GAP 200.380, Endowment Expendable Funds

  1. General
  2. Responsibility for Ensuring Compliance with Donor Intent
  3. Restriction on Transfers from Endowment Expendable Funds
  4. Restriction on Endowment Expendables Invested in the Long Term Pool

I. GENERAL

An endowment expendable code, typically a WBS element found in the code series 39XXXXX (an "expendable fund"), is designated to receive endowment distributions (the "distributions") generated from a specific endowment cost center (code series 6XXXXXX). All distributions within an expendable fund must be used in accordance with the specific intent of the donor(s), set forth in the endowment agreement governing that endowment. The Endowment/Investment Accounting office ("EIA") is responsible for providing a copy of each new endowment agreement to the administrative office of the department or unit given discretion over the expendable fund. That department or unit is responsible for ensuring that the distribution is used in accordance with the specific intent of the donor(s). Distributions within an expendable fund should not be transferred to other discretionary, expendable or reserve funds; instead, all expenses associated with the expendable fund (i.e. scholarships, salaries, etc.) should only be charged directly against that expendable fund itself.

II. RESPONSIBILITY FOR ENSURING COMPLIANCE WITH DONOR INTENT

Each expendable fund is assigned the BFR code of the department or unit given discretion over the use of the expendable fund. This department or unit has the responsibility for ensuring that all expenses charged against the expendable fund are in full compliance with the intent of the donor(s). Usually this intent is memorialized in an endowment agreement signed by the donor(s) and the University. In some instances, however, the donor(s) made his/her wishes known only through some other directive, such as correspondence with the University or an estate planning document such as a will or trust, rather than a signed endowment agreement. In such cases, EIA will work with each department or unit to determine the appropriate source for determining the intended terms of the endowment.

III. RESTRICTION ON TRANSFERS FROM ENDOWMENT EXPENDABLE FUNDS

Because each endowment cost center and its related expendable fund are subject to the restrictions set forth in the endowment agreement (or other donor directives), the use of expendable fund distributions must be traceable and auditable. This tracing becomes difficult or impossible when those distributions are transferred from an expendable fund to other discretionary, expendable or reserve funds, where they may be commingled with other assets subject to different restrictions or no restrictions at all. For this reason, distributions should never be transferred from an endowment expendable fund to other WBS elements, cost centers or profit centers without prior approval from the management center finance office. For approved transfers, the receiving fund must be subject to restrictions that fall within the scope of those applicable to the endowment expendable fund and the transfers must be accounted for and specifically reported as to their use.

IV. RESTRICTION ON ENDOWMENT EXPENDABLES INVESTED IN THE LONG TERM POOL 

The endowment expendable should not be invested in the Long Term Pool but should be used in accordance with the specific intent of the donor(s), set forth in the endowment governing the endowment.  Distributions from an endowment to its expendable fund may exceed the amount actually spent in accordance with the purpose of the endowment. Some endowment agreements allow fund distributions not expended in a given year to be (1) accumulated and temporarily invested and used in subsequent years, or (2) added to the principal of the fund. “Temporarily invested” as in (1) above, refers only to short-term, liquid investments, such as Duke’s Cash Management Fund (CMF). Therefore no excess distributions can be invested in the Long Term Pool, unless it is being added permanently to the principal of the fund.  Each endowment agreement must be reviewed in order to determine the allowable uses of excess distributions.