Administrative Policies and Procedures Manual - Policy 7500: Endowments
Date Originally Issued: 06-01-2006
Subject to Change Without Notice
Authorized by Regents' Policy 7.13, "Receipt and Investment of Gifts to the University"
Private support is extremely important to the teaching, research and public service mission of the University. Through private support, the University can enhance current programs and develop resources to support future programs. Endowments are a special type of private support whereby the donor designates that the principal is held for investment and the interest earned on the principal is spent as directed by the donor. The University is responsible for ensuring endowments are held and expended in accordance with the donors' wishes. To ensure the University fulfills all fiduciary responsibilities and complies with federal and state regulations, all endowments are managed by the University Development Office under the oversight of the UNM Foundation Board of Directors and the Vice President for Institutional Advancement. The UNM Foundation was chartered by the University of New Mexico Board of Regents in 1979 to solicit, accept, and manage private contributions for the purpose of promoting the educational, research, and service commitments of the University. The University Development Office staffs the UNM Foundation under the oversight of the UNM Foundation Board of Directors and the Vice President for Institutional Advancement.
2. Investing Endowments
In accordance with a Memorandum of Agreement between the Regents of the University of New Mexico and the University of New Mexico Foundation, Inc. dated March 11, 1991, and amended June 11, 2002, University and the UNM Foundation endowments are combined for investment purposes and operated as a unitized pool known as the Consolidated Investment Fund (CIF). When an endowment is received it is allocated units in the CIF at the current unit price. Unless there are specific donor restrictions, endowments are invested as part of the CIF and managed in accordance with the UNM Foundation's "Consolidated Investment Fund Endowment Investment Management Policy."The objective of the CIF is to produce growth and income sufficient to support both donor goals and fund objectives with a primary focus on providing a steady stream of income and preservation of principal. All gifts and other additions become part of the endowment pool on the first day of the month following the date of receipt.
3. Types of Endowments
Endowments established with private funds are accounted for and held by the UNM Foundation, and endowments that predated the UNM Foundation or are established with institutional or state matching funds are accounted for and held by the University. These endowments are classified as permanent, quasi, or term endowments.
3.1. Permanent Endowments
A donor specifies that the principal is to be invested and maintained in perpetuity and that only a portion of the income may be expended in accordance with the endowment agreement.
3.2. Term Endowments
Term endowments are similar to permanent endowments except that after a stated period of time or occurrence of a specified event, all or part of the principal may be expended in accordance with the endowment agreement.
3.3. Quasi Endowments
Quasi endowments are funds functioning as an endowment that are established by either the University or the UNM Foundation from either donor or institutional funds, with the principle being retained and invested rather than expended and income expended in accordance with the endowment agreement. Occasionally quasi endowments may allow for some expenditure of principal, but this will generally not exceed ten percent (10%) of the principal in any given fiscal year.
If the quasi endowment is established solely from donor funds, the endowment must retain the purpose and intent as specified by the donor, and must be approved by the President of the UNM Foundation and the Board of Regents. Quasi endowments established with institutional funds must be approved by the Board of Regents with earnings to be used for designated purposes. To request a quasi endowment, the college, school, department, or program should complete a "Request to Establish a Quasi Endowment" form, obtain the required approvals, and forward it to the Development Office. The Development Office will coordinate with the Office of the Executive Vice President for Administration to have the quasi endowment presented to the Board of Regents for approval if required.
4. Establishing Endowments
To establish an endowment, the University's standard Endowment Agreement form must be completed and approved by the Development Office before obtaining the donor's signature. After approval by the Development Office, the donor and cognizant academic dean or administrative director for non academic units must sign and return the endowment agreement to the Development Office for final approval by the President of the UNM Foundation. The endowment agreement will stipulate how the endowment will be funded and the purpose or intent of the endowment. The minimum dollar amounts required to establish endowments will be reviewed periodically by the Development Office and are subject to change with the approval of the UNM Foundation Executive Committee and the University President.
5. Funding Endowments
5.1. Lump Sum Gift
A donor may fully fund an endowment with a one-time gift. Additional gifts may be made to the endowment by the donor or any other individual or entity by gift or bequest at a later date.
5.2. Fund Over Time
A donor may choose to fund an endowment over time, provided the initial gift is at least ten percent (10%) of the required minimum endowment amount or $3,000 (whichever is greater) and a pledge agreement is signed by the donor that stipulates that the endowment will be fully funded within five (5) years. Until such time as the fund reaches the minimum level, all earned income will be reinvested into the principal. No awards will be made from the endowment until the fund reaches the minimum level. After the endowment is fully funded, additional gifts may be made to the endowment by the donor or any other individual or entity by gift or bequest. If, for some reason, a donor is not able to meet the minimum endowment within the five-year time frame, the Development Office will contact the donor to discuss completion of the endowment or disposition of the fund balance. If at the end of five (5) years, an endowment fund has reached the minimum but has not yet reached the level originally anticipated by the donor, the Development Office will contact the donor and revise the endowment agreement to reflect the current status of the fund.
5.3. Bequest or Deferred Gift
A donor may choose to fund an endowment with a deferred gift other than to satisfy a binding pledge commitment (e.g. a will, trust or annuity) by executing an endowment agreement. The endowment will not be established until the gift is received from the donor's estate, unless the donor has given lifetime gifts to begin the fund. The endowment minimums in effect at the time the endowment agreement is signed will apply.
The first distribution of any endowment income will be made at the end of the fiscal year in which the account becomes fully funded. Often, the amount available for distribution the first year will be less than in subsequent years because the fund will not have earned income for a full year. The amount distributed each year is based on the Spending Policy Section of the "Consolidated Investment Fund Endowment Investment Management Policy."
7. Administrative Fees
In addition to the customary investment management, consultant, and custody fees, an administrative fee equal to a percentage of the market value of the CIF may also be allocated for investment management and development costs. The annual amount of this allocation will be mutually agreed upon by the University and the UNM Foundation.
8. Related Policies
8.1. Board of Regents' Policy Manual
"Naming University Facilities, Spaces, Endowments, and Programs" Policy 2.11, RPM
"Receipt and Investment of Gifts to the University" Policy 7.13, RPM
"Regents' Endowment Fund" Policy 7.19, RPM
8.2. University Business Policies and Procedures Manual
"Naming Facilities, Spaces, Endowments, and Programs" Policy 1020 UBP
8.3. UNM Foundation Policies
"Consolidated Investment Fund Endowment Investment Management Policy."