What is an endowment?
Endowments serve as vehicles through which donors can provide permanent funding to University programs of their choice. Two categories of endowments are:
• True endowments are funds received from external donors with the restriction that the principal (gift amount) is to be retained in perpetuity and cannot be spent.
• Quasi-endowment (funds functioning as endowment) are funds the University has determined to invest in an endowment account. Quasi-endowments are submitted to the President for approval.
What are Spendable Dollars?
Spendable Dollars is the title applied to the funds calculated and made available (allocated) as per the spending policy authorized by the CMU Board of Trustees. The dollars are transferred at the beginning of the fiscal year, for each qualified endowment. The fiscal year runs from July 1 - June 30.
What is the Endowment Spending Policy?
The spending policy determines how much of the total return will be allocated and identified as spendable (amount available to distribute) and how much will be reinvested in the endowment investment pool.
For the 2006 fiscal year, the Board of Trustees has authorized a 4.5% spending policy. The calculation is: 4.5% of the average market value for the 20 quarters prior to and including June 30, if the fund has been in existence for 60 months or more; or, 4.5% of the average market value for the actual number of months the fund has existed prior to and including June 30, if the fund has been in existence for less than 60 months. This policy is designed to ensure that the purchasing power of an endowment fund is maintained into perpetuity. The policy, ideally, maximizes the probability that the distributions steadily increase from year to year.
The spendable "estimates" are calculated annually in February and the actual disbursements occur in July. The calculation is referred to as the "Spending Allocation". Spendable dollars accumulate from year to year, and remain invested until withdrawn from the endowment fund.
If the endowment's market value is less than the gift amount, no distribution will be allowed until the market value exceeds the total contributions.