FAQ - Endowment Funds

  1. What is the difference between the endowment principal account and the endowment operating account?
  2. The donor would like to establish a quasi endowment, how do I go about setting one up?
  3. I noticed that a donation was applied to my account, how do I find out who the donor was?
  4. I noticed that a donation was incorrectly applied to my account, how do I go about transferring the funds to the proper account?
  5. How do I differentiate between contributions that have been received at the Foundation and assigned to my account versus those received at the University?
  6. I know that the Foundation has received a contribution for one of my accounts, when will it be applied to the account?
  7. What is the difference between book value and market value?
  8. How do I obtain the latest book value of an endowment's principal?
  9. How often are market values calculated?
  10. How quickly after the quarter end are market values made available?
  11. Can I spend out of my endowment principal account?
  12. Can I cover overdrafts in my endowment operating account with funds from my endowment principal account?
  13. How do I determine how much money is currently available to spend from my endowment?
  14. When is interest assigned to my operating account?
  15. Do I earn interest on contributions given during the fiscal year? If so, when does the interest get applied to my operating account?
  16. I want to spend against the interest that will be assigned at year end this year. How will I know how much interest I will receive for contributions received during the fiscal year?
  17. How do I know if an account participates in the endowment pools or is separately invested?
  18. How can interest be assigned to my endowment pool accounts at the beginning of the year when you don't know what the true interest will be for the remainder of the fiscal year?
  19. What happens to the difference between the 4.5% interest assigned at the beginning of the year and the actual interest recognized at year end?
  20. What is the Endowment Administrative Fee?
  21. Can I get a history of income and spending against my endowment accounts?

1. What is the difference between the endowment principal account and the endowment operating account?
The principal account represents the funds contributed by the donor, or set aside by the University that are to be invested.  The interest generated from the principal is made available in the operating account for use by the department as the donor, or University, has specified in their fund agreements.

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2. The donor would like to establish a quasi endowment, how do I go about setting one up?
Donors cannot establish a quasi endowment.  If a donor wishes to establish an endowment, it must be setup as a true endowment (to exist in perpetuity) or as a term endowment (to exist for a specified period of time).  Any fund agreements being drafted for a donor to sign cannot make reference to the establishment of a quasi endowment.

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3. I noticed that a donation was applied to my account, how do I find out who the donor was?
The Rutgers University Foundation should be contacted since they are in possession all donor information, including amounts applied to the University accounts.

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4. I noticed that a donation was incorrectly applied to my account, how do I go about transferring the funds to the proper account?
The Rutgers University Foundation is responsible for the application of all donations to University accounts.  If there are questions as to why funds were charged to an account, or a need to transfer the funds to another account, the Foundation must be contacted.  The departments should not attempt to move donated funds that have been received at the Foundation.

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5. How do I differentiate between contributions that have been received at the Foundation and assigned to my account versus those received at the University?
All contributions received at the Foundation and transferred to the university are assigned to sub code 0936.  All other gift sub codes relate to contributions from sources outside of the Foundation.

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6. I know that the Foundation has received a contribution for one of my accounts, when will it be applied to the account?
If an account has been established, the funds should be applied to the university account within one month of receipt.

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7. What is the difference between book value and market value?
Book value of an endowment represents the current balance of the principal account related to all realized transactions on the general ledger.  Realized transactions include contributions, realized gains or losses, transfers, endowment administrative fee and income.

Market value of an endowment is the net value of an endowment’s book value plus or minus any unrealized gains or losses.

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8. How do I obtain the latest book value of an endowment's principal?
In OFIS, refer to the “FB” (Fund Balance) screen in the current fiscal year for your 0-6xxxx endowment principal account.

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9. How often are market values calculated?
Market values are calculated quarterly (9/30/XX, 12/31/XX, 3/31/XX and 6/30/XX).

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10. How quickly after the quarter end are market values made available?
Market values are calculated by the Restricted and Endowment Funds department after receiving the latest quarterly investment portfolio assessments.  The assessments are not available until the 3rd week in the month immediately following the quarter end.  Therefore, market values are normally available 4 weeks after the quarter end.

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11. Can I spend out of my endowment principal account?
No.  All expenditures should be assigned to the endowment operating expense account (6-4XXXX).

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12. Can I cover overdrafts in my endowment operating account with funds from my endowment principal account?
As a general rule, the answer is no. This is especially true for all true and term endowments whereby donors specify that principal is never invaded. Only when dealing with quasi endowments can funds be withdrawn from principal.  However, even with quasi endowments, the intent should be to limit expenditures to the extent that it can be funded from the endowment income operating account.

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13. How do I determine how much money is currently available to spend from my endowment?
In OFIS, refer to the “BA” (Balance Available) screen in the current fiscal year for your 6-4xxxx endowment operating account.  Please keep in mind that if you are looking for the fund balance during the months of July and August, the interest may not be posted yet (see the next Frequently Asked Question).

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14. When is interest assigned to my operating account?
Interest is normally assigned prior to the end of the first fiscal quarter for endowments that participate in the endowment pools.  The interest is based upon the market values of the endowments as of the last closed fiscal year.  For endowments that are separately invested (not in the pools), interest is assigned as it is earned throughout the year.

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15. Do I earn interest on contributions given during the fiscal year? If so, when does the interest get applied to my operating account?
Yes, interest is awarded for contributions made during the fiscal year.  However, the interest is assigned on a pro-rated basis based upon when the funds are transferred from the Rutgers University Foundation to the University and actually invested in the endowment pools.  Interest is applied in June of each fiscal year for these contributions.

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16. I want to spend against the interest that will be assigned at year end this year. How will I know how much interest I will receive for contributions received during the fiscal year?
A projection for interest on contributions received during the year can be obtained, in most cases, by contacting the Endowment Senior Accountant in the Restricted and Endowment Funds department.

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17. How do I know if an account participates in the endowment pools or is separately invested?
Any endowment principal accounts that begin with 0-69XXX are separately invested.  All other 0-6XXXX accounts participate in the endowment pools.

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18. How can interest be assigned to my endowment pool accounts at the beginning of the year when you don't know what the true interest will be for the remainder of the fiscal year?
Similar to other large universities, Rutgers employs a 4.5% spending policy to provide income at the beginning of the year so that departments know what funds they have to spend.  The spending policy applies a 4.5% rate of return to the average market values of the pools over the past 13 fiscal quarters since the last closed fiscal year.  By using the average of the last 13 quarters, the University looks to avoid any major short-term fluctuations in interest that could complicate a department’s spending each year.

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19. What happens to the difference between the 4.5% interest assigned at the beginning of the year and the actual interest recognized at year end?
Any differences between the 4.5% interest allocated at the beginning of the year to the operating accounts and the true interest earned that fiscal year is assigned to the principal of the account as a component of that year’s realized gain or loss.

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20. What is the Endowment Administrative Fee?
The Endowment Administrative Fee is a Board of Governors approved annual charge to every endowment that helps cover the cost of maintaining the endowments at the University.  The fee represents a 1% charge to the average market values of the pools over the past 13 fiscal quarters since the last closed fiscal year.

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21. Can I get a history of income and spending against my endowment accounts?
Yes.  Requests for such reports should be made to the Endowment Senior Accountant in the Restricted and Endowment Funds department.  At this time, the process to compile endowment history is a manual effort, please allow ample time to process a historical report (especially if the request involves 5 or more years of history).

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