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 the accepted method of measuring performance, representing the combination of income, interest, dividends, and appreciation and depreciation in the fund's value over a specified period.

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 4.5 percent. It is applied to the endowment’s average market value of the 60 months before and including June 30 if the fund has been in existence for 60 months or more. If the endowment has existed for less than 60 months, the application is based on the average market value of the actual number of months the fund has been in existence. 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 Spendable dollars accumulate from year to year and remain invested until withdrawn from the endowment fund.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.