Presentation on theme: "February 8, 2011. Agenda Definitions: Gift Grant and contract Private support Types and tenders of gifts – rules and processing Special events - special."— Presentation transcript:
Agenda Definitions: Gift Grant and contract Private support Types and tenders of gifts – rules and processing Special events - special rules The Gift Fee and STIP Gift recording in the systems Where does the gift go once recorded? Regents versus Foundation – which entity and the outcomes? Private grants – where do we get the information? Reporting private support – to whom and when? References Endowment – how does it work?
GIFT A conveyance or transfer of an asset (including cash or negotiable instruments) given with charitable intent and without consideration – (legal definition). Processed by Gift Processing
Definitions, cont WHAT MAKES A GIFT TAX DEDUCTIBLE? Given to a bonafide charity recognized by the United States Internal Revenue Service for its charitable purpose. Charitable gifts are not made to individuals and cannot be restricted to benefit individuals for personal benefit. Funds are awarded irrevocably. May be restricted for a specified purpose such as an approved capital project or facility improvement within new or existing buildings, for general research purposes and for various endowment purposes, as well as for current expenditures to benefit specific campus groups such as for scholarships, fellowships, library or equipment purchases. Not a “quid pro quo” transacation (even exchange of funds for results or services) by the University or its employees for the gift, other than to use the funds for the purpose intended by the donor. (There can be a quid pro quo component, and that part will not be tax deductible)
Definitions GRANT Written agreement between two or more parties which obligates the recipient to provide something or perform a service of more than incidental significance to the grantor. Grants have “terms and conditions”, or consideration. Often intention is still charitable, and the requirements are more of a detailed reporting nature within a time frame. Processed by OCGA.
Definitions CONTRACT Written agreement between two or more parties which obligates one party to provide significant services, research with deliverables or ownership rights in exchange for money, goods or other services from the other party. Contracts are even exchanges and are not charitable. They are never included in private support totals Processed by OCGA.
What is Private Support? PRIVATE SUPPORT (CASE Management Reporting Standards) All gifts and private grants provided by private entities in support of educational, research and outreach missions Does not include contracts Includes support from private sources – defined as being from non-governmental entities, for profit or not-for-profit. A role of Advancement Services is to report all Private Support given to UCSD (more later)
Overarching Guidelines What are the policies governing gifts? UCOP Development Policy and Administration Manual UCOP Policies and Delegations of Authority UCSD Policy and Procedure Manual UCSD Foundation Policies and Guidelines CASE (Council for Advancement and Support of Education) Management Reporting Standards IRS Regulations Other legal/ethical considerations (many of these have references at the end)
Responsibilities of Department Personnel Preliminary Classification of an Award from a Private Source per PPM 150-35 http://adminrecords.ucsd.edu/PPM/docs/150-35.HTML UCSD PPM 150-35: All awards received directly by a campus department will be preliminarily classified by that department as a gift, fellowship, contract, grant or service agreement. All awards initially classified as gifts or fellowships shall be forwarded to the Gift Administration Office. However, all awards which are not considered clearly definable gifts or fellowships by the Gift Administration Office will be immediately forwarded to the OCGA for additional review and classification. It is the policy of the Gift Administration Office to routinely send all proposed gifts for research from private, for-profit sponsors to OCGA for review. OCGA has the authority for final determination of an award classification Ensure gift made to correct entity Gift Documentation (more in a minute!) Sent to Gift Processing in a timely fashion Stewardship: Acknowledged by Department or Development personnel
Responsibilities of Gift Processing To adhere to UCOP “delegations of authority” at each campus for our specified role. UCSD Gift Processing is officially designated as the UCSD office to accept or obtain acceptance, record, receipt, report, and maintain records for all gifts to the campus – Regents or Foundation. To report PRIVATE SUPPORT given to the campus to UCOP, CAE and the campus (It has to get IN the system to be reported!) Generally CASE Standards guide us. http://www.ucop.edu/instadv/documents/2009.pdf To ensure GIFTS meet IRS Regulations and UC and UCSD policy and are truly a gift. A transaction may not be called a gift to cover another underlying type of transaction (ie, one that may be prohibited, or require the assessment of overhead).
Delegation of Authority for Gift Acceptance Over $5 Million: UC President Up to $5 Million: Chancellor Up to $1 Million: VC- External and Business Affairs Up to $500,000: AVC: Development Up to $250,000: Director, Advancement Services Up to $100,000: Dep. Director, Advancement Services Up to $25,000: Manager, Gift Processing All Foundation gifts in excess of $5 million must be accepted by the UC President as well. Development/Dept staff should not sign to accept a gift or gift agreement.
FUND TYPES Current Funds: Current funds are funds that are to be entirely expended for the purpose designated by the donor. Are held by either the Regents or Foundation. Once expended, the fund is closed Current funds are not credited with the STIP earnings…earnings are swept Endowed Funds: Endowments are gift made to be held and invested in perpetuity: The principal is never spent to ensure growth and long term funding Endowments require special gift language. Endowments are held by either the Regents or Foundation. Endowment Spending Policies allow for spending some of the annual return. This “spending” is then made available to the Departments.
Purposes/Uses Campus Improvement Department Support Instructional Support Research Student Support Other Purposes Unrestricted
Processing a Gift What do we need to process a gift to EITHER the UC Regents or the UC San Diego Foundation? A proper gift or pledge letter from the donor or solicitation letter sent to the donor (required for all gifts over $10,000; otherwise encouraged) Pledge versus contingent pledge (pledge potential) Check (unless it is only a pledge) Credit Card information Stock gifts Other Gifts in Kind (a little later and special processes may apply) Deferred gifts and bequests
Processing a Gift (cont.) A proper Regents or Foundation gift fund number the gift may be placed in, or a request for a new gift fund if needed Fund Accounting rules = all gifts for a similar purpose are allocated to the same fund. New funds are only created when a unique purpose cannot be attributed to an existing fund. Need a new fund info sheet for a Foundation gift http://www-er.ucsd.edu/foundationDir/FDN-ACT/fundfrms/fundinfosheet1.pdf http://www-er.ucsd.edu/foundationDir/FDN-ACT/fundfrms/fundinfosheet1.pdf Always use Gift Acceptance form for a Regents fund http://www-er.ucsd.edu/giftprocessing/pdf_excel/GiftAcceptanceForm.pdf http://www-er.ucsd.edu/giftprocessing/pdf_excel/GiftAcceptanceForm.pdf Economic Interest Statement from the faculty member if applicable. (discussed later)
Event Tickets Often have a Quid pro quo component– defined as “value received” (get what you pay for) In a gift or event transaction, the charity is responsible, per IRS guidelines, to SPECIFICALLY disclose at the time of solicitation, the fair market value of any benefits a donor receives in exchange for a gift. Special events are notorious for this: meals, entertainment, drink, valet, music, etc. The COST of providing these items to the charity is not necessarily a measure of FMV, especially if the costs were underwritten. The charity still must disclose the FMV of the benefits, which is NOT a tax deductible gift.
Raffles RAFFLES are regulated by the State of California Charitable raffles are now permitted, via a registration process. Only the UC San Diego Foundation can hold a raffle. The dept. holding the raffle must file a financial report after the raffle. For more information and forms go to: http://ag.ca.gov/charities/raffles.php http://ag.ca.gov/charities/raffles.php There is a 90/10 rule where 90% of the proceeds must go to charity and only 10% of the proceeds spent on expenses (50/50 raffles are illegal).
Raffles,cont. The ticket sales are still not a charitable donation, as they represent the purchase of a chance to win, or 100% quid pro quo. Raffles can be complex and have tax implications for the winners of the prizes. If the prize is over $5,000, there is tax withholding rules and you may need to get the taxes from the winner before they take possession of their prize. Generally, they not widely used or recommended. Call Gift Processing if you are considering holding a raffle at your next fundraiser.
Auctions Auctions involve a good amount of organization and paper trail. They have two components: 1. Incoming gifts in kind from donors (the items to be auctioned off): Some items are recorded and receipted as gifts, such as tangible personal property. Other items, such as free services, free uses of facilities or homes etc, are lost income and are not receipted or recorded.
Auctions, cont. 2. Items Auctioned Off: Must be listed with a fair market value at the auction with disclosures related to deductible and non- deductible. Anything paid under or at FMV is quid pro quo, meaning, no gift and no tax deductibility. Anything paid in excess of FMV is receipted as a gift and tax deductible.
Event Sponsorships SPONSORSHIP Sponsorships come in two forms: where commercially valuable benefits (generally meaning commercially viable advertising of the sponsor and their products, or by virtue of UCSD training of sponsor company personnel) are returned to a sponsor by the donee entity, the sponsorship is considered business income to the donee entity and advertising or marketing expense to the sponsor (that is, not a gift). Such income may be subject to Unrelated Business Income Tax (UBIT) by the donee.
Event Sponsorships SPONSORSHIP (cont’d) Where only incidental benefits are returned to a sponsor by the donee entity, such as use of the sponsor’s name or logo for donor acknowledgment, and when less than 2% the sponsorship paid is returned in value of goods or services to the sponsor, then the sponsorship is a “qualified sponsorship” to the donee entity, is not subject to UBIT, and is a defined as a GIFT under University policy and IRS regulations.
Underwriting EVENT UNDERWRITING Generally a gift provided to assist UCSD in putting on an event. Underwriting is solicited often at UCSD and is treated as a charitable gift, as long as the benefits returned to the sponsor fall under the 2% rule. Some benefits, in the form of event tickets, etc, may be provided in return to the underwriter, as quid pro quo, and will be receipted accordingly.
Gift Fees and STIP crediting Assessment Fee – PPM 410-3PPM 410-3 94% of every $ given goes towards the purpose for which it was intended; 6% is directed to administrative costs related to fundraising Applies to Regents and Foundation gifts, only exceptions are gifts in kind that are not sold and certain fellowship gifts Does not apply to grants STIP Crediting PPM-410-10PPM-410-10 STIP defined STIP is not credited to funds. It is swept.
What Charitable Entities at UCSD Can A Gift Be Made To?
Two Legal Charities Gifts that are solicited on behalf of UCSD belong to either of the following two legal entities: The Regents of the University of California (95-6006144) UC San Diego Foundation (95-2872494) The UC Board of Regents are a governing Board of the system. The Regents do have charitable status. Each campuses gift office may accept and process gifts on behalf of The Regents. The individual campus foundations were established to provide a local Board and entity which could more effectively support the raising and management of funds for the unique needs of each campus. Each campus has a foundation, governed uniformly by a single policy.
Regents vs. Foundation What’s the difference between the entities? How are gifts processed to each? When does a gift go to the Regents vs. the Foundation? Once money is in the Foundation, how do you get it out? (Transferring funds for expenditure)
GUIDELINES ON DIRECTING A DONOR’S GIFT TO THE REGENTS OR THE UC SAN DIEGO FOUNDATION There are various administrative and donor relations advantages to be considered in directing a donor’s gift. In particular, the UC San Diego Foundation is geared to handle high volume funds (many gifts solicited for the same purpose.), ongoing funds (those that will continue to receive gifts in the future) and endowed gifts. The Regents is primarily geared to handle individual one time gifts, particularly those for current expenditure. OF NOTE: Except for in-kind gifts to be held and retained by UCSD, any gift may be made to EITHER entity! OF NOTE: All gifts are counted for private support and credit to Development should be done regardless of the entity! The Regents One-time current use gifts (directed to a specific researcher and/or project) Gifts-in-kind to be held and retained by department and not sold – includes gifts of intellectual property rights Real Estate to be held and used by UCSD Previously established Regents Funds Fellowships with a named Fellow and an application process: money really belongs to the Fellow Any gift where a case cannot be made that the donor made an error and did not intend it to go to the Foundation Bequests that do not specifically state “UC San Diego Foundation” or a Foundation fund All items classified as Grants, Contracts, or Business Agreements UC San Diego Foundation Most gifts solicited by Development Gifts made to funds that will be ongoing with a balance maintained over period of years Annual funds and other higher volume gifts Fundraising events managed by Development (gifts with quid pro quo) Gifts-in-kind to be sold Most planned/deferred gifts (Lead Trusts, Life Estates, Gift Annuities & Charitable Remainder Trusts) Real estate for sale Previously established Foundation Funds Most endowed gifts Most gifts for capital projects
Parameters Common to Regents and Foundation Quid pro quo (discussed earlier) Gifts that must be approved and accepted by the President of the UC Endowed chairs Real property to be retained by UC Gifts over $5 million
Parameters Common to Regents and Foundation (cont.) Gifts-in-Kind (tangible items) - must have “related use” to UCSD; exceptions for appreciated property of securities and real estate. Valued at their fair market value Equipment gifts: Need a department owner. Are documented using a gift letter or deed of gift form If new, must be valued at our “educational discount” cost to purchase. For used for equipment – we need to ensure it is safe, and we often ask for help to determine the value.
Parameters Common to Regents and Foundation (cont.) Free or reduced services are considered “Lost Income” and are not charitable gifts. Only out-of- pocket costs related to providing these gifts may be deducted by the donor. Intellectual property gifts are particularly cumbersome – and rare now. Contact us. Real estate gifts require a great deal of due diligence and are handled as a planned gift.
Parameters Common to Regents and Foundation (cont.) If the FMV of a GIK is $5,000 or more, donor will need an appraisal and must submit an IRS Form 8283 with tax return. Form 8283 Gifts-in-kind are receipted with a description of the gift only -- “value as declared by donor” is listed as the amount. Donors are responsible for determining the deducted amount on their tax returns.
Parameters Common to Regents and Foundation (cont.) Matching gifts Donor completes, signs & send with gift GP Staff finalizes and submits for payment Dept. Staff NOT authorized to sign Anonymous gift Request must be in writing Two types: a flag, or, we really don’t know! Gifts of Marketable Securities Valuation date is the date they are received into our brokerage account (via DTC wire) or the properly endorsed certificates are delivered to UCSD
Parameters Common to Regents and Foundation (cont.) Marketable Securities (cont.) Valuation amount is the average of the high and low price as published by the exchange on the date of the gift Donors are advised of how UCSD calculated the value of their securities gift; however, it is the donor’s obligation to determine valuation deducted for tax purposes VERY IMPORTANT: Donors should not endorse the back of stock certificates. Separate stock power forms should be used. Consult with our Planned Giving Office or Gift Administration for proper handling. Donor completes, signs & send with gift GP Staff finalizes and submits for payment Dept. Staff not authorized to sign Anonymous gift Request must be in writing No information will be released to anyone Gifts of Marketable Securities
Parameters Common to Regents and Foundation (cont.) Conflict of InterestConflict of Interest Filing (PPM 200-13)PPM 200-13 Having a direct or indirect financial interest in the sponsor of research, which is funded in whole or in part. When is the filing required Negative vs. Positive EI Exclusions Gift Receipts Sent out by Gift Processing as soon as possible, generally within a few days unless there are funds to be set up, issues with documentation or COI, or questions as to whether it is a gift or not Non-monetary gift receipts describe the item given only – not a valuation
Gift Recording Process Review the gift documentation to ensure it is a gift and determine acceptance criteria Batch checks for deposit Batch gifts for keying (includes checks, credit cards, pledges, in kind etc. ) Key pledge/payments/ outright gifts into Millennium Database Receipt and thank donor File our back-up information E-mail notifications – next day, to Development and to PI or BO
What happens to a Foundation gift once processed? Foundation Accounting gets all the data and accounts for the transactions in the Foundation’s Fund Accounting system Department owners access the information on the fund from their login on the Foundation web portal
Spending a Foundation Gift The Foundation fund works like a savings account Departments request use of Foundation funds by lump sum transfers to the University The transferred funds are placed in a University Fund by Foundation accounting personnel. Departmental personnel then expend the funds in the same manner as other University funds The transfer fund works like a check book
What happens to a Regents Gift once processed? Review the gift documentation to ensure it is a gift and determine acceptance criteria Batch checks for deposit (creates a financial entry in IFIS) Batch gifts for keying (includes checks, credit cards, pledges, in kind etc. ) Key pledge/payment/outright gift into Millennium Database Receipt and thank donor Budgetarily allocate the gift in the University Fund Accounting system File our back-up information E-mail notification to PI or BO Note: Only after a gift is allocated will the gift show on the Department ledger for spending.
Spending a Regents Gift Gifts may be spent from the ledger in accordance with normal ways to expend all University funds. For example…. Check request Travel Purchase order Payroll costs These funds work like a check book
Private Grants Private grants are received monthly by a report from OCGA. We code and record them in the database so that the private support can be properly reported. The office of acceptance is “Grant” and is listed under “category on the Mill screen.
Private Support Reporting We report internally weekly. We report to UCOP quarterly and annually using both the CAE criteria and the “Regents” criteria. We report to CAE/VSE annually and to UCOP annually for campaign totals.
Other Policy References UC Development Policy and Administration http://www.ucop.edu/ucophome/policies/devpol/ http://www.ucop.edu/ucophome/policies/devpol/ UCSD Gift Processing Manual http://www- er.ucsd.edu/giftprocessing/ http://www- er.ucsd.edu/giftprocessing/ Classification of Awards from Private Sources PPM 150-35PPM 150-35 UCSD Gift Fee Policy – PPM 410-3PPM 410-3 UCSD Naming Policy – PPM 410-4PPM 410-4 UCOP Resources http://www.ucop.edu/instadv/fundraising.html http://www.ucop.edu/instadv/fundraising.html
Forms Foundation Fund Information Sheet, Signature Authorization http://www-er.ucsd.edu/foundationDir/FDN- ACT/fundfrms/Forms.asp Gift Acceptance Form http://www-er.ucsd.edu/giftprocessing/
Endowment A gift given whereby the original gift is not to be expended It is to be invested, generally with the objective to grow the principal over time by investment returns. Generally invested in diversified portfolios of stocks, fixed income and alternative investments that produce both cash returns of interest and dividends and return in the form of unrealized appreciation (or depreciation, as the case may be!)
Endowment If the gift cannot be spend, what good then, is the gift? The idea is that a portion of the annual investment returns will be used for expenditure. This is called the “endowment spending policy”. It is set by the policy of the governing board. The unexpended amount of return is retained in the principal, helping to protect it from inflation and thus protect the future “spending streams”
Endowment Put another way: Grow the principal, grow the spending. Purchasing power hopefully stays the same, or improves, over time. The fund lasts forever, done right. Permanent money is the best kind to have! But yes, a large endowment is needed to produce any reasonably sized spending stream. We manage endowments under the guidelines of the Uniform Prudent Management of Institutional Funds Act “UPMIFA” Impact of the recent drastic market on value