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Changes to FY'14 Endowment Payout Process: Enhancements & Simplifications

In July 2013, a collaborative effort led to significant changes in the FY'14 endowment payout process, involving multiple departments including the Office of the VP for Business Affairs and Financial Management Services. The primary goals were to simplify the payout process, eliminate the confusing shortfall method, better align cash and accounting, and facilitate easier budgeting for fund holders. The new approach introduces monthly payouts without requiring share liquidations, enhancing financial flexibility and stakeholder clarity regarding fund allocations.

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Changes to FY'14 Endowment Payout Process: Enhancements & Simplifications

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  1. Fiscal Year 2014Endowment Payout Process Change Posted July 2013

  2. Drivers of the FY’14 Changes • Collaborative effort involving • Office of the VP for Business Affairs • Financial Management Services • Budget Office • Administrative Systems • Office of Development • Goals • Identify the simplest solution that works for the majority of funds • Eliminate “confusing” shortfall process (liquidation of shares) • Better align cash and accounting tracks • Make it easier for fund holders to effectively budget/forecast allocated payout Financial Management Services

  3. What Changed – Payout Timing & Process $12k Annual Payout Process (“Shortfall”) Pre-FY’14 Sep Mar Apr May Oct Nov Dec Jan Feb Jun Jul Aug Sell Shares to Cover Shortfall Annual Payout Allocation to Income Funds ( # shares X payout per share ) Monthly Impact to Share Value No Impact to Spending Flexibility No Sale of Shares $1k $1k $1k $1k $1k $1k $1k $1k $1k $1k $1k $1k Beginning FY’14 Sep Mar Apr May Oct Nov Dec Jan Feb Jun Jul Aug Monthly Payout = # shares X payout per share 12 Financial Management Services

  4. 1,000 X $299 =$299,000 Impact on Number of Shares & Share Value Example: Fund value = $300K (1,000 shares, $300/share). Annual Payout = $12/share; Monthly Payout $1/share 960 X $300 =$288,000 Sept Aug Nov Pre-FY’14 1,000 X $300 =$300,000 1,000 X $300 =$300,000 SellShares To Cover Shortfall Annual $12K Payout Allocation Share value declines by $1/month as payout is distributed $1K $1K $1K $1K $1K Beginning FY’14 1,000 X $298 =$298,000 1,000 X $296 =$296,000 1,000 X $297 =$297,000 1,000 X $288 =$288,000 . . . . . . . Sept Oct Nov Dec Aug Financial Management Services

  5. Summary of Changes Financial Management Services

  6. End

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