1. Updated February 2012 1 Endowment Accounting Growing Our Future

2. Updated February 2012 2 What is the balance in my endowment? A simple question that does not have a simple answer Each endowment has at least three answers to this question: – The book value – The market value – The available payout value

3. Updated February 2012 3 The book value Also referred to as Corpus or Principal Equal to the original gift amount Only changes if additional gifts are made, spending occurs from corpus (not income), or in some cases, if payout is reinvested Has important legal and accounting implications under Uniform Prudent Management of Institutional Funds Act of 2007 (UPMIFA)

4. Updated February 2012 4 The market value What the corpus is worth today Includes both the book (corpus) value and all accumulated income and/or losses – GW uses total return on investments; there is no difference between interest/dividend income and capital gains and losses Payout reduces the market value, not the corpus

5. Updated February 2012 5 The available payout value Board of Trustees authorizes a payout rate every May for the following fiscal year Payout is like a dividend from a mutual fund – Each month the payout is distributed from the investment pool (held at BNY Mellon) to GW’s operating cash – Once distributed, the payout no longer participates in earnings, even if it is not spent

6. Updated February 2012 6 Spending the payout Some departments spend previous years’ payout Some departments spend current year payout Payout will increase as new gifts are received and/or payout is reinvested into corpus We encourage schools and departments to spend the payout or reinvest it

7. Updated February 2012 7 Spending the payout For some endowments the payout is automatically transferred each month to the department – Professorships – Discretionary funds – General University support Most scholarship endowments are drawn through Banner by the Offices of Financial Aid and Graduate Student Support For some endowments, the Budget office will draw funds as needed

8. Updated February 2012 8 Spending the payout Endowment spending must be approved by Treasury Management as follows: – Send the request form to Treasury Management, who will prepare a check request Most prizes and awards are done this way Stipends usually are done this way – Spend out of departmental C or R funds, and send the request form to Treasury Management for reimbursement Visiting scholar, travel, and special events are done this way

9. Updated February 2012 9 Spending the payout When completing your request, be sure to include: – Copies of supporting documentation These will not be returned – please do not submit originals – Signatures for approval – Check requests require the payee’s Social Security Number for tax purposes – Do not include personal information, such as Social Security Numbers, credit card numbers, home addresses, etc. on R and C fund reimbursement requests

10. Updated February 2012 10 Sample Endowment Accounting Flow – The Green Fund Initiating the endowment: – Recording the gift – Establishing the endowment – Investing in the pool Participating in pool earnings and receiving payout Spending payout

11. Updated February 2012 11 Initiating the endowment In January a $100,000 gift was received from Mr. Green to endow an annual scholarship for eligible GW accounting students Development deposited the gift and sent the Memorandum of Understanding (MOU) and any other donor correspondence and agreements to Treasury Management (only after gift was deposited). Since coded as an endowment, it fed to the Endowment Tracking System (ETS) to the clearing account EQ60000

12. Updated February 2012 12 Treasury analyzed the terms of the endowment and set it up in ETS, specifying the net asset class of the corpus, and of the income. Treasury then prepared a “numbered memo” directing the Comptroller’s office to transfer the funds from EQ60000 to the final numbered account set up for that endowment. The Comptroller’s Office made a journal entry to transfer the funds to the new endowment account and updated the Banner/Oracle/ETS mapping table for the new fund Towards the end of February, after calculating the January 31 value of the total pool investments, the endowment accountant bought $100,000 worth of units (shares) in the pool for the Green endowment. In this case, $100,000 bought 1,000 units. Initiating the endowment

13. Updated February 2012 13 Earnings and Payout Once a month, after all the investment reports for the previous month have been finalized, the endowment accountant credits each endowment with its share of the investment income – The Green endowment received $1,000 as its share of income in March (for the first time, since it purchased its shares in February) – Also in March, the Green endowment was credited with monthly payout of $250 (@$3 per share/12 months)

14. Updated February 2012 14 Spending the payout In March, an accounting student applied for endowment funds – The administrator of the endowment granted the student $200 towards the cost of books for the current semester; A form was sent to Treasury Management, requesting payment. – Treasury verified that the purchase of books was a permissible expense in accordance with the endowment documents, and that the Green endowment had sufficient unspent payout to cover the request – Treasury prepared a payment request, and in due course, Accounts Payable issued a check to the student.

15. Updated February 2012 15 Pop Quiz What is the corpus of the Green endowment? What is the market value of the Green endowment? What is the unspent payout of the Green endowment?

16. Updated February 2012 16 Answers The corpus is $100,000. Thank you very much Mr. Green!

17. Updated February 2012 17 Answers The market value at March 31 is $100,750 $100,000 original gift 1,000 income earned (250)payout distributed $100,750 market value

18. Updated February 2012 18 Answers The unspent payout balance at March 31 is $50 $250 payout allocated (200)spent on eligible expenses $ 50 balance of unspent payout

19. Updated February 2012 19 The Endowment Tracking System Endowments are captured on the General Ledger at a high level All endowments are tracked at the individual level in ETS (the sub-ledger) Reports are produced each quarter and distributed via the MyGWU Portal Access to ETS is limited

20. Updated February 2012 20 The Endowment Tracking System Monthly reports include: – Description Report – Gift Report – Corpus Report – Payout Rollforward Report – Payout Drawdown Report

21. Updated February 2012 21 Files and Documentation All Treasury documents are currently stored in Documentum/GW Documents For access, contact Jennifer Hinkle at x6- 1910 or hinklej@gwu.edu. G:\GROUPS\endowment\Endowment manuals and documentation\Endowment manuals and documentation\Procedures - master file\Endowment Accounting Revised Feb 12.ppt