BOV-018: Endowment Spending Policy and Administrative Fee

Date: 06/13/2008 Status: Final
Policy Type: Board of Visitors
Oversight Executive: Executive Vice President and Chief Operating Officer
Applies To: Academic Division, Medical Center, College at Wise, and University-Related Foundations.
Table of Contents:

Policy Statement

Reason for Policy:

To provide reliable and predictable endowment distributions and a fee for administering the endowment by the University, its schools, and units.

Definition of Terms in Statement:
  • Terms:

    There are no terms that require definition.

Policy Statement:

An endowment spending policy was approved by the Board of Visitors in April 2001 and revised in April 2005.  The current policy was adopted in June 2008 and included the creation of a fee for administering the endowment.  The fee was increased in December 2017.

 

ENDOWMENT SPENDING POLICY AND ADMINISTRATIVE FEE

(Approved June 13, 2008)

 

WHEREAS, the Board of Visitors wishes to fund institutional priorities, including the recommendations of the Commission of the Future of the University, from several sources; and

 

WHEREAS, unusually high investment returns in recent years and a prudent spending policy have resulted in an accumulation of excess appreciation; and

 

WHEREAS, a modest increase in the endowment distribution for spending can be achieved without affecting the sustainability of future payouts; and

 

WHEREAS, it is the intent of the Board of Visitors that increases in the spending distribution be used, where possible, to repatriate institutional subsidies from unrestricted sources to release funds for institutional priorities; and

 

WHEREAS, it is the intent of the Board of Visitors that the University’s gift agreement be reviewed and amended as appropriate to facilitate the solicitation and acceptance of unrestricted funds;

 

RESOLVED, the endowment spending policy, effective July 1, 2008, shall be as follows:

 

The spending policy calls for a percentage increase in the annual distribution from the endowment, unless such increase causes the distribution to fall outside a range defined as 4.0 percent on the low end and 6.0 percent on the high end of the market value of the Pooled Endowment Fund.  If the distribution falls outside of this range, the Finance Committee may recommend either raising or lowering the rate of increase.  The first distribution under the new parameters would be made in January 2009; and

 

RESOLVED FURTHER, the University will reset the fiscal year 2008-2009 spending rate to 5.0 percent of the June 30, 2008, market value; and

 

RESOLVED FURTHER, the University shall implement an administrative fee on the endowment, effective July 1, 2008, of 0.5 percent of endowment market value, or 50 basis points (bps).  Of that fee, 25 bps will be applied to a central pool for University priorities and 25 bps will be distributed to units for departmental support of endowments.

 

ENDOWMENT ADMINISTRATIVE FEE

(Approved on December 8, 2017)

 

WHEREAS, the Board of Visitors wishes to advance a philanthropic campaign to invest in the University’s strategic priorities; and

 

WHEREAS, an increase in the endowment distribution can be achieved without affecting the sustainability of future payouts, and is an appropriate alignment of administrative expenses and revenues;

 

RESOLVED, the University shall increase the administrative fee on the endowment, effective July 1, 2018, from 50 basis points (bps) to 100 bps to support increased advancement efforts and an accompanying increase in annual philanthropic commitments and cash flow, with such additional 50 bps increase to be utilized at the direction of the Vice President for Advancement and subject to the development of agreed-upon protocols for information sharing, goal setting, and accountability standards that apply to all University advancement functions and University-related foundations; and

 

RESOLVED FURTHER, as the campaign for the third century winds down, the University will reduce the administrative fee on the endowment to 85 bps effective July 1, 2023, 70 bps effective July 1, 2024, and 55 bps effective July 1, 2025, unless other action is taken by the Board of Visitors.

Major Category: Board of Visitors
Category Cross Reference: Finance and Business Operations
Approved by, Date: Board of Visitors, 09/13/2008