Endowments serve as vehicles through which donors can provide permanent funding to University programs of their choice. There are three principal categories of endowments:
- True endowments are funds received from external donors with the restriction that the principal is to be retained in perpetuity and cannot be spent. True endowments are controlled by donor stipulation.
- Term endowments are like true endowments, except that all or part of the principal may be used after a stated period of time or upon the occurrence of a certain event.
- Quasi-endowments—funds functioning as endowment—are funds the University—rather than a donor or other external agency—has determined to treat as permanent capital although there is no legal obligation to do so. Quasi-endowments are submitted to the Board of Trustees for acceptance. The governing document—generally a Statement of Quasi-Endowment—is signed by a University employee and controlled by the University and department.
Contact the Office of Development and Alumni Relations to establish a true or term endowment.
Contact Nick Griffith or Ruth Halcomb with the following information to create a quasi-endowment:
- Title
- Criteria and purpose for which the quasi-endowment will be used
- Fund and Department Number of the source funding
- Funding amount, minimum $30,000
- Name and title of a University employee to sign the Statement of Quasi-Endowment, usually a chair, dean, department head, etc.
Pooling
Endowment assets are pooled and maintained similar to a mutual fund in that each individual endowment maintains its separate identity but the assets are commingled with all endowments for purposes of investment and accounting efficiencies. Pooling the endowment assets provides the opportunity to develop a more diversified investment portfolio, which should maximize investment performance long-term. The WMU Foundation endowment pool investment structure consists of a diversified mix of investments that include global equity, real assets, global fixed income and diversifying assets strategies. As of Dec. 31, 2015, the endowment pool held more than 900 individual endowments.
Spending Policy
The spending policy determines how much of the total return will be allocated and identified as spendable dollars and how much will be reinvested in the endowment investment pool. Total return is defined as the accepted method of measuring performance; it is the combination of income—interest and dividends—and appreciation and depreciation in the funds' value for a specified period of time.
The WMU Foundation Board of Directors authorized a 4.5 percent spending policy in March 2010. Unless otherwise stipulated by the donor, each endowment’s spending allocation is based on the 4.5 percent. It is applied to the endowment’s average market value of the 60 months prior to and including June 30 if the fund has been in existence for 60 months or more. If the endowment has existed less than 60 months, it is applied to the average market value of the actual number of months the fund has existed. This policy is designed to ensure that the purchasing power of an endowment fund is maintained in perpetuity, ideally maximizing the probability that the distributions steadily increase from year to year.
Spendable dollars are calculated annually in July. The calculation is referred to as the Spending Allocation. Spendable dollars accumulate from year to year, and remain invested until withdrawn from the endowment fund.
Additions, withdrawals, or adverse market conditions could limit the spendable dollars available for distribution from a true endowment. If a true or term endowment's market value is less than ninety percent of the historic gift amount no distribution will be allowed until the market value exceeds ninety percent of the historical gift amount. If a true or term endowment's market value at June 30 is less than ninety percent of the historical amount no spendable dollars will be allocated in July.
Monitoring Activity
The EMS website is the beneficiary departments’ resource to view endowment investment activity and the single point of access to withdraw funds from an endowment. Information available on the EMS website includes:
- Fund Summary, including a general ledger identification number, endowment type, destination fund and department number, primary and secondary contacts, current pooled and total market values, historical gift amount, accumulated net spendable dollars and available spendable dollars.
- Spending Bucket, which provides distribution history and spendable dollars allocations.
- Distributions by Account and User, which displays the distribution activity and any pending distributions.
- Request Distribution, which is departments’ single point of access to withdraw funds from an endowment.
- History and Market Value, which provides monthly detail activity, including investment activity, transfers, distributions and more. The information can be copied to a Microsoft Excel spreadsheet for summation of columns.
Please contact Nick Griffith or Ruth Halcomb to obtain your EMS username and password or to obtain assistance in using the EMS website site. The username and password will be assigned once an Endowment Contact/Administrator Form has been completed and forwarded to the Investments and Endowment Management Office.