1. The Catholic University of America
CUA Budget Meeting
Endowments at
The Catholic University of America
Deborah L Brown,
AVP Advancement Services
Renell D. Lewis
Director of Treasury Services

2. What is a Gift?
A gift is a voluntary transfer of cash, securities or property from a donor to the University.
The University makes no commitment of resources or services in return for these gifts, other than a promise to use the gift as the donor wishes.

3. Types of Gifts we receive of gifts
Unrestricted gifts: gifts where the donor has placed no restrictions. The University can use the gifts for current operations.
Example – Annual Giving to a School/Center – Fund 11 gifts

4. Types of Gifts we receiveof gifts
Restricted Gifts: a gift where the donor has placed limitations or conditions on how or when the gift can be used.
These gifts are credited to Orgs. The Org is established to hold gifts with the same restricted – they are not commingled.
Examples
Operating – provide short term support for a lecture series
Capital – construct a building, renovate a classroom
Endowment – establish a professorship, provide scholarship

5. Types of Gifts we receive gifts
What is an Endowment?
Types of Gifts we receive gifts
Permanently restricted gifts - also referred to as endowed gift,
An Endowment is a “permanent fund of property or money bestowed upon an institution or a person, the income of which is used to serve the specific purpose for which the gift was intended.”
-Dictionary of Business Terms

6. Examples of transactions that are not gifts
What is not a gift?
Examples of transactions that are not gifts
Funds given in exchange for goods or services rendered is not a gift.
Examples:
Tuition for a specific student.

7. Now - Back to Endowmentsowment
It is, a gift where the donor has stipulated that the principal will remain intact forever, in perpetuity. The donor wishes only the income to be spent to provide support for a specific program.
Permanently Restricted Fund

8. Quasi Endowment 
 Sometimes called “board designated”, means a fund that functions like an endowment, but without any legal or donor restriction to hold the fund permanently. Thus, net appreciation, reinvested income and/or principal may be appropriated. The fund can be University-directed or Donor-directed.   

9. Endowment Management
The CUA Endowment Spending Policy, and the related Investment Policy guides our endowment management.
Two principal goals of endowment management:
1. Providing a significant and stable flow of funds to the operating budget over the short-term;
2. to provide resources to this generation of scholars, while at the same time maintaining the purchasing power of the endowment over the long term

10. Investment of Endowments
The endowment is invested in a pooled investment vehicle much like a mutual fund.
The University’s endowed investments are managed by our outsourced CIO, Strategic Solutions.
Due to the investment management and administrative costs involved with managing an endowed fund, the minimum level of cash on hand needed to create an endowed fund is $100,000.

11. Investment of Endowments (Cont’d)
The Board of Trustees of the University requires that all investment advisors adhere to the University’s strict prohibition of investments in companies substantially engaged in the manufacturing, distribution, or provision of products or services on the basis that such activities are inconsistent with the teachings of the Catholic Church.
Prohibited investment areas include abortion, contraceptives, stem cell research, and military weaponry inconsistent with Catholic teachings on war (e.g. weapons of mass destruction, chemical and biological weapons).

12. CUA as of August 31, 2016 CUA is invested in: Domestic and
International Equities
Fixed Income – Domestic and Intl
Real Assets
Hedge Funds
Alternative Investments

13. Performance & Income Distribution
Performance is computed and reported on a total return basis.
This includes both appreciation and income earned.
Income and gains are distributed monthly.
One month lag to general ledger.
Example: August income is posted in September.
Payouts are posted on a quarterly basis.

14. What is Spending Rule?
Spending rule provides income available for spending during the fiscal year.
The amount distributed to each fund is calculated by averaging the quarter-end per share value of the twelve fiscal quarters for the previous three fiscal years. That per share average is then multiplied by the total number of shares of the specific endowment fund at the time of the endowment distribution calculation. This average value of the fund from the calculation above is then multiplied by 4.5 percent to obtain the annual endowment distribution.

15. Spending Rate The Catholic University of America
FY15_FY18 Payout Calculation
FY15
Per Unit
FY16
FY17
FY18
Market
Quarter
Value
Jul-10
498.32
Jul-11
581.69
Jul-12
577.68
Jul-13
633.94
Oct-10
533.05
Oct-11
558.95
Oct-12
592.72
Oct-13
661.19
Jan-11
561.13
Jan-12
566.62
Jan-13
621.50
Jan-14
655.84
Apr-11
592.74
Apr-12
584.59
Apr-13
637.06
Apr-14
687.42
Jul-14
704.54
Oct-14
705.40
Jan-15
678.30
Apr-15
707.10
Jul-15
700.08
Oct-15
687.62
Jan-16
650.09
Apr-16
685.44
12-qtr. avg.
575.50
613.27
655.22
679.75

16. Endowment Market Values
$319 million at August 31, 2016.
Endowment Market Value
Total Return
8/31/2011
226,809,850
13.98%
8/31/2012
246,601,990
5.75%
8/31/2013
267,575,320
6.99%
8/31/2014
312,489,672
15.27%
8/31/2015
304,812,468
-2.94%
8/31/2016
319,001,437
7.46%

17. Endowment gifts: How they happen
Faculty
Advancement
Donor
Finance

18. The Well-crafted Gift Agreement: what it is – and what it is not!
Example 1: The income from this gift shall be used to support needy and worthy undergraduate scholars from the City of Boston, who are studying micro-economics, have achieved a 4.0 in all the way through high school, are all eagle scouts, and agree to complete graduate work at The Catholic University of America,

19. The Well-crafted Gift Agreement: what it is – and what it is not!
Example 2:
The spendable portion shall be used for scholarship support for Music School Students, to be awarded in a manner consistent with the University’s scholarship award policy.

20. Most Important Item to Remember
But.. What if we can’t do what the donor wants us to do?
Rule # 1:
The University has a fiduciary responsibility to ensure that the donor’s wishes are met..
If we cannot meet the restriction as defined by the donor, we have a few options:

21. But.. What if we can’t do what the donor wants us to do?
The principle of Cy-Pres, from French, meaning "as close as possible.”
We can, when possible, return to the original donor, and his or her representative and request approval to update the restriction.
3. The court of last resort …UPMIFA

22. Uniform Prudent Management of Institutional Funds Act
UPMIFA – Federal Law
Uniform Prudent Management
of Institutional Funds Act
Signed into law in 2006
It guides organizations in the management of endowments
Eliminates the historic gift value corpus spending limitation, replacing it with a modern prudence standard;
Provides for prudence in the management and spending of the endowment;
Provides for easier modifications to certain donor restrictions.

23. UPMIFA Provisions
It permits the modification of a restriction with written permission from the donor;
It permits the organization to apply to court to modify the restriction for those funds that are:
Unlawful
Impractical
Impossible
Wasteful

24. What Donors Expect from us:

25. Donors want accountability and transparency

26. The Importance of Partnership
Your Role
The Importance of Partnership

27. The Invision Report Modification
Criteria for donor intent
Candidates for this scholarship are students who reside within the Diocese of Pittsburgh and who are in need of financial assistance.
Preference is given to students from public high schools in the Diocese.
Credit to: Aaron Basch, SME Financials Systems; Renell Lewis,Director of Treasury Services; Jim Clavin, Executive Director Advancement IT and Victoria Rumsey, Stewardship Manager, Advancement.