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Kuali Endowment Module (KEM) November 18, 2008 PowerPoint Presentation
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Kuali Endowment Module (KEM) November 18, 2008

Kuali Endowment Module (KEM) November 18, 2008

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Kuali Endowment Module (KEM) November 18, 2008

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  1. Kuali Endowment Module (KEM)November 18, 2008 Marlene Moldenhauer University of Arizona Norman Peacock Indiana University Foundation KEM -1

  2. KEM Presentation Agenda • Why Endowments? • Project Summary • KEM Overview • KEM Features Note: Reference and additional materials available in the back of presentation. KEM - 2

  3. Why Endowments? Significant Institutional Resource • 2007 NACUBO Endowment Study • 785 respondents • Over $411 Billion total value • From $571,000 to $34,634,906,000 in assets “…an increase of more than $71 billion from NACUBO’s 2006 study. As a result, according to NACUBO estimates, this one-year increase in endowment assets being managed by colleges and universities will generate approximately $3.25 billion in additional revenue during the current fiscal year to pay for institutional programs and initiatives.” NACUBO, January 24, 2008 KEM - 3

  4. Why Endowments? Increased Public Awareness and Scrutiny • Excerpt from letter to 136 college and university presidents from US Senate Committee on Finance, January 25, 2008: “We would appreciate additional information about tuition costs and your institution’s endowment. University endowments receive very generous tax breaks under the Internal Revenue Code. We want to better understand how these tax benefits for higher education endowments are improving education and making undergraduate studies more affordable for low and middle income families today.” KEM - 4

  5. Why Endowments? Increased Legislation • Uniform Prudent Management of Institutional Funds Act of 2006 (UPMIFA) • Updates principles established by UMIFA (1972) • requires investment “in good faith and with the care an ordinarily prudent person in a like position would exercise under similar circumstances.” • states that the institution “may appropriate for expenditure or accumulate so much of an endowment fund as the institution determines to be prudent for the uses, benefits, purposes and duration for which the endowment fund is established.” • Enacted by 20 states, pending in 12 others National Conference of Commissioners on Uniform State Laws KEM - 5

  6. Increased Regulations Proposed FASB FSP 117-a Endowments of Not-for-Profit Organizations: Net Asset Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosures Guidance on the net asset classification of donor-restricted endowment funds Additional financial statement disclosures: governing board’s interpretation of the law that underlies the net asset classification of donor-restricted endowment funds description of endowment spending policies description of endowment investment policies reconciliation by financial statement net asset class that shows cumulative investment returns (“roll-forward”) composition of an organization’s endowment by financial statement net asset classification (donor vs board designated endowment funds) Why Endowments? KEM - 6

  7. Project Summary History of KEM project • Kuali Financial System (KFS) based on Indiana University’s existing FIS system • Endowment management not part of FIS so not considered part of the core scope • Interested Kuali partners reviewed existing applications • Selected IU Foundation’s Endowment and Trust Accounting System (ETA) to be the base • Determined KEM should be a stand-alone system (could be implemented without KFS) KEM - 7

  8. Project Summary KEM Subject Matter Experts • Indiana University Foundation • Norman Peacock, Lead SME • Cornell University • Gail Thayer, Kim Yeoh, Ming Bengtsson • Indiana University • Bill Buskirk, Amoret Heise • NACUBO • David Lyons • San Joaquin Delta College • Shelley Pierce • University of Arizona • Marlene Moldenhauer, Marilyn Overpeck, Lindsey Lee KEM - 8

  9. Project Summary Current Status of KEM project Completing the development of functional specifications Programming scheduled to begin in first quarter 2009 Target completion date July 2010 KEM - 9

  10. KEM Overview KEM - 10

  11. KEM Overview • KUALI Features • Kuali standard architecture • Web-based technology utilizing electronic documents • Integrated workflow for transaction generation and approval • Flexible, robust data structures; facilitates data warehousing for decision support • Institutionally defined custom attributes KEM - 11

  12. KEM Overview • Productivity Features • Consolidates endowment accounting functions in a single application • Defined interfaces to external systems • Enhanced access to donor documents • Includes ticklers to serve as task reminders • Automated and recurring transactions • Group and report endowments based on user-defined criteria KEM - 12

  13. KEM Overview • System Features • Stand-alone application • Inquiry with drill-down capabilities • Supports UMIFA requirement to track underwater endowments • Supports donor due diligence and stewardship • Supports trust accounting KEM - 13

  14. KEM Overview Modular Data Design KEM - 14

  15. Common Kuali document components Document header information Doc number, Status, Initiator, Created Tabs Document Overview Notes and Attachments Ad Hoc Recipient Route Log KEM Overview KEM - 15

  16. KEM Features Sample KEMID Maintenance Document Screen KEM - 16

  17. KEMID Features KEMID Maintenance Stores long title Identifies organization responsible for administering endowment/trust Tracks date KEMID was established Captures purpose Allows for restriction of certain transactions Tracks status of KEMID KEM Features KEM - 17

  18. KEMID Features (cont’d) Agreement Description Identifies type of agreement Tracks status of agreement and changes to the agreement Place to list other documents on file Can include other comments and unique donor instructions KEM Features KEM - 18

  19. KEMID Features (cont’d) Benefitting Organization(s) Identifies the organization(s) that will benefit from the endowment/trust If multiple benefitting organizations, allows tracking by percentage or dollar amount KEM Features KEM - 19

  20. KEMID Features (cont’d) Account Responsibility Identifies individual(s) responsible for monitoring KEMID Assigned with date parameters Can be incorporated into the document workflow by the organization KEM Features KEM - 20

  21. KEMID Features (cont’d) Use Restriction Categorizes donor imposed restrictions Allows for additional, more detailed instructions KEM Features KEM - 21

  22. KEMID Features (cont’d) Source of Funds Identifies original source and date of funds Tracks original gift value KEM Features KEM - 22

  23. KEMID Features (cont’d) Investment Instructions Assign “models” for investing income cash and investing principal cash Automate movement of funds in and out of investment vehicles KEM Features KEM - 23

  24. KEMID Features (cont’d) Fee Instructions Identifies what type of fees should be charged Allows allocation to income or principal Provides date parameters Indicates whether fees should be accrued Allows for waiver of fees KEM Features KEM - 24

  25. KEMID Features (cont’d) Payout Instructions Provides instructions for endowment payout Allows payout to be split by percentage or by dollar amount Can link payout to multiple KEMIDs or general ledger accounts KEM Features KEM - 25

  26. KEMID Features (cont’d) Reporting Codes Links KEMID to the Council for Aid to Education (CAE) standard reporting codes Organization may create additional reporting criteria according to need KEM Features KEM - 26

  27. KEMID Features (cont’d) Ticklers Enables date driven ticklers Can establish frequency and end date Identifies who should receive tickler KEM Features KEM - 27

  28. Securities, Holdings and Cash (SHC) Securities Tracks separately invested securities and investment pools Current Values Units, Carry Value, Unit Value, Market Value Interest rates and dividend per share, payment schedule Track by CUSIP, registration code, class code, subclass code, reporting group Standard income accrual methods KEM Features KEM - 28

  29. SHC Features (cont’d) Holdings Balances By security Current Position Share Price Income information All Holders List by security By KEMID Current and Historical Tax Lots Holding Detail KEM Features KEM - 29

  30. SHC Features (cont’d) Investment Pools Can establish dummy security representing investment pool Endowments use cash to purchase units of the investment pool security Control KEMID holds all investment pool activity Set and schedule distributions per unit Tracks current and historical unit values and distribution amounts KEM Features KEM - 30

  31. SHC Features (cont’d) Investment Models Can establish multiple models with instructions for how and when to invest income cash and principal cash Examples of models might include: Uninvested cash may purchase shares of a money market pool nightly as a cash sweep Cash and money market pool funds may be used to purchase shares of a long term pool monthly KEM Features KEM - 31

  32. Transaction Processing Features Securities Transactions Purchases and Sales Free Receipts Corporate Actions Adjustements Accrued Income Calculations Income Distributions KEM Features KEM - 32

  33. Transaction Processing Features (cont’d) Unique transaction types Cash, Asset and Liability Purchases, Sales, Deposits, Disbursements Increase, Decrease or Transfer Special types Original Gift Value Adjustment Holding Unit Adjustment Trust Asset Transfer KEM Features KEM - 33

  34. Transaction Processing Features (cont’d) Multiple methods for transaction generation Imported Transactions Gift Transactions interface Spreadsheets Daily Processes Recurring transactions KEM Features KEM - 34

  35. Transaction Processing Features (cont’d) Recurring transactions Investment Models Cash Sweeps Pooled Funds Scheduled Transactions Income Distribution Transfers Disbursements KEM Features KEM - 35

  36. Transaction Processing Features (cont’d) Automated Processes Interfaces Scheduled processing Nightly Monthly and Year-end KEM Features KEM - 36

  37. KEM Features Reporting Features • Standard Reports • Statement of Activity • Balance Statement • Institutionally defined ad hoc reporting

  38. Special Trust Accounting Features Tracking by tax lots Flexible gain/loss calculations (FIFO, LIFO or Average Balance) Beneficiary disbursements and tax reporting KEM Features KEM - 38

  39. Other Features Name and Address records Home, Business, Campus, Seasonal 1099 reporting Independent Contractor, NRA Bank Depository ACH or Wire Transfer KEM Features KEM - 39

  40. Opportunity! Interested in KEM?! Will still consider new development partners Major benefits: Participate in decisions regarding functionality Develop local resource who is fluent in JAVA and the ins and out of Kuali programming Implementation Customization On-going local support KEM - 40

  41. Thank you! Questions? For progress updates http://www.kuali.org/ KEM - 41

  42. Additional References KEM Presentation Supporting Materials KEM - 42

  43. 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 reporting KEM - 43

  44. 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. Go Back KEM - 44

  45. 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. Go Back KEM - 45

  46. 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. Go Back KEM - 46

  47. 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 Go Back KEM - 47

  48. KEM Scope • Beneficiary disbursement process and tax reporting • Disburse payments to beneficiaries (including “split interest agreements”) • Provide data for annual tax reporting Go Back KEM - 48

  49. KEM Interface Diagram KEM - 49

  50. 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. • On the next few pages are displayed some of the KEM docs in progress and selected ETA screens yet to be re-designed. KEM - 50