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Endowment Funds Procedure

  • Owner: Chief Financial Officer, Financial Services 
  • Approval Dates: March 2026

I.    Purpose

These procedures (the “Procedures”) assist in the operationalization of the Investment Policy for Non-Expendable Funds (the “Policy”) by outlining the principles and process by which the University’s endowed funds are administered.

II.    Scope

These Procedures apply to all University funds designated as endowed funds by the University, unless the endowed funds are specifically exempted from the Procedures by the Chief Financial Officer.

III.    Definitions

a. “Endowment” means the Endowment Principal and all generated returns from the Endowment Principal that are to be utilized by the University for a specific purpose as set out in the associated gift agreement entered into between the University and the donor in respect of the Endowment Principal.

b. “Endowment Investment Pool” means a non-expendable pool of Endowment Principal that is established by the University that earns investment returns and is expected to grow at the rate of inflation over time for the purpose of capital preservation. 

c. “Endowment Principal” means the original amount of funds received from a donor by the University, including any reinvested earnings over time, that is held in perpetuity by the University and used to generate on-going and self-sustaining support for the specific purpose(s) set out in the gift agreement.

d. “Expendable Account” means the internal cost centre established by the University to hold the annual balance available for spending in respect of an Endowment in a Fiscal Year.

e. “Fiscal Year” means May 1 to April 30.

f. “Inflation” means the rate of increase in prices since the prior redemption from the Endowment Investment Pool, based on the Canadian consumer price index, with a cap of 3.5%.

g. “Spend Level” means an amount of money that is calculated as a percentage of the 36-month rolling average of the market value of the Endowment Principal.

h. “Stabilization Fund” means the reserve fund established by the University used for the purpose of smoothing year-over-year fluctuations in investment earnings from the Endowment Investment Pool.

i. “Target Rate” means the rate of Inflation plus the Spend Level.

j. “University” means Toronto Metropolitan University.

IV.    Procedures

  1. The University invests the Endowment Principal in the Endowment Investment Pool in accordance with the Investment Policy for Non-Expendable Funds with the aim of generating a total return at a level that is sufficient to ensure the preservation of the purchasing power of the Endowment Principal over time, and the intention to provide a relatively predictable annual Spend Level so that that the specific purpose obligations with respect of the Endowment Principal set out in the gift agreement are able to be met.
  2. Spending from a specific Endowment may only commence after the Endowment Principal has been held by the University for at least twelve months and sufficient returns have accumulated in respect of the Endowment Principal to support the specific purpose obligations.

    Spend Level
  3. On an annual basis, Financial Services will calculate the Spend Level in respect of each Endowment and provided sufficient investment returns were earned, shall redeem from the Endowment Investment Pool and/or Stabilization Fund and transfer into an Expendable Account established in respect of the Endowment, an amount that is equal to the Spend Level to allow such funds to be utilized by the University for the specific purpose of the Endowment.
  4. Unspent amounts remaining in an Expendable Account at the end of a Fiscal Year will be re-invested by Financial Services in the Stabilization Fund, unless a formal request to carry forward the unspent funds to the next Fiscal Year has been submitted by the respective TMU account holder and approved by the Chief Financial Officer or their delegate.  In no event may a carry forward request be submitted for an amount that is the lesser of (i) 10% of the previous Fiscal Year’s Spend Level for an Endowment; and (ii) $100.  Carry forward requests will only be approved in exceptional circumstances where spending of an Endowment did not occur due to unforeseen circumstances, and funds are expected to be spent in the following Fiscal Year. Carryforward requests are an exception and should not be recurring.

    Stabilization Fund
  5. The Stabilization Fund is held as a separate fund in the University’s records and is invested in accordance with the Investment Policy for Expendable Funds.
  6. From time to time, Financial Services will undertake an evaluation of each Stabilization Fund with the goal for each Stabilization Fund to not exceed 20% of the market value of the Endowment Principal.
  7. If the Stabilization Fund balance reaches the 20% threshold at the time of the review, excess earnings may be recapitalized by adding the excess earnings to the Endowment Principal and investing them as part of the Endowment Investment Pool, unless market conditions suggest that such a transfer should be delayed. The retention of funds in the Stabilization Fund in excess of the threshold is subject to approval by the Chief Financial Officer.

    Shortfalls
  8. In a Fiscal Year where the investment return generated from the Endowment Investment Pool is less than the Target Amount for the Endowment, funds will be transferred from the Stabilization Fund in order to provide the required top-up to support the current year’s Spend Level for that Endowment.  
  9. If there are insufficient funds in the Stabilization Fund to make up the Spend Level, one of the following will occur:
    • There will be either a delay in spending; or 
    • In rare and exceptional circumstances, the Chief Financial Officer may approve an Expendable Account to go into a short-term deficit position. Any such deficits incurred must be eliminated during the next Fiscal Year by way of department or donor top-up, otherwise spending in future years may be withheld to bring the fund back to required levels.