43
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
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Balances by Account
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Securities by Account
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Accrued Income Calculations
• Income Accrual Methods– Automated Cash Management – This is the accrual mechanism for “money
market” type KEMIDs. It will calculate daily based on the holdings of each date and add the amount to the total interest due to the KEMID 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 KEMID 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
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Securities Managed
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Pooled Investment Funds
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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 KEM - 50
Transactions
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Transactions
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Transactions
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Recurring Transactions
• Investment Models– Cash Sweeps (Money Market Investments)– Pooled Funds
• Scheduled Transactions– Transfers– Disbursements
• Automated Processes– Interfaces– Batch
• Daily• Monthly• Annual KEM - 54
Investment Models
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Investment Models
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Scheduled Transfer
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Scheduled Disbursement
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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 AccountsKEM - 59
Individuals
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ETA Automated Processes
• Interfaces– Importing Gift Transactions– Security Pricing– Exporting General Ledger Entries– Updating Database used for Web Inquiries
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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
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Nightly Batch Processes
• Monthly– Cash Balance Archive– Holding Balance Archive– Seasonal Address Update– Fee Assessment Transaction Process
• Year-End– Update Original Gift Values
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What is KEMID?
• KEMID – represents monies held and invested for the benefit of a specific area and to be used for a specific purpose. One KEMID may be related to one or many GL accounts.
• The unique name was developed so as not to confuse it with the GL account concept.
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KEM Resource Estimates
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KEM Standard Reports
The following seven reports will be delivered with the KEM module:– Endowment Asset Statement– Endowment Transaction Statement– Endowment Transaction Summary– Non-Endowed Asset Statement– Non-Endowment Transaction Statement– Non-Endowment Transaction Summary– Trial Balance
Notes:– Trial Balance – will include columns for available expendable cash and
estimated income for the balance of the fiscal year.– All reports should have the capability to be run for organizational entities
or sequences including: department, division, school and campus, etc. The trial balance report should also have the capability to be run by endowment or account type.
– Additional internal and other reports needed by a KEM institution will be run at the school using a reporting tool of each school’s choice.
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End of Additional Resources
Thank you for your continued support!
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