CR2012 ENDOWMENT STEWARDSHIP
Last Revision:

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:

  • Award - Recognition for achievement of a single specific nature. It may be for grades, for activities, or a combination of both grades and activities. Awards may be created to benefit students, faculty, or staff
  • Early Career Professorship - Provides supplemental department support for outstanding University faculty in order to provide a holder of the career development professorship with critical financial support and encouragement for faculty starting an academic career. The holder must be a full-time or visiting faculty member with the academic rank of assistant professor or higher and the term of the appointment shall be awarded on a rotating basis for a three-year period. Early Career Professorships are created under the University Early Career Matching Program and Career Development Professorships do not receive matching funds
  • Chair - Provides supplemental department support for outstanding University faculty in order to provide a holder of the chair with the resources necessary to continue and further the scholar's contributions to teaching, research, and public service. The holder shall be a full-time member of the University faculty with the academic rank of professor, senior scientist, or librarian
  • Endowed Account/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)
  • Graduate Assistantships - A form of graduate support, teaching, research or administrative, that includes a stipend, tuition remission, and a subsidy for health insurance. See The Graduate School Policy GSAD-901 Graduate Fellows and Graduate Trainees for complete details
  • 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
  • Guideline Agreements - An official University document that describes the benefactor's intent and specifies how the subject endowment or annual income will be used. All Guideline Agreements are drafted and approved by the Office of Gift Acceptance
  • Honorariums - A token payment to an individual of special achievement or renown not currently employed by Penn State, in return for that individual's willingness to visit the University and participate in a University event or short duration (such as speaker, reviewer, seminar participant, etc.), with the understanding that the payment does not constitute compensation commensurate with the actual services provided. Such payments are given for services for which fees are not legally or traditionally required
  • Lectureship - Lectures enable Penn State students and faculty to interact and develop relationships with important leaders and professionals in a variety of fields. Lecture series often provide the stimulus for innovations in research and education
  • 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 Guideline Agreements. To establish NAFA Guideline Agreements, the donor must pledge, for a period of at least five (5) years, a dollar amount equal to a 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 in Policy FN15 Endowed or Named Annually Funded Accounts
  • Professorship - Provides distinguished scholars the opportunity to continue and further the scholar's contributions to teaching, research, and public service through the provision of salary and supplementary funds. The holder must be a full-time member of the University faculty, or a visiting faculty member, with the academic rank of professor, senior scientist, or librarian
  • Program Support/General Endowment - Enhances the academic environment of our students and faculty, often merging the special interest of a donor with enrichment opportunities
  • Quasi-Endowment (funds functioning as an Endowment) - Internally funded endowments, which are supported 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
  • Scholarship - An award of money to a student, granted in recognition of academic distinction and/or to provide financial assistance
  • 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 Donor Intent are drafted and approved by the Office of Gift Acceptance
  • Term Endowment - Term endowments are created with funds from external sources, which generally fund a specific event. An end-date is established in the requirements and the principal is spent down over the life of the term endowment. Use of term endowments is NOT encouraged
  • True Endowment - Endowment created with funds received from an outside donor, which will be held in perpetuity with income used for designated purposes

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.

  • An endowment Guideline Agreement and account are created
  • All endowment purposes may be funded in this manner

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.

  • An endowment Guideline Agreement and account are created
  • All endowment purposes may be funded in this manner

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.

  • All endowment purposes may be early activated in this manner.

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.

  • NO endowment Guideline Agreement or account is created until funding is received
  • NOT all endowment purposes may be funded in this manner; specifics are provided in the minimum requirements section

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.

  • An endowment Guideline Agreement and account are created
  • NOT all endowment purposes may be funded in this manner; specifics are provided in the minimum requirements section

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.

  • NAFA Guideline Agreements and non-endowed account are created
  • NOT all endowment purposes may be funded in this manner; specifics are provided in the minimum requirements section

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:

  • Minimum Endowment: $5,000,000 - payable over no more than five (5) years
  • Eligible Funding Options:
  • Purpose: Provide unrestricted support to the academic college or campus led by the Dean/Chancellor. The funds are not meant for long-term commitments to support any specific project, program, or person. They are not intended to be used to supplement the salary of the Dean/Chancellor.

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

  • Minimum Endowment: $4,000,000 - payable over no more than five (5) years
  • Eligible Funding Options:
  • Purpose: Provide unrestricted support to the academic college or campus for the Assistant/Associate Dean/Chancellor. The funds are not meant for long-term commitments to support any specific project, program, or person. They are not intended to be used to supplement the salary of the Assistant/Associate Dean/Chancellor.

Department Head's Chair:

  • Minimum Endowment: $3,000,000 - payable over no more than five (5) years
  • Eligible Funding Options:
  • Purpose: Provide unrestricted support to the academic department led by the Department Chair. The funds are not meant for long-term commitments to support any specific project, program, or person. They are not intended to be used to supplement the salary of the Department Head.

Faculty Chair:

  • Minimum Endowment: $2,000,000
  • Eligible Funding Options:
  • Purpose: Provide supplemental department support for outstanding University faculty in order to provide a holder of the chair with the resources necessary to continue and further the scholar's contributions to teaching, research, and public service. The support monies will be used for such purposes as salary supplementation, graduate assistantships, administrative staff assistance, research, travel expenses, etc. The holder shall be a full-time member of the University faculty with the academic rank of professor, senior scientist, or librarian.

Professorship:

  • Minimum Endowment: $1,000,000
  • Eligible Funding Options:
  • Purpose: To provide distinguished scholars the opportunity to continue and further the scholar's contributions to teaching, research, and public service through the provision of salary and supplemental funds. The supplemental funds are to be used for, but are not restricted to, such areas as graduate assistantships, administrative staff assistance, course development, research, and travel expenses. The holder must be a full-time member of the University faculty, or a visiting faculty member, with the academic rank of professor, senior scientist, or librarian

Faculty Fellowship:

  • Minimum Endowment: $750,000
  • Eligible Funding Options:
  • Purpose: To provide distinguished scholars the opportunity to continue and further the scholar's contributions to teaching, research, and public service through the provision of salary and supplemental funds. The supplemental funds are to be used for, but are not restricted to, such areas as graduate assistantships, administrative staff assistance, course development, research, and travel expenses. The holder must be a full-time member of the University faculty, or a visiting faculty member, with the academic rank of professor, senior scientist, or librarian.

Early Career Professorship:

  • Minimum Endowment: $500,000
  • Eligible Funding Options:
  • Purpose: To provide supplemental department support for outstanding University faculty in order to provide a holder of the career development professorship with critical financial support and encouragement for faculty starting an academic career. The monies provided will be used for, but not necessarily limited to, salary supplementation, research expenses, education and travel expenses, graduate assistantships, and support services for the holder or the holder's program. The holder must be a full-time or visiting faculty member with the academic rank of assistant professor or higher, and the term of the appointment shall be awarded on a rotating basis for a three-year period
**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:

  • Minimum endowment: $100,000
  • Eligible Funding Options:
  • Purpose: For expenses associated with planning and implementing lectures/speaking events in specific area and/or on specific topics. Lectures enable Penn State students and faculty to interact and develop relationships with important leaders and professionals in a variety of fields. Lecture series often provide the stimulus for innovations in research and education. A benefactor may specify an area of study for the lecture series to address. Expenditures from the lectureship shall consist of an honorarium and/or expenses for the lecturer. Reimbursement of expenses shall conform to current University travel policy.

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):

  • Minimum endowment: $400,000
  • Eligible Funding Options:
  • Purpose: To encourage the establishment of endowments to provide support for academic excellence for the University's most talented graduate students through support packages that include tuition, stipend, and insurance subsidy. In consideration of a donor's willingness to support a DGF, the University will match annually a portion of the graduate student's fellowship. Matching funds commence when the DGF is fully funded. If the gift is early activated, the match from the Graduate School is activated as well

    The DGF offering will end when matching DGF funds are depleted.

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:

  • Minimum endowment: $50,000
  • Eligible Funding Options:
  • Purpose: These are University scholarships designed for students enrolled in the Graduate Law or Medical degree programs, engaged in graduate-level coursework and are established according to a donor's interests and/or preference(s) for a particular campus, college, geographic area, academic merit, or any number of other eligibility specifications consistent with University policy.

UNDERGRADUATE SCHOLARSHIPS:

Undergraduate Scholarship:

  • Minimum endowment: $50,000
  • Eligible Funding Options:
  • Purpose: These are University scholarships designed for undergraduate students and are established according to a donor's interest and/or preference(s) for a particular campus, college, geographic area, academic merit, financial need, or any number of other eligibility specifications consistent with University policy (i.e., Athletic, Destiny, Enrichment, and Honors scholarships). Students enrolled in the Graduate School, but still undertaking undergraduate coursework are eligible for this scholarship.

Renaissance Scholarship

  • Minimum endowment: $30,000
  • Eligible Funding Options:
  • Purpose: Granted to the top students among those who have the greatest financial need. These scholarships "follow" the recipient throughout their college experience providing the student continues to meet the eligibility criteria.

PROGRAM SCHOLARSHIPS:

Athletic Position Scholarship:

Libraries Endowment:

  • Minimum endowment: $25,000
  • Eligible Funding Options:
  • Purpose: Often benefits large segments of the University community. A libraries endowment can be specified to be used at the Dean's discretion or may specify subject areas to address with monies available for expenditure. While the required minimum is $25,000, the actual gift depends on the nature of the program that is to be supported; practical minimums should be determined.

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:

  • Loan Funds where the Guideline Agreements specify transfers to other accounts
  • Endowed funds where the Guideline Agreements specify transfers to other accounts
  • Endowed funds with Guideline Agreements allowing expenditures in support of the Hershey Medical Center or Four Diamonds Funds, where these funds must be transferred to the appropriate accounts for expenditure
  • Spending account on Unrestricted Quasi Endowment (those with a single principal fund within the fund range of 1730000000 - 1737996999), given that these funds are University funds and have no donor stewardship requirements

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

  • a detailed explanation providing a compelling reason why the funds must be transferred to another account for management and spending;
  • a copy of the Guideline Agreement for the endowed fund;
  • a detailed explanation of how the account will be managed to facilitate accurate donor reports through the Office of Donor Relations on the expenditure of funds; and
  • a detailed plan on how employees managing the transferred funds will be accountable for adhering to the donor Guideline Agreement.

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:

  • University Records subject to a Legal Hold (see AD35, Legal Hold). A legal hold will remain in effect until it is released in writing by the Office of General Counsel.
  • University Records under audit or review, either internally or externally. An audit hold will remain in effect until the hold is released by the Office of Budget and Finance. The Financial Officer will be notified regarding any accounts that are under audit; the Financial Officer will be responsible for contacting the unit associated with the accounts.

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:

  • July 1, 2023 - Editorial changes: The Office of Gift Planning name changed to Office of Gift Acceptance.

REVISION HISTORY:

  • February 1, 2023 - Editorial changes: Changed all references to the Associate Vice President for Finance to the Associate Vice President for Budget and Finance, per the directive of the Senior Vice President for Finance and Business.
  • January 19, 2023 - Editorial changes:
    • Changed all references to the Office of the Corporate Controller to the Office of Budget and Finance, per the directive of the Associate Vice President for Finance
    • Changed all references to the Corporate Controller to the Associate Vice President for Finance, per the directive of the Associate Vice President for Finance
    • Changed all references to the Vice President for Administration to the Senior Vice President and Chief of Staff, per the directive of the Associate Vice President for Finance
  • Original - October 25, 2022 (replaces Policy Guideline FNG07 Endowment Spending Stewardship)