Establishment and Management of Endowments
Policy Number: 171
Establishment and management of endowments
- Date Reviewed:
- March 2014
- Responsible Office:
- Office of Development
- Responsible Executive:
- Vice President for Development
I. POLICY AND GENERAL STATEMENT
The University of Texas Health Science Center at Houston ("university") seeks and receives private sector contributions for the purpose of establishing endowments to fulfill its mission and goals. Endowments are designated for endowed faculty positions (chairs and professorships), scholarships, fellowships, and other educational activities.
The university strives to uphold the highest level of accountability by reporting annually to contributors on the use of income distributions from their endowments.
Noncompliance with endowment policies, procedures and guidelines may result in suspension of a holder's access to endowed funds or, in extreme cases, loss of the employee's position as holder of the endowment.
True endowments: Funds for which donors have stipulated, under the terms of the creating gift agreement that the principal of the fund is not currently expendable. It is to remain in perpetuity and invested for the purpose of producing present and future income.
Quasi-endowments: Funds established with institutional funds or unrestricted gifts and function as endowments as a result of a determination by the Board of Regents of The University of Texas System ("Board of Regents") that these funds are to be retained and invested. They differ from true endowments in that the Board of Regents, or designee, can, at its exclusive discretion, return these funds to current funds.
Term endowments: Funds for which the donor has stipulated that the principal may be expended after a stated period or on the occurrence of a certain event.
A. Establishing an Endowment
When establishing an endowment, the Office of Development ("OD") works with the contributor to define its purpose and terms and prepares a gift agreement to document those terms. OD requests acceptance in accordance with UT System Administration Policy 138 Gift Acceptance Procedures. The endowment cannot be announced publicly until accepted in accordance with the procedures in UT System Policy 138.
Funding of endowments may occur outright with cash or an equivalent or by pledge. The endowment can be initiated with 20 percent of the ultimate pledge, but payment of the remaining pledge will not be extended beyond five years, except in rare circumstances. Endowment monies received by OD will be transferred to UT System to be invested. OD provides the holder of an endowed academic position ("holder") or the principal investigator ("PI") with a copy of an applicable gift agreement.
Income distributions on endowments are deposited into local endowment accounts on a quarterly basis.
B. Addition to an Established Endowment
As with all charitable contributions, upon receipt of a gift meant to augment an established endowment, the gift and related correspondence must be forwarded to OD. Refer to HOOP Policy 203 Gifts: Solicitation, Acceptance, Processing, Acknowledgement and Stewardship and the instructions for gift deposits.
C. Managing an Endowment
The PI/holder, in conjunction with his/her financial administrator, is responsible for the management and expenditure of the endowment distributions for each of the endowments entrusted to him/her.
PIs/holders and financial administrators are responsible for using endowment distributions for the purpose(s) intended by the contributor(s), according to the document(s) associated with the establishment of the endowment(s) and in accordance with applicable UT System and university policies and procedures.
- Endowment distributions will be budgeted and used by PIs/holders to carry out the university's mission of education, research, clinical practice and service in accordance with the contributor's wishes and all applicable university policies and procedures.
- The PI/holder is responsible for authorizing all expenditures using endowment distributions. OD will review and approve expenditures prior to payment.
- Endowment distributions cannot be used to establish or create, in whole or in part, another endowment, except in accordance with UT System Administration Policy 138 Gift Acceptance Procedures.
- Endowment distributions are an important source of funding and should be expended on an annual basis. Endowments will be monitored for amount and appropriateness of expenditures. Funds should only accumulate if they are being saved for a specific purpose. The PI/holder is required to provide an explanation and a plan to expend the accumulation when the accumulation is greater than or equal to two years' worth of endowment distributions. The plan to expend the accumulation is subject to approval by the appropriate dean. When it is impossible or impracticable to use an endowment's distribution accumulations, an exception may be granted by OD upon request of the PI/holder.
- In addition to reviewing expenditure requests as they occur, the Gift Assurance Officer in the OD regularly reviews all endowments to ensure compliance with the purpose of the endowment and with UT System and university policies. The Gift Assurance Officer monitors for various elements, such as appropriateness of expenditures, excessive accumulation of funds, and whether a position is vacant and if so, for how long. When there is a compliance issue, the PI/holder will be notified and will be required to effect a timely resolution.
D. Training Responsibilities
Each employee involved in managing or expending endowed funds must complete certain required training every two years. If such training is not completed in a timely fashion, access to endowed funds may be suspended until the training is completed.
All newly-appointed PIs/holders, as well as their financial administrators, will meet with the Gift Assurance Officer for initial training. Access to endowed funds will not be given until this initial training is completed. It is the responsibility of the PI/holder to notify the Gift Assurance Officer when he/she has a new financial administrator managing endowed funds.
E. Reporting Responsibilities
A PI/holder must provide an annual explanation of the use of funds (including an explanation of excessive accumulations), to update the contributor on the progress made during the year and explain the impact of the gift on the PI/holder's work. If an endowed academic position is vacant, the dean or his/her designee should submit a summary of recruitment efforts and plans for filling the vacancy, which will be shared with the contributor. For endowed scholarships, lecture series, etc., the PI/holder must provide details of how the money was spent, e.g., the name of the scholarship recipient and brief biographical information.
These reports are due by December 1 each year. Each fall, the Executive Vice President for Academic and Research Affairs will request the narratives and other endowment information and will forward the completed reports to the Gift Assurance Officer.
The Gift Assurance Officer coordinates the completion of annual reports to endowment contributors which include a letter from the Vice President for Development, an endowment financial report, and the narrative on the use of the endowed funds.
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