UBC’s Endowment Management Policy
The purposes of this policy are to:
- benefit all generations of endowment beneficiaries equally by maintaining the purchasing power of endowment capital over time
- ensure that the University is responsive to changes in the financial markets
- achieve stability and predictability in year-to-year spending
- preserve the University’s competitiveness relative to other comparable universities
- provide for the periodic review of endowment funds to ensure that the use of such endowment funds are providing the maximum benefit for the advancement of the University’s academic mission, including educational and research activities carried on by the University which benefit society generally.
Each endowment is set up on the FMS with three accounts:
- The value of the Capital Account represents the total of all capital contributions that have been made to the fund and capitalizations of income and inflation. Endowment capital is held in perpetuity to generate income.
- The value of the Spending Account represents the amount that is available to be spent in support of the purpose of the endowment fund. The spending account is comprised of the amount allocated to spending for the current fiscal year plus any accumulated unspent amounts from previous years.
- The value of the Stabilization Account represents the health of the endowment fund and is expected to hover around zero over the long-term. This shows the degree to which the market value of the fund is greater or less than the inflation-adjusted value of all capital contributions made to the fund.
The sum of the Capital Account and the Stabilization Account represents the market value of the endowment fund. The market value is used in the calculations of the annual spending allocation, and the monthly income and cost allocations.
The Spending Rate is established by the Board of Governors to maintain the value of the endowment pool over time. This rate may vary between endowment pools.
Spending on the Endowment funds cannot begin until the endowment terms of reference or deed has been created by the Development Office, reviewed by University Counsel, signed by the donor, and signed by the President.
The following are required:
- Endowment Document (Terms of Reference (TOR) or Endowment Trust Agreement)
- Chartfield Request Form
These minimum thresholds for named endowments are monitored by the Development Office. In many cases, the funds are established at higher amounts and/or donors add to the endowment capital over time.
- Chair: $4.0 million - $5.0 million (minimum).
- Professorship: $2.0 million - $2.5 million (minimum).
- Fellowships: $200,000 - $400,000 (minimum).
- Scholarships, Bursaries and Service Awards: $30,000 (minimum).
- Smaller gifts should be added to existing endowments.
The guidelines set out in University Policy #47 should also be referenced for endowed chairs, professorships and distinguished scholar honorifics.
Negotiation with donors is based on how much the endowment can spend, or how much it will build up. Contact the UBC Development Office (Donor Relations Unit) for further details.
Spending allocations are based on a percentage of the moving average of the preceding three December 31 market values. To calculate the spending allocation for fiscal year 2017, market values at December 31, 2013, December 31, 2014 and December 31, 2015 are used. For example: (assumed spending allocation rate of 3.5% for 2016/17)
|Capital Account||Stabilization Account||Market Value|
|December 31, 2013||$100.00||$(10.00)||$90.00|
|December 31, 2014||$102.10||$1.00||$103.10|
|December 31, 2015||$104.30||$5.00||$109.30|
Three-Year Average Market Value: $100.80
Spending Allocation Rate Fiscal Year 2017: 3.5%
Spending Allocation: $3.53
For new contributions received during the year, a spending allocation is provided on a pro-rated basis (new contribution x months / 12 * 3.5%).
Over-expenditures are not allowed in all endowment funds. Requisitions should be checked against the terms of the deed, as well as UBC expenditure policies. Spending Allocation calculations are provided to the departments twice a year:
- November: Preliminary/projected spending allocations for the coming fiscal year.
- April ledgers: actual spending allocation for the current fiscal year.
Interfund transfers are transfers between the endowment fund and other funds (S =Specific Purpose, R = Research, G = General Purpose Operating, F = Fee-for-service).
Transfers of unrestricted funds into the Capital Account of an endowment fund subject to trust obligations require approval from the office of the University Counsel. In addition, all transfers of unrestricted funds into the Capital Account of any endowment fund must be approved in writing by the appropriate Vice President (UBC Vancouver) or the Deputy Vice Chancellor (UBC Okanagan).
Please send completed Endowment Transfer Request forms to firstname.lastname@example.org for processing.
The Board of Governors delegated its responsibility and powers for investment of the endowment pool to UBC Investment Management Trust Inc. (IMANT). The Board of Governors has appointed IMANT as an advisory board under the University Act.
External investment fees will be allocated monthly to the Stabilization Account of each endowment fund in the endowment pool based on the market value of the endowment fund relative to the market value of the endowment pool. All endowment funds are charged for other expenses at a rate that is determined by the Vice President, Finance, Resources and Operations.
All investment returns and losses from the endowment pool (including interest and dividend income, realized and unrealized capital gains and losses) will be allocated monthly to the Stabilization Account of each endowment fund in the endowment pool based on the market value of the endowment fund relative to the market value of the endowment pool.
The University’s Endowment Management Policy (#113) and Capital Preservation Guidelines provide for the following guidelines:
- The Capital Account will be credited (and the Stabilization Account will be debited) as at the end of each fiscal year by an amount equivalent to the rate of inflation experienced during the fiscal year (as represented by the Canadian Consumer Price Index).
- Capitalization of Spending Allocation requires the approval from appropriate Vice President (UBC Vancouver) or the Deputy Vice Chancellor (UBC Okanagan).
- For each endowment fund in existence as at December 31, 2008, if the market value of the fund is greater than the aggregate capital contributions that have been made to that fund, the value of the Capital Account will be set at that market value and the value of the Stabilization Account will be set at zero as at January 1, 2009.
- For each endowment fund in existence as at December 31, 2008, if the market value of the fund is less than the aggregate capital contributions that have been made to that fund after allowing for the decapitalization of previously capitalized income, the value of the Stabilization Account will be established by subtracting the market value from the value of the Capital Account.
- For any endowment where the value of the Stabilization Account is less than zero (the Pre-Existing Deficit) as at January 1, 2009, the Spending Allocation will be reduced by one-tenth of the Pre-Existing Deficit until the sooner of: the aggregate value of the adjustments is equal to the amount of the Pre-Existing Deficit, or the value of the Stabilization Account is no longer less than zero.
The following reports are available in the Financial Management System:
- Ledger Summary through FMS nQuery
- Monthly ledgers
- Endowment Reports
Need Assistance? Contact Wendy Merlo in Endowment Accounting.