UNIVERSITY OF WISCONSIN SYSTEM Trust Funds

1. UNIVERSITY OF WISCONSIN SYSTEM Trust Funds Doug Hoerr, Director, dhoerr@uwsa.edu, 608/262-9779 Tom Reinders, Senior Portfolio Analyst, treinders@uwsa.edu, 608/265-4174 Lori Keil, Accountant, lkeil@uwsa.edu, 608/265-9664 Jamie Erbs, Financial Specialist, jerbs@uwsa.edu, 608/262-7480 Carol Yanna, Univ. Serv. Program Assoc, cyanna@uwsa.edu, 608/265-0857 Suite 305, 780 Regent Street, Madison, WI 53715 November 2013

2. Trust Funds Operations • Trust Funds Acronyms • Overview • Sources • Account Categories • Investment Pools • Fund “payouts” • Account Set-up, Maintenance and Closing • Accessing PAL (Portfolio Account Link) • Inquiry on PAL and WISDM • Accessing Terms and Conditions of Accounts • Deposits, Expenditures and Transfers • SFS and SunGard Interface • Vendor Refunds

3. Trust Funds Acronyms • BOR = Board of Regents • E = Endowment • DE = Designated Endowment • IC = Income Cash Fund • IT = Intermediate Term Fund • LT = Long Term Fund • MV = Market Value • PAL = Portfolio Account Link • PC = Principal Cash Fund • QE = Quasi Endowment • SWIB = State of Wisconsin Investment Board • TC = Terms and Conditions • TF = Trust Funds • SG = SunGard Endowment System

4. Overview • Trust Funds (TF) are “longer-term” investable funds of the UW System, for which the BOR are trustees and fiduciaries. • TF Office provides investment oversight, accounting and administration. • Funds are pooled for investment purposes. • Records are maintained for each individual account; i.e. 161/162-1000, 161/162-4500, 161-PRJ22QC.

5. Primary Sources • Bequests from individual wills & trusts, which name a UW unit(s), UW System, or BOR as beneficiary (and not an affiliated Foundation). • Matching gifts • Other gift funds • Student loan repayments • Research & Sponsored Programs 133 – can temporarily invest when grant/contract requires “investment”  (currently 100 accounts with MV $13.7M)

6. Account Categories • Endowment (20, 25 E) – donor restricts use of principal • Designated Endowment (22, 27 DE) – Board of Regents restricts use of principal (bequests > $250,000) • Quasi Endowment (21, 26 QE) – no restriction on use of principal; all monies expendable

7. Investment Pools • Long Term Fund (LT) – used for principal, generally non-spendable portion of account (State Appropriation/ Fund 162) • Intermediate Term Fund (IT) – used for principal, generally portion of account (162) • Income Cash Fund (IC) – used for “current income” spendable portion of account (161) • Principal Cash Fund (PC) – holding area for new gift purchases of IT or LT and other transactions pending the quarter-end close (161/162)

8. Investment Pools What determines how monies are invested? • Income Cash Fund – All earnings on IC, IT and LT posted here; also, generally other spendable amounts expected to be expended within  2 years. • Intermediate Term Fund – Spendable amounts not expected to be expended for more than  2 years but less than  10 years. • Long Term Fund – Endowment principal (Es, DEs) must be invested here; also, spendable amounts expected to be held for  10+ years.

9. Investment Pools • Long Term Fund – Invested in a very diverse portfolio, which strategic asset allocation includes equities, bonds and “alternative assets”; valued and transacts quarterly. • Intermediate Term Fund – Invested in a portfolio comprised primarily of high quality, intermediate-maturity bonds, but with some equity and other exposures; valued and transacts quarterly. • Income Cash Fund – Invested in short-term money market vehicles (SWIB’s “State Investment Fund”); maintains constant $1.00 value, transacts daily.

10. Fund “Payouts” • Intermediate Term & Income Cash Funds • Interest earnings allocated quarterly • Credited to Income Cash Fund (161) component

11. Fund “Payouts” • Long Term Fund • “Spending Policy”: • 4% per year, applied to trailing 12-quarter moving average of Fund MV • Smooths fluctuations in distributions • Distributed in quarterly installments – 1% per quarter • Earnings comprised of: • Income on investments (interest/dividends) • Capital appreciation • Credited to Income Fund (161) component after quarter-end

12. Setting Up Accounts • Parent Accounts • TF Director initiates new parent account set-ups by coordinating with the Chancellor and, generally, the Department Dean (or his/her designee). • TF accounting staff sets up the new parent account in SFS and SG and obtains PRJ# that will be communicated to Department.

13. Setting Up Accounts Sub-Accounts • A sub-account is requested by the Department with an approved budget transfer from the parent account. • Sub-accounts will be set-up in the same manner as the parent accounts, entry into SFS & SG and # given to Department. • Information needed to set up a sub-account: - Sub-Account set-up forms can be found on Trust Funds webpage in the Customer Corner “Forms” link • Earnings from a sub-account revert back to the parent account (unless the Department chooses otherwise) • The Department is responsible for monitoring the account to ensure it doesn’t go into overdraft, notify TF when the end date should be extended, when new budget should be transferred to or from the sub and when the account is ready to be closed.

14. Changes to an Account • To close or edit a non-endowment parent account, sub-account, or to add budget to a sub-account, contact Trust Funds accounting staff.

15. Closing an Account • Endowment Parent Accounts (Es, DEs) are never closed. • Quasi Endowments (QEs) must have a zero balance on SG and SFS before closing. If the balance is not at zero: • You must spend down the Income Cash Fund • Contact TF Accounting Staff to liquidate IT and LT prior to spending down • If a sub-account, either spend down or contact TF Accounting Staff to return balance to parent

16. How to Access PAL • Go to Trust Funds Website: http://www.uwsa.edu/tfunds/ • Customer Corner • Click Account Balance & Transactions • Enter Username: • Username: For Madison campus, enter “uwmsn” and the first 2 or 4 Department ID #’s; e.g., uwmsn48, uwmsn53, uwmsn12 or uwmsn5342, or uwmsn480305, etc; tab to password • For non-Madison campus, enter “uwmil”, “uwstp”, “uwlac”, etc.; tab to password; • Password: It is ALWAYS “trust” (all lower case), regardless of campus • Click the “Login” button

17. This screen may appear at your first login, depending on how much of the UDDS you have entered:“I Accept”

18. This “dashboard” screen will appear:

19. You can search for an individual account by entering the 4 digit account #; i.e., 1902, 4510, 14SI or 26EF in any of the following locations: “Portfolio Review“ tab using the drop down menu “Account” tab “Account Group” tab Use the “search account” box and enter the four digit account number 1081 or 41NS

20. Viewing Balances and Transactions • PAL (to view 161 & 162) total balances – spendable and non-spendable • WISDM (to view 161 only) • This is the best way to view transaction activity • Actual Cash or Current Fund balance on WISDM should total the Income Cash Fund on Portfolio Review (except for daily timing issues)

21. Terms • Go to Trust Funds Website: http://www.uwsa.edu/tfunds/ • Customer Corner • Click Account Terms, Conditions and Coding and enter your four digit account number:

22. Terms (cont’d) Your Account Information will appear: 22

23. Making Deposits • Generally, Departments would initiate deposits only to existing, multiple-donor parent accounts expected to receive recurring contributions (i.e., Departments would generally not be sending a check to open a new account) • Prepare Trust Funds “Gift Receipts Form” • Complete “Gift Receipts Form “ (found in “Forms” link on website) – for non-endowments, designate the investment election: Income Cash Fund (IC), Intermediate Fund (IT), or Long Term Fund (LT) (or a combination of Funds) • Attach check • Route “Gift Receipts Form” and check per your Department established procedures if internal signatures are needed • Submit completed form/check/other documents to the Trust Funds office

24. Expenditures • Disbursements are made only from Income Cash Fund (161) • Disbursement can be made if: • Sufficient funds exist – if not, the Department will be contacted by TF to transfer expenses to another funding source-Department retains all original documentation to support cost transfer • Expenditure complies with Account Terms & Conditions • Conforms to pre-audit guidelines

25. Transfers • Automatic transfer of unspent 161 balances to 162 (IT or LT), for accounts with specific Terms & Conditions stipulating such “reinvestment” • Budget transfers between parent and sub-accounts per Department request • Automatic quarterly transfer from 162-IT or 162-LT (QEs only) to 161 to cover overdrafts • For QEs, Departments can request transfers between 161-IC, 162-IT, and 162-LT as appropriate (TF investment staff can be consulted) • IMPORTANT NOTE – The automatic sweep of unspent 161 balances to 162-IT for all accounts was discontinued as of 6/30/12 • Departments responsible for closer monitoring of usage and balances!

26. Interface between SFS and Sungard • Revenues (deposits, earnings) are initiated on SG and interfaced to SFS • Expenditures are initiated on SFS and interfaced to SG • Timing issues can occur and cause reconciliation differences for a few days or longer during FY-end and period 13

27. Vendor Refunds • ONLY vendor refunds are allowed on Fund 161 • Complete “Vendor Refund Form” from UW Bus Svcs site • There must be an original voucher number included with this form to verify the original purchase • For Fund 161, the form should be sent to Trust Funds Office • You CANNOT apply sales credits to Fund 161 • If this happens, you will be asked to reverse it a.s.a.p