1. University of Georgia External Affairs Division Office of Financial Services Spending Budgets Arch Foundation for the University of Georgia The University of Georgia Foundation October 26, 2010

2. Spending Budgets Policies and Procedures Available online: Arch Foundation www.uga.edu/archfoundation UGA Foundation www.externalaffairs.uga.edu/ugaf Policy Section 7.3 (both Foundations) Endowment Guide / FAQ

3. Spending Budgets Policies and Procedures Georgia law requires a spending policy for endowments. July 1, 2008, the Foundations adopted the State of Georgia’s Uniform Prudent Management of Institutional Funds Act (UPMIFA). UPMIFA requires the preservation of the fair value of the original gift as of the gift date of the donor restricted endowment funds absent explicit donor stipulations to the contrary. The Foundations will protect your endowment by monitoring spending.

4. Spending Budgets Policies and Procedures The Foundations adopted a new spending budget method in January 2010. The new method attempts to: Reduce the spending volatility. Include predetermined inflation factor. Will target a spend rate - currently 4%. Maintain the purchasing power of endowment assets.

5. Spending Budgets Spending Budget Formula Current year spending budget (annual funding): (80% x ((1+CPI) x prior year spending budget)) + (20% x (4% x endowment market value*)) = Spending Calculation. Spending Budget = lesser of (1) Spending Calculation, or (2) Available Investment Return. * Based on value as of December 31.

6. Spending Budgets Spending Budget Formula - Example Fund XYZ: Endowment Market Value = $50,000 Prior year spending budget = $2,000 Available Investment Return = $1,500 CPI = 2% (80% x ((1+2%) x 2000 )) + (20% x (4% x 50000)) = $2,032 = Spending Calculation Spending Budget = $1,500 (lesser of $2032 vs $1500)

7. Spending Budgets Timeline for Fiscal Year 2012 February 2011: Foundation investment committees determine Spending Rate for next fiscal year (FY12). March 2011: Spending budgets calculation based on December 31 data. FY12 Spending budgets available on IFAS dashboards. April 2011: Begin dollar cost average funding of spending budgets for FY12.

8. Spending Budgets Timeline for Fiscal Year 2012 August 2011: FY11 final spending budget reports available. FY12 spending budget reports available. Spending budget will be fully funded and held as cash. Funds with cash balances greater than two years spending will not be liquidated. Excess cash balances greater than two years spending will be reinvested automatically. Cash balances can be reinvested more frequently at request of VP / Dean / Director.

9. Spending Budgets Requirements before Spending from Endowments Fund agreement is signed. Endowment minimum is met. Invested for at least twelve months. Calculation based on December 31 market value for all funds with twelve months of data. A second calculation based on June 30 market value for new funds that have reached the twelve months of data.

10. Spending Budgets Funding Available for Endowments Investment Returns Gift Allocation Represents any gifts or transfers to support current spending, not intended for investment in the endowment. UGAF Allocation Represents one-time funding for current spending as requested by the Provost.

11. Spending Budgets Current Spending Budget Report

13. Spending Budgets Projections Projections are a tool for long-term endowment spending. Each fund should be reviewed individually. Based on best assumptions available to the Foundations. Will be distributed at least bi-annually for each endowment.

14. Spending Budgets Projection Template Assumptions

15. Spending Budgets Projection Template Example #1

16. Spending Budgets Projection Template Example #2

17. Spending Budgets Projection Template Example #3

18. Spending Budgets Projection Template Example #4

19. Spending Budgets Endowed Giving

20. Spending Budgets IFAS Access and Training Access forms for both Foundations are on their respective websites. Future training dates: November 18. Register through UGA Training and Development.

21. Spending Budgets Contact Us Jenny Dutton: (706) 542-6458 jdutton@uga.edu Ryan Hitchins (706) 583-0758 hitchins@uga.edu