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Endowment Accounting andReportingUpdated October 2015Leah KabaSenior Endowment SupervisorComptroller’s Officelkaba@gwu.edu(571) 553-1910

Objectives Provide general overview of the endowment– Endowment transaction process– How to spend endowment payout– Green fund example Endowment Tracking System (ETS) reports Frequently Asked Questions (FAQ)

Endowment Overview:What is the balance in my endowment?Each endowment as at least three answersThe bookvalue Also referred to as Corpus or Principal Equal to the original gift amount Only changes if additional gifts are made, spending occurs fromcorpus (not income), or in some cases, if payout is reinvested Has important legal and accounting implications under UniformPrudent Management of Institutional Funds Act of 2007 (UPMIFA)The marketvalue What the endowment fund is worth today Includes both the book (corpus) value and all accumulated incomeand/or losses GW uses total return on investments; there is no differencebetween interest/dividend income and capital gains and losses Payout reduces the market value, not the corpusThe availablepayout value Board of Trustees authorizes a payout rate every May for thefollowing fiscal year Payout is like a dividend from a mutual fund Each month the payout is distributed from the investment pool(held at BNY Mellon) to GW’s operating cash. Once distributed, thepayout no longer participates in earnings, even if it is not spent Departments can spend current and prior year payout Payout will increase as new gifts are received and/or payout isreinvested into corpus We encourage schools and departments to spend the payout orreinvest it

Endowment Overview:Like a Mutual FundPrice per share based (Market Value: 2/28)Month 1: New EndowmentGift / Internal FundTransfer (IFT)(Transaction Date: 2/15)Month 2: Units bought(Transaction Date: 3/31)Month 2: Fund allocationsbegin(Transaction Date: 3/31) Received and recorded as revenue/transfer by Development andComptroller’s Office in appropriate fund designation Corpus increases in ETS (both gift and IFT) Market Value increases in ETS for IFT (cash invested the month it occurs) Endowment gift and IFT (corpus/principal) buys units in the followingmonth Units bought based on 2/28 market value price per share Market Value increases in ETS for gifts (cash transferred the month after itoccurs – allows for reconciliation and any adjustments) Fund generates payout based upon current year payout rate Fund shares in earnings/expenses of the pooled endowment

Endowment OverviewGift received byDevelopmentfrom donor(Gift)Gift interfaceto ETSGift or Transferposted in ETSDepartment/Boardelects to designatefunding to anendowment(Transfer)Internal FundTransfer (IFT)in EASAssign units(ETS)AllocationsFlow of MonthlyEndowmentProcess (GWU)PayoutDepartmentrequests transferof paymentScholarshipsand stipendsawardedSummaryinformationinput to EASPayouttransferin EASPayouttransferin ETSAdministrativeexpensesInvestmentgain / loss

How to Utilize Payout Submit Endowment Request Form to Treasury Management with signatures andsupporting documentation attached (please provide copies, not originals as supportwill not be returned)Do not include personal information, such as Social Security Numbers, credit cardnumbers, home addresses, etc. on R and C fund reimbursement requests. UseGWID numbers where ID is necessary.Form ing

Required Information:-Requestor-Endowment FundSomething to keep Inmind What specificinformation wouldbe useful forreporting back to thedonor?Option 1:Payment Request(for Direct Charge)Option 2:Funds Transfer(for Reimbursement)Required Information:-Requestor & DepartmentApprover SignaturesOption 3:PayoutReinvestment

3 Options to Utilize Payout:1) Payment Request/Direct charge Have an endowment pay for an expense directly from available payout Send the request form to Treasury Management Treasury Management will review form and supporting documentation and sendapproved form to Accounts Payable for processing Examples: Prizes and awards Note: Scholarship endowments are drawn through Banner by the Offices of FinancialAid and Graduate Student Support (i.e. no form is used) Purchase Requisitions/Purchase Orders may be required See guidance du/files/downloads/Procurement%20Manual.pdf

3 Options to Utilize Payout:2) Funds Transfer/Reimbursement Reimburse department for expenses incurred out of departmental C or R funds relatedto endowment purpose Send request form to Treasury Management Treasury Management will review form and supporting documentation and sendapproved form to Endowment Accounting (Comptroller’s Office) for processing Examples: Visiting scholar, travel, and special events Note: Some endowments have payout automatically transferred to the department forprofessorships, discretionary funds, and general University support3) Reinvest Payout into Endowment Fund Department does not have current use for payout Once reinvested, payout is no longer available for spending, but it buys additional units.These additional units then generate more payout for use in future periods. Send request form to Treasury Management Treasury Management will review form and send approved form to EndowmentAccounting (Comptroller’s Office) for processing

Sample Endowment Accounting Flow – The Green FundInitiating the endowment In February a 100,000gift was received fromMr. Green (donor) toendow an annualscholarship for eligibleGW accounting students.Development depositedthe gift and sent theMemorandum ofUnderstanding (MOU)and any other donorcorrespondence andagreements to TreasuryManagement.New GiftRecord inSystem If this was a gift for a pre-existing endowment, thegift would feed to the relevant endowment fundin the Endowment Tracking System (ETS). However, since this is a new endowment (not preexisting), it fed to the clearing fund EQ60000 andrequires additional steps: Treasury Management analyzed the terms of theendowment and set up the new fund in ETS,specifying the net asset class of both the corpusand income. Treasury Management thenprepared a “numbered memo” directing theComptroller’s Office to transfer the 100,000from EQ60000 to the fund set up for thatendowment. The Comptroller’s Office makes a journal entryto transfer the 100,000 to the new endowmentfund. Systems, Analytics, and Insights Group (SAIG)sets up the Banner/Oracle/ETS mapping tablefor the new endowment fund so future gifts willpost directly to the new endowment fund. On March 31, aftercalculating the February28 value of the totalpooled endowment, theendowment accountantprocessed a purchase of 100,000 worth of units(shares) in the pool forthe Green endowment.In this case, 100,000bought 1,000 units basedon the February 28market value.Unit Purchase10

Sample Endowment Accounting Flow – The Green FundAllocationsGreen FundMarch Allocations Once a month, the endowmentaccountant allocates the investmentgain or loss to each endowment fundin addition to the established payoutand administrative expenses. The Green Fund purchased its shares inMarch and also will begin receivingallocations in March.Allocations Payout: 250 (for the month 1,000units * 3 per share / 12 months). Administrative expenses: 10 as itsshare of the total administrativeexpenses for the pooledendowment. Income: 1,000 as its share of thetotal pooled gain on investmentsbased upon finalized investmentreports for the previous month Note: Investment income isrecorded on a one month lag, soFebruary income is booked in ETSin March, and so on during thefiscal year. In June, GW books bothMay and June income so the yearend market value is correct.11

Sample Endowment Accounting Flow – The Green FundSpending payoutPayout Used toFund Scholarship In April, an accounting student appliedfor endowment fundsPrize Awarded The administrator of the endowmentgranted the student 200 towards thecost of books for the currentsemester. A form was sent to TreasuryManagement requesting payment. Treasury Management verified thatthe purchase of books was apermissible expense in accordancewith the endowment documents, andthat the Green endowment hadsufficient unspent payout to cover therequest. Treasury Management recorded theexpense in ETS. Treasury Management prepared apayment request, and in due course,Accounts Payable issued a check tothe student.12

Sample Endowment Accounting Flow – The Green FundTransaction Flow 100,000 giftfrom donor on 2/15deposited byDevelopment(Gift)Summaryinformationinput to EASGift or Transferposted in ETSGift interfaceto ETS1,000 units purchased 3/31(ETS) based on 2/28 marketvalueAllocationsbegin 3/31Flow of MonthlyEndowmentProcess (GWU) 200 PrizeawardedPayout 250Payouttransferin EASPayouttransferin ETSAdministrativeExpenses 10Investmentgain / loss 1,000 gain

Trivia QuestionsWhat is the corpus of the Green endowment? The corpus is 100,000. This is the value of the original gift from the donor, Mr. Green.What is the market value of the Green endowment as of March 31? The market value at March 31 is 100,740 100,000 original gift 1,000 income earned (10) administrative expenses (250) payout allocated 100,740 market valueWhat is the unspent payout of the Green endowment as of April 30? The unspent payout balance at April 30 is 300 250 payout allocated in March 250 payout allocated in April (200) spent on eligible expenses 300 balance of unspent payout

The Endowment Tracking System The Pooled Endowment– All pooled endowments are tracked at the individual level in ETS(the sub-ledger)– Access to ETS is limited– All pooled endowments are captured on the General Ledger at ahigh level– Reports are produced each quarter and distributed viaGWDocuments– Access to GWDocuments is limited to departmental usersresponsible for spending endowments and administrative users. Separately held funds are now also tracked in ETS––––ET80020 – Ramsey Student Investment FundET80021 – Undergraduate Student Investment FundET80022 – Cheney Endowment FundET80023 – Katzen Endowment Fund15

ETS Reports Frequency: Quarterly– Monthly or ad-hoc reports providedupon requestJune ReportsQ1 SeptemberReportsQ2 DecemberReportsQ3 MarchReportsApril ReportsMay ReportsProvided byOctober 20thProvided byJanuary 20thProvided by April20thProvided by May20thProvided by June20th(Year-end)Provided midSeptember (afterfinancialstatement audit)

ETS Reports Location: GWDocumentsGWDocuments alsocontains DONORDOCUMENTS such as:-Memorandums ofUnderstanding (MOU)-Internal memos Report Types: 6––––––DescriptionPayout RollforwardPayout DrawdownGiftCorpusPayout Available (Year End Only)-Payout requests

Description ReportPurpose Quick snapshot of funds by fund number (ET/EQ)Includes Description of fund purpose (see MOU for more detail)Number of unitsBook value (i.e. gifts, IFTs that contribute to the corpus/principal)Market valueUnspent payout balance

Payout Rollforward ReportIncludesPurpose Shows payout activityduring current fiscal year A. Beginning unspent balance rolled over from prior year B. Payout allocated to date C. Payout spent to date (drawdowns) See Drawdown report for more detail! D. Payout spent to date (direct charges) See Drawdown report for more detail! E. Current system balance as of report date F. Number of units G. Remaining payout to be allocated through June

Payout Drawdown ReportPurpose Detail of payout spent in current fiscal yearIncludes Fund number, amount of expense, description of expense (scholarship, direct charge, payout drawdown request, etc.) “Release of Restrictions” are entries for accounting purposes and have no impact (net to zero)

Gift ReportPurpose Shows gifts, pledge payments, and internal fund transfers for the current fiscal yearNote Some versions show the units bought and total units Remember, units are purchased on a one month lag from the gift date!