1. Endowment Module Norm Peacock, Assistant Director ITS Indiana University Foundation Mary Wheeler, Kuali Project Specialist Cornell University

2. Kuali Endowment Module (KEM) Least “mature” of the Kuali Modules Envisioned to cover –transactions of the individual investments –managing the unitized investment “pools” –administering the funds that are the “owners” of the investments

3. The Design Process Group of Endowment “Subject Matter Experts” (SME’s) from the six Kuali Partner institutions Demonstrations of 3 existing systems –Michigan State University –University of Arizona –Indiana University Foundation Developed a “high-level” list of requirements

4. Some record the individual security transactions in their systems – others record summary information Some provide information about competitive scholarships and prizes to their students Five follow GASB for financial reporting, one follows FASB The number of endowment and similar funds vary from less than 100 to more than 7000 Kuali Partner (Differing) Needs

5. All follow some form of the Uniform Management of Institutional Funds Act (UMIFA) or similar state laws All currently or plan to manage some form of a “unitized” investment pool or multiple pools All have “separately invested” securities, or non-pooled investments All need to provide information about donor restrictions, anticipated income, and available balances to their departments All need to provide appropriate stewardship information to their donors Kuali Partner (Similar) Needs

6. Desired Requirements: Investment tracking and reporting –number of shares, book, par and market values, CUSIP number, investment category (stocks, bonds, real estate, etc.), and capital commitments. –purchases and sales of investments; income earned, collected, accrued; management and custodial fees and commissions; and other investment related data. –compare investment policy allocation targets to actual allocations and incorporate pending transactions (i.e. rebalancing). –track investment commitments for limited partnerships and contributions made against these commitments. –Maintain database of key information for each investment manger

7. Desired Requirements (continued): Investment participation management and reporting including unitized transactions –Investment pool data (number of units, market value per unit) for all funds that participate in an institution's investment pool(s). –Quantify units purchased and sold, and calculate the gain or loss on withdrawal. –Record investment income, realized gains, unrealized gains, and fees to the various funds, either in the specific fund or in high level accumulation accounts. –Track the net asset balance of a true endowment fund between its components of historical book value and accumulated earnings. –Allocate either a budgeted payout to the income accounts affiliated with a principal account (based on pooled units), or actual income earned on separately invested endowment funds.

8. Desired Requirements (continued): Enable formula and/or actual income projections –Project the budgeted payout (based on pooled units and an approved spending policy) –Project the anticipated actual income based on declared dividends, bond holdings, etc. –Update current year income projections –Create spending policy reports by fund, account #, college, dept, etc.

9. Desired Requirements (continued): Access to donor instructions –Capture and electronically distribute the donor instructions for a gift or endowment fund

10. Desired Requirements (continued): Scholarship Award System –summarized set of available income and donor instructions searchable for external parties –based on information from any agreement with a donor for a scholarship, whether endowed or expendable –separate searchable data elements for common qualification criteria –Ability for departments to grant, change or delete scholarship awards

11. Desired Requirements (continued): Beneficiary disbursement process and tax reporting –For “split interest agreements” – disburse payments to beneficiaries –Provide data for annual tax reporting –Update the actuarial calculation of the liability for accounting adjustments.

12. Out of KEM Scope: Gift Records System –fund raising activity - campaign goals and results –donor contacts –pledges- both conditional and unconditional –gift payments However, data elements that provide linkages between an external gift system and the Kuali Endowment Module will be necessary.

13. Outcome of Design Process The SME group was unanimous in its selection of the IU Foundation system. –viewed as the most organized and connected –contains nearly all of the processes and data identified in the requirements document

14. Who is the Indiana University Foundation? The Indiana University Foundation (IUF) is a not- for-profit corporation dedicated to maximizing private resources for Indiana University (IU). Chartered in 1936, we partner with IU to raise an average of more than $100 million annually in contributions for IU from more than 100,000 donors. The majority of the monies we generate are held and invested by the Foundation for the benefit of IU.

15. The IUF Relationship with IU The IUF is independent of the university it serves. Approximately 5000 individual accounts are managed which benefit over 200 unique departments on 8 campuses. –Endowments –Expendable (Quasi) Endowments –Operating/Discretionary –Charitable Remainder Trusts and Charitable Gift Annuities Invested assets under management total over $1.1 Billion dollars.

16. Business Functions of the IUF Development –Fund Raising Campaigns, Annual Gifts, Major Gifts, Planned Gifts –Donor Relations Reporting, Stewardship Investment Management –Cash and Non-Cash gifts Pooled Investments, Real Estate, Stocks, Bonds –Charitable Trusts Account Administration –Account Management Payments from accounts, reporting –Gift Administration

17. Operations at the IUF Trust Banking method of operation for more than 10 years. Automated daily sweep of cash into and out of an interest bearing fund. Automated periodic investment of cash and money market investments in long term investments. Automated distribution of income Ability to receive deposits of cash or securities Ability to distribute income automatically or on request. Daily pricing of marketable securities.

18. IU Foundation System Overview

19. IUF General System Requirements Flexible enough to change with our needs Offered functionality to support our business Generated automated recurring processes A single data source for endowment and trust information A fully relational database Capable of interfacing to any gift or general ledger system

20. Process Overview

21. Modular Design

23. Accounts All relevant account administration data –Open and close records –Ticklers –Account type –Associations with Fund and Unit Instructions –Transaction Restrictions Account Status, Agreement Documentation Status, Restrictions and authorizations –Investment Instructions Automated Investing, Daily and Periodic –Fees

24. Accounts

28. Securities, Holdings and Cash Balances by account –Current and historical –Cash –Securities Units, Carry Value, Market Value, Accrued Income Securities managed by the IUF –Current Values Units, Carry Value, Unit Value, Market Value Security type Interest rates and dividend per share, payment schedule Pooled Investment fund data –Current and historical unit values and distribution amounts

29. Securities, Holdings and Cash

33. Transactions Unique transaction types –Cash, Asset and Liability Purchases, Sales, Deposits, Disbursements Increase, Decrease or Transfer –Special types Original Gift Value Adjustment Holding unit adjustment Corporate Reorganization Trust Asset Transfer Multiple entry methods –Recurring transactions –Imported Transactions Gift transactions, Spreadsheets –Daily Processes

34. Transactions

37. Recurring Transactions Investment Models –Cash Sweeps (Money Market Investments) –Pooled Funds Scheduled transactions –Transfers, Trust distributions Automated Processes –Daily, Monthly, Annual Pricing update, Transaction import, Accrual processing, Distributions, Sweeps and Investments History table updates

38. Recurring Transactions

43. Individuals Payees, Account Signers, Users Name and Address records –Home, Business, Campus, Seasonal 1099 reporting –Independent Contractor, NRA Bank Depository –ACH or Wire Transfer Associated Accounts

44. Individuals

45. User Security Screen level –Read, Write, Exclude Defined Groups

46. User Security

47. Automated Processes Interfaces –Importing Gift Transactions –Security Pricing –Exporting General Ledger Entries –Updating Database used for Web Inquiries

48. Automated Processes Daily –Transaction Import –Large Batch Posting –Accrual Calculations –Accrual Transactions –Recurring Transactions –Pooled Fund Distributions –Automated Cash Investments –Cash Sweeps –Pooled Fund Accounts Summary Transactions –Change Reporting –Date Frequency Roll Process

49. Automated Processes Monthly –Cash Balance Archive –Holding Balance Archive –Seasonal Address Update –Fee Assessment Transaction Process Year-End –Update Original Gift Values

50. Investment Tracking and Reporting

54. Income Accrual Methods –Automated Cash Management – This is the accrual mechanism for “money market” type accounts. It will calculate daily based on the holdings of each date and add the amount to the total interest due to the account holder. –Dividend –The total dividend amount to be paid to the holder of a security based on the ex-dividend record date, units held, dividend amount and payment date. These accrual amounts will be calculated periodically, based on the ex-dividend date. –Treasury Notes and Bonds – Daily accruals are calculated based on the number of days in the six months prior to the semiannual payment date. –Discount Bonds – Accruals are calculated daily but will never be paid to the account holder until the security reaches maturity or is sold. –[Mortgage Pass-Through 30 –This is not a true daily accrual. The total income due is recomputed daily. It assumes that payments are made one month in arrears (30 days) on the 15th of the month. –Mortgage Pass-Through 60 – Like the previous method except that it assumes that payments are made 2 months in arrears (60 days) on the 15th of the month.] –Time Deposits – Simple interest calculations, not compounded. Payment frequencies will vary depending upon the instrument Investment Tracking and Reporting

55. Investment Participation Management

61. Account Management Investment Management Automated Functions Relational Database Multiple Reporting Options –ODBC –User-Designed Daily and On Demand Reports –Web Access

62. Endowment and Trust Accounting

63. Next Steps Get into the details: Compare the requirements list to the IU Foundation system in more detail Identify gaps – if any Describe and prioritize enhancements SME group meeting October 12 and 13

64. Additional Next Steps Answer the following questions: 1.What changes will be required for the IU Foundation system to fit Kuali architecturally (technical and overall system design). 2.How would the Kuali Chart of Accounts need to be changed (if at all) to incorporate the IU Foundation design into the Kuali Endowment Module (KEM)? 3.What is the fit of the Kuali GL with the Kuali Endowment Module? 4.What changes will be required in the electronic documents, lookups, routing, etc. for the IU Foundation system to become KEM?

65. Questions? For progress updates www.kuali.org