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Endowment Funds Policy

  • Owner:  Financial Services; University Advancement
  • Approver:  Board of Governors
  • Approval Dates:  April 2002, November 2006, August 2007

I.    Purpose

This policy outlines the objectives and principles by which the Toronto Metropolitan University's (the "University") endowment funds are established, maintained and administered.

II.    Scope

This policy is applicable to all University endowment funds and related donor agreements, unless specifically exempted by the Finance Committee of the Board of Governors.

III.    Policy

Endowment funds are established when a donor(s) makes a contribution of $25,000 or more.  Under exceptional circumstances this limit may be waived by the Vice Presidents Adminsitration and Finance, and University Advancement. Normally, a written agreement with the donor(s) stipulates the purpose and terms of the donation(s).

An endowment fund consists of a non expendable pool of funds that earns investment income and grows at the rate of inflation. Each fund has its own stabilization fund and one or more expendable accounts. Investment income earned on the endowment principal provides the financial resources needed to preserve the value of the endowment and fund the related spending commitments.

Preservation of Capital:  Capital preservation ensures that the real, inflation (CPI) adjusted value of the original endowment is maintained over time.  Income in excess of spending plus inflation (CPI) will go to a stabilization fund.  

Spending Policy:  From time to time, a spending level will be authorized by a resolution of the Board of Governors. 

·         The spending level (a percentage of a three year rolling average of the inflation adjusted capital value of the endowment) allows investment income to be used to support the endowment commitments. 

·         Spending will commence once the endowment has existed for at least one full year.

·         Unspent amounts in the expendable account at year end will return to the stabilization fund unless an exemption is requested by the University account holder and approved by the Executive Director, Financial Services.

Stabilization Fund:  The stabilization fund has been established to smooth the year over year fluctuations in earnings and provide a reserve to be used when a fund does not earn sufficient income to cover inflation and the approved spending amount.

·         The maximum size of a stabilization fund is 15% of the inflation adjusted cost of the endowment.  

·         When a stabilization fund reaches the 15% maximum, excess earnings are returned to the principal endowment account. 

Whenever the investment return is less than the rate of inflation (CPI) plus the spend rate, the stabilization fund will provide the top-up necessary to maintain capital preservation and bring spending up to prescribed levels. Whenever the investment return is less than the rate of inflation (CPI) plus the spend rate, and there are insufficient funds in the stabilization fund to fund committed spending, there will be either a delay in spending or the expense(s) will be paid from operating funds, after approval by the Board.

IV.    Jurisdiction

This policy falls under the jurisdiction of the Vice President, Administration and Finance, and the Vice President, University Advancement. The interpretation, application and administration of this policy are the responsibility of the Executive Director, Financial Services.