CR2012 ENDOWMENT STEWARDSHIP
Systems and Procedures
 A Division of The Office of Budget and Finance
IN
Last Revision: 10/26/2022

CR2012 ENDOWMENT SPENDING STEWARDSHIP

Process Owner: Student Financial Services

Policy Steward facilitating procedure: Associate Vice President for Budget and Finance

Table of Contents:

GENERAL:

University endowments funded by donors must be established and managed in accordance with Policy FN15 Endowed or Named, Annually Funded, Accounts and with the highest level of stewardship to assure that the University can provide detail on how funds were managed and expended in compliance with the Guideline Agreements set by the donor. Guideline Agreements are established by donors and become a legal contract with the University, which dictates how the University may use the funds generated by an endowment. The individuals responsible for the management of endowments for the unit must assure that the spending from the account meets the Guideline Agreements set by the donor, including selection of recipients for scholarships and other awards.

DEFINITIONS:

PROCEDURE:

ESTABLISHING ENDOWMENTS AND NAMED, ANNUALLY FUNDED, ACCOUNTS:

All proposals, to persons or organizations, contemplating the establishment of endowed or named annually funded accounts must:

  1. be approved by the appropriate administrative officer (dean or chancellor)
  2. be approved by the Vice President of Development & Alumni Relations through the Prospect Management and Solicitation System before submission to the potential donor

While the emphasis should be on encouraging unrestricted gifts to the institution, donors may restrict the purpose for which an outright gift (via Endowment or NAFA Guideline Agreements) will be used or how a planned gift will eventually be used (via Statement of Donor Intent) by the University. Any such restrictions must be agreed upon at the time the gift is established and must be fully documented in writing in the Guideline Agreements. Provisions are included in all Guideline Agreements, Statement of Donor Intent, and gift agreements to modify the restrictions included therein should it be determined by the University at some future date that the purpose for the gift can no longer be fulfilled.

FUNDING OPTIONS:

The University has established six (6) different options for funding endowments and named, annually funded, accounts.

Outright Gift:

A benefactor's gift satisfies the specific endowment minimum requirement at the time that the endowment is established.

Pledge Commitment:

A benefactor may sign an irrevocable pledge commitment to satisfy the specific endowment minimum requirement during a period of no more than five (5) years from the time that the endowment is established.

Early Activation of a Pledge Commitment:

A benefactor may also pledge to early activate their pledged endowment by providing annual gifts, for a period of at least five (5) years, to the spending account of at least 5% of the minimum endowment level.

Future Funding:

A benefactor may choose to create an endowment in the future with some type of deferred gift (i.e., gift annuity, charitable remainder trust, bequest) and may choose to formalize this future gift by creating a Statement of Donor Intent. If a gift annuity is used to fund a future endowment, the amount must be two (2) times the minimum funding level required at the time the gift annuity is established.

Early Activation of Future Funding:

A benefactor may choose to early activate a pledged future endowment during their lifetime by providing annual gifts, for a period of at least five (5) years, to the spending account of at least 5% of the minimum endowment level. In this case, the Statement of Donor Intent would be converted to a Guideline Agreement.

Named Annually Funded Account:

Named Annually Funded Accounts (NAFAs) may be established for a fixed period of time by an annual expendable gift of not less than 5% of the minimum required endowment level. The benefactor must make such a commitment for a minimum of five (5) years and sign a pledge commitment form.

MINIMUM REQUIREMENTS FOR ACCOUNTS:

The University has established certain requirements for each type of endowment. The endowment types, the minimum gift required, the payment terms of the gift, the purposes for which the endowment will be established, and the monies used are as follows:

FACULTY ENDOWMENT MINIMUMS:

Dean's/Chancellor's Chair:

Assistant/Associate Dean's or Chancellor's Chair:

Department Head's Chair:

Faculty Chair:

Professorship:

Faculty Fellowship:

Early Career Professorship:

**Future Funding/Early Activation of an Endowed Chair, Professorship, or Named Career Development Professorship:

In certain cases, the agreement reached with a major donor regarding the support of an endowed chair, professorship, or named career development professorship may specify that the University will not receive the endowment principal funding for several years. Proposals for the early activation of a future endowed chair, professorship, or named career development professorship will be reviewed and approved by the Executive Vice President and Provost of the University. The following general Guideline Agreements apply:
  • The agreement reached with the donor to fund the future endowment must be of an irrevocable nature (i.e., charitable remainder trust, charitable gift annuity, estate note, etc.)
  • If a gift annuity is used to fund a future endowment, the amount must be two (2) times the minimum funding level required at the time the gift annuity is established.
In cases where approval has been received, the donor must commit to a minimum five-year pledge of at least 5% of the minimum required endowment per year until the endowment principal becomes available. A term of at least five (5) years is required.

The faculty position exists as long as it is early activated. At the point where the donor cannot or will not fund a five (5) year commitment, the College has the option to fund the position, or the position will be suspended.

Early activation of an endowed chair, professorship, or named career development professorship through annual gifts will require that all parties be informed that the funding of the position will continue as long as resources are available.

Lectureship:

Awards:

GRADUATE STUDENT ENDOWMENT MINIMUMS:

Graduate Fellowship:

Graduate Fellowships are highly prestigious financial support packages that typically include a stipend, tuition remission, and a subsidy for medical insurance. They derive from University or outside awards. Unlike assistantships, they do not have a required instruction or research responsibilities. Recipients must be enrolled in degree programs and be registered full-time.

Distinguished Graduate Fellowship (DGF):

Awards:

SCHOLARSHIPS:

Minimum requirements vary depending upon type of scholarship.

Scholarships solely designed to support students pursuing J.D. or M.D. degrees have a minimum endowment level of $50,000, as opposed to a minimum endowment level of $250,000 for Graduate Scholarships.

Scholarships that are designed to support both Graduate and Undergraduate students must have a minimum endowment level of $250,000.

GRADUATE SCHOLARSHIPS:

Graduate Scholarship:

Graduate J.D. or M.D. Scholarship:

UNDERGRADUATE SCHOLARSHIPS:

Undergraduate Scholarship:

Renaissance Scholarship

PROGRAM SCHOLARSHIPS:

Athletic Position Scholarship:

Libraries Endowment:

Program Support Endowment:

FIDUCIARY MANAGEMENT:

All scholarships from endowed funds must be awarded through eSteward or LionPATH. Policy FN15 Endowed or Named, Annually Funded, Accounts applies to scholarships from all endowed funds regardless of exceptions noted below. Refer to Policy FN09 Scholarship for more details on scholarships.

To assure appropriate stewardship and fiduciary management of endowed accounts, all spending must be made DIRECTLY from the endowment spending account and must adhere to the purpose and expenditure requirements stated in the endowed Guideline Agreements. Transfers of funds from endowed/named, annually funded, spending accounts into other University accounts are NOT permitted (see exceptions below).

NOTE: General Ledger 52660301 Aid - Scholarship is restricted to the disbursement of scholarships/awards/fellowships through the LionPATH System and should NEVER be used in a transaction within SIMBA.

EXCEPTIONS:

Exceptions to Establishment and Minimum Requirements:

Exceptions to the establishment and minimum requirements must be justified to, and written approval received from, the Vice President for Development and Alumni Relations.

Requesting a Transfer:

There are certain categories of endowments where transfers are permissible, due to the nature of the endowment. The following endowment spending accounts are exempt from the prohibition on transfers:

Exceptions to allow transfers from an endowment spending account, beyond those specified above, must contain the following information:

The request for transfer exceptions must be approved (in this order):

  1. by the Budget Executive and the Financial Officer
  2. by the Associate Vice President of Development
  3. by the Associate Vice President for Budget and Finance

If an exception is granted, all transfers must use a journal entry, debiting general ledger account 59000401 Transfers to Other Funds - Bursar Use Only for the endowed spending account and crediting the funds to income general ledger 450001000 Transfer from Endow Fund - Bursar Use Only in the receiving account. Endowed spending account transfers cannot be made to general funds unless specifically approved.

VIOLATIONS:

Violation of a financial policy and/or procedure should be reported to y our supervisor, unit manager, Human Resources representative, and/or office responsible for the policy and/or procedure. Where those resources are inadequate, you may choose to make an anonymous report through the Penn State University hotline by calling 1-800-560-1637.

AUDIT COORDINATION - FINANCIAL AND PROCEDURAL

The Financial Officer is responsible for ensuring that procedures pertaining to the accountability and safeguarding of all cash receipts, cash funds, and other assets are established and followed in accordance with approved University policies and procedures. Regular audits relating to advances, cash, travel, equipment accountability, and other expenditures provide a means to protect University assets. The Financial Officer is responsible for working with Internal Auditing when audits are being performed in the administrative area. Audits pertaining to sponsored activities or other audits performed by external auditors may also be performed. The Financial Officer is also be responsible for working with the external auditor and/or a central University office related to these procedures.

UNIVERSITY RECORDS RETENTION AND DISPOSITION:

University Records retention must be managed in accordance with Policy AD35 University Archives and Records Management, and retention schedules approved by the Records Management Advisory Committee, the Office of General Counsel, and Senior Vice President and Chief of Staff. These records retention schedules are derived from - or based upon - federal, state, and local statutes or regulations, University Policy, industry standards, and business needs. All University Records must be maintained in such a manner to provide ease of access, establish a suitable audit trail for all transactions, and to be reviewed prior to disposition.

Upon completion of the retention period, University Records must be disposed of via secure destruction or transfer to University Archives, unless an exception to the disposition process set forth below applies. If the disposition method for University Records states "Review by Archives" on the records retention schedule, the employees responsible for those records should consult the University Archivist for a final determination of disposition. For University Records that must be securely destroyed, units may arrange for shredding services by either contacting the Blue/White Shredding Program or the Inactive Records Center.

Exceptions to the disposition process are as follows:

To safeguard the privacy of individuals, records that contain Personally Identifiable Information (PII), as defined in University Policy AD53 Privacy Policy, or student records, as defined in University Policy AD11 Confidentiality of Student Records, must be destroyed beyond recovery. For additional information regarding privacy and the protection of an individual's personal information, see Policy AD53 Privacy Policy.

Additional questions may be directed to the Records Management Program.

EXHIBITS:

There are no exhibits associated with this procedure.

CONTACT INFORMATION:

For questions or additional details, please contact the Office of Gift Acceptance.

To request changes to this procedure, please contact the Office of Systems & Procedures.

CROSS REFERENCES:

PROCEDURE STATUS:

DATE APPROVED:

October 25, 2022

MOST RECENT CHANGES:

REVISION HISTORY:

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