University of Georgia External Affairs Division Office of Financial Services Spending Budgets Arch Foundation for the University of Georgia The University

University of GeorgiaExternal Affairs Division

Office of Financial Services

Spending Budgets

Arch Foundation for the University of Georgia

The University of Georgia Foundation

October 26, 2010

Spending BudgetsPolicies and Procedures

• Available online:Arch Foundation www.uga.edu/archfoundationUGA Foundation www.externalaffairs.uga.edu/ugaf

• Policy Section 7.3 (both Foundations)

• Endowment Guide / FAQ


• Georgia law requires a spending policy for endowments.

• July 1, 2008, the Foundations adopted the State of Georgia’s

Uniform Prudent Management of Institutional Funds Act (UPMIFA).

• UPMIFA requires the preservation of the fair value of the original gift as of the gift date of the donor restricted endowment funds absent explicit donor stipulations to the contrary.

• The Foundations will protect your endowment by monitoring spending.


• The Foundations adopted a new spending budget method in January 2010.

• The new method attempts to:

• Reduce the spending volatility.• Include predetermined inflation factor.• Will target a spend rate - currently 4%.• Maintain the purchasing power of endowment assets.

Spending BudgetsSpending Budget Formula

Current year spending budget (annual funding):(80% x ((1+CPI) x prior year spending budget)) +

(20% x (4% x endowment market value*)) = Spending Calculation.

Spending Budget = lesser of(1) Spending Calculation, or(2) Available Investment Return.

* Based on value as of December 31.

Spending BudgetsSpending Budget Formula - Example

Fund XYZ:Endowment Market Value = $50,000Prior year spending budget = $2,000Available Investment Return = $1,500CPI = 2%

(80% x ((1+2%) x 2000 )) + (20% x (4% x 50000)) =$2,032 = Spending Calculation

Spending Budget = $1,500 (lesser of $2032 vs $1500)

Spending BudgetsTimeline for Fiscal Year 2012

February 2011:• Foundation investment committees determine Spending

Rate for next fiscal year (FY12).

March 2011:• Spending budgets calculation based on December 31 data.

• FY12 Spending budgets available on IFAS dashboards.

April 2011:• Begin dollar cost average funding of spending budgets for

FY12.

Spending BudgetsTimeline for Fiscal Year 2012

August 2011:• FY11 final spending budget reports available.

• FY12 spending budget reports available.

• Spending budget will be fully funded and held as cash.

• Funds with cash balances greater than two years spending will not be liquidated.

• Excess cash balances greater than two years spending will be reinvested automatically.

• Cash balances can be reinvested more frequently at request of VP / Dean / Director.

Spending BudgetsRequirements before Spending from Endowments

• Fund agreement is signed.

• Endowment minimum is met.

• Invested for at least twelve months.

• Calculation based on December 31 market value for all funds with twelve months of data.

• A second calculation based on June 30 market value for new funds that have reached the twelve months of data.

Spending BudgetsFunding Available for Endowments

• Investment Returns

• Gift Allocation

• Represents any gifts or transfers to support current spending, not intended for investment in the endowment.

• UGAF Allocation

• Represents one-time funding for current spending as requested by the Provost.

Spending Budgets Current Spending Budget Report

Spending Budgets Current Spending Budget Report

Spending BudgetsProjections

• Projections are a tool for long-term endowment spending.• Each fund should be reviewed individually.

• Based on best assumptions available to the Foundations.

• Will be distributed at least bi-annually for each endowment.

Spending BudgetsProjection Template Assumptions

Spending BudgetsProjection Template Example #1




Spending BudgetsEndowed Giving

Spending BudgetsIFAS Access and Training

• Access forms for both Foundations are on their respective websites.

• Future training dates:• November 18.

• Register through UGA Training and Development.

Spending BudgetsContact Us

Jenny Dutton:• (706) 542-6458• [email protected]

Ryan Hitchins• (706) 583-0758• [email protected]

Documents

University of Georgia External Affairs Division Office of Financial Services Spending Budgets Arch Foundation for the University of Georgia The University