Endowments, as defined by the University, are gifts or bequests of money that are given for the permanent support of the University. Spending of the endowment principal is prohibited unless otherwise specified by the donor. Only a portion of investment returns generated from the principal may be used to support designated activities. This definition is the basis for the University's endowment policies and procedures.
The University has developed minimum contribution levels for the establishment of endowment funds. The minimum contribution levels vary depending on the specified purpose of the proposed gift. Investment returns generated by the fund principal may not be spent until the principal balance of the fund has reached the respective contribution level. Refer to University Policy FN-15 for details on endowment categories and the associated contribution levels.
Types of Endowments
Endowments are invested gifts that provide stable, sustained revenue to support their intended purpose in perpetuity. Although distinct in purpose or restriction, individual endowments are commingled and invested together in Penn State's Long-Term Investment Pool (LTIP).
Endowments created with funds received from an outside donor, which will be held in perpetuity with income used for designated purposes.
QUASI-ENDOWMENT (FUNDS FUNCTIONING AS AN ENDOWMENT)
Internally funded endowments, which are funded through unrestricted miscellaneous funds (general funds may not be used for this purpose). The decision to hold the funds in perpetuity is made by the University, not an outside donor.
Term endowments are created with funds from external sources, which generally fund a specific event. An end-date is established in the guidelines, and the principal is spent down over the life of the term endowment. Use of term endowments is not encouraged.
NAMED ANNUALLY FUNDED ACCOUNT (NAFA)
Gifts are made annually to the NAFA, which only has a spending account, and spent annually in accordance with the guidelines. To establish NAFA guidelines, the donor must pledge, for a period of at least 5 years, a dollar amount equal to at least 5% of the minimum required to endow the same type of account. This option is available for some but not all of the purposes identified for endowments.
|An official University document that describes the benefactor's intent and specifies how the subject endowment or annual income will be used. All guidelines are drafted and approved by the Office of Gift Planning.
|STATEMENT OF DONOR INTENT
|A University document that reflects the benefactor's current wishes for the administration of the future endowment and locks in the current minimum for that specific type of endowment. All Statements of Intent are drafted and approved by the Office of Gift Planning.
The Bursar's Endowments and International Taxes unit is responsible for:
- Reviewing and approving all University Endowed and Non-Endowed guidelines on behalf of the Corporate Controller's office. We determine conformance with federal and state tax and student financial aid regulations as well as University policies.
- Creating, updating, and maintaining endowment accounts.
- Calculating Market Value of endowments invested in the University's Long Term Investment Pool (LTIP).
- Reporting estimated funds available to award for Endowed and Annually Funded scholarships/awards, including carry-over balances, to the appropriate awarding units.
- Establishing disbursement controls and disbursing University Scholarships/Awards to student accounts.
- Reporting recipient and financial data to the Office of Donor Relations for fiscal year-end donor reports.
- Reporting year-end financial data to the Office of Financial Reporting.