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FUND 320 Chartstrings

FUND 320 Chartstrings. Building Endowment Chartstrings. Why So Many Chartstrings?. Principal tracked separately from spending. Spending budget set by policy. New gifts can be added to principal at any time.

micah-little
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FUND 320 Chartstrings

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  1. FUND 320Chartstrings Building Endowment Chartstrings

  2. Why So Many Chartstrings? • Principal tracked separately from spending. • Spending budget set by policy. • New gifts can be added to principal at any time. • Changes to endowment uses, purposes, agreements, etc. require written authorization from each and every donor.

  3. The Board of Trustees has fiduciary responsibility. Basics Book Value consists of the original corpus (gifts) and reinvested income; represents the money used to buy units (or shares) of the consolidated endowment and is used to determine when an endowed fund reaches term and becomes a true endowment. Consolidated Endowment Gift Buys units Market Value is the current value of the consolidated endowment. Each fund has units (or shares) of the consolidated endowment and the unit value is calculated each month. Units are purchased at MV. Gifts are added to the consolidated endowment. Reinvestment Investments are made. Performance of investments increases market value of the consolidated endowment. Term Policy determines income distributed for spending. 4.5% rate of spending is based on a rolling 13 quarter average of the consolidated endowment market value (not the current endowment market value). This spending policy provides a smoothing effect to the highs and lows of endowment market values. True Spending Income SPENDING If a term endowment, then spending income is reinvested. Year-end balances are made available for spending the following year. BUDGET - EXPENSES = BALANCE Once a year, a management fee is assessed against the consolidated endowment, based on a 4-quarter average of the market value. The 0.5% management fee does not reduce the 4.5% spending rate.

  4. Growth & Spending Income reinvested while a term endowment. 4.5% spending based on 13-qtr average (not market value). Buy units based on current market value. $100,000 Pledge payable over 5 years Term until $100,000 Becomes true endowment when book value reaches term. Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Gifts 20,000 20,000 20,000 20,000 20,000 0 Income 616 1,628 2,803 4,076 5,375 5,762 Spending 0 0 0 0 4,222 5,762 2,803 Reinvestment 616 1,628 4,076 1,153 0 Book Value 20,616 42,244 65,047 89,123 110,276 110,276 Units 0.3445 0.7081 1.0951 1.5070 1.8246 1.8246 Market Value 21,982 46,696 74,528 105,834 132,229 136,449 Unit Value Current 63,814 65,948 68,058 70,230 72,470 74,783 Unit Value 13Q Ave 51,524 58,281 63,477 65,912 68,021 70,176

  5. Chartstring - Fund Consolidated Endowment Gift Buys units 352 Term Endowment Reinvestment 400 True Endowment Term 320 Endowment Spending True Spending Income SPENDING BUDGET - EXPENSES = BALANCE

  6. Building the Chartstring BASICS O DPT FD SRC FNC PCBU PROJ AID PRO PUR PRP You 12 52050 0397 Term Endowment 352 0484 True Endowment 400 0484 Endowment Spending 320 0000 Donors & Restrictions 3xxxxx Source _________ Describes the donors and any restrictions. See fund documents to view restrictions, including purposes and investments.

  7. Completing the Spending Chartstring Fund - Spending _________ Departments usually spend from endowments and that’s why you use Fund 320 so much.

  8. All endowments have governing documents including such things as: • who established the fund • who can give to the fund • restrictions on spending • restrictions on investing • contingency plans To receive a copy of endowment documents, please contact: Development and Alumni Relations or Financial Reporting and Accounting Services To establish new endowments, please contact: Development and Alumni Relations

  9. alumni.uvm.edu/business

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