Operating Gift Funds

Document Last Updated: April 14, 2004

…. Financial Training Department 1 Table of Contents

What is a gift?...... 3 Unrestricted gifts...... 3 Restricted gifts...... 3 What is not a gift?...... 4 Grants vs. Gifts...... 4 What is an endowment?...... 4 Overview of the Gift Process...... 5 Gift Agreements...... 6 Gift Transmittal Forms...... 8 Creating a New Gift Fund...... 10 Trust Sheets...... 12 Fund Attributes...... 13 Receiving and Recording Gifts...... 18 Recording Cash, Check, or Credit Card Gifts...... 18 Recording Gifts-in-Kind and Securities (Stock) Gifts...... 18 Recording Pledges (Promises to Give)...... 18 Net Present Value...... 19 Writing Off A Pledge...... 19 Accessing Gift Information in BEN Financials...... 20 Revenue Reclassification...... 26 Budgeting Gift Funds...... 27 Carry-forward...... 27 Anticipated Current Income...... 27 Monitoring Income and Expense Activity...... 28 Closing a Gift Fund...... 29 Appendix A: Common Acronyms and Abbreviations...... 30 Appendix B: Glossary of Terms...... 31 Revision History...... 32

Trust Administration 427 Franklin Building / 6205 215-898-7254 Fax: 215-573-5118 [email protected] http://www.finance.upenn.edu/treasurer/investments/trustadmin/

…. Financial Training Department 2 What is a gift?

A gift is a voluntary transfer of things of value, usually in the form of cash, checks, securities, real property, or personal property. Gifts may come from individuals, corporations, foundations, and other sources. The University of Pennsylvania can use gifts for unrestricted and restricted purposes, as designated by the donor. The University makes no commitment of resources or services in return for gifts, other than agreeing to put the gift to use as the donor designates.1

Unrestricted gifts Unrestricted gifts are resources received from a donor where there are no restrictions or conditions on how the resources may be used.

Restricted gifts Restricted gifts refer to resources received from a donor where the donor has placed limitations or conditions on how or when the resources can be used.

Gifts may be used for  Operations (e.g., publish a newsletter)  Capital (e.g., gift to build a building)  Endowment (e.g., gift to establish a professorship) In the case of an operating or capital gift, a gift fund (BEN Financials fund number 6xxxxx – 65xxxx for a capital gift) will be established. In the case of an endowment gift, an endowment fund (BEN Financials fund number 4xxxxx) will be established.

The Financial Accounting Standards Board (FASB), which governs the accounting activity of the University of Pennsylvania and other entities, established standards which include the requirement that all financial transactions be classified into three “net asset” categories according to donor-imposed restrictions. That requirement is reflected in the “Net Asset Class” value (part of the Center Net Asset Class [CNAC] account segment) in BEN Financials for each of the three net asset categories: 1. Unrestricted – Net Asset Class (NAC) 0 2. Temporarily Restricted – Net Asset Class (NAC) 1 3. Permanently Restricted – Net Asset Class (NAC) 2 The gift agreement (see sample on pages 6 and 7) determines into which asset class a contribution is recorded. Once donor restrictions are met, the net assets can be reclassified. Only endowment (4xxxxx) funds may have gifts in NAC 2 – gift (6xxxxx) funds must have all gifts in NAC 1 or NAC 0.

1 Taylor, John H., Advancement Services Research and Technology Support for Fund Raising

…. Financial Training Department 3 What is not a gift?

Not all money the University receives is for gifts. Money given in exchange for goods or services rendered (e.g., tuition or tickets to a Penn basketball game or to a performance at Annenberg) are clearly not gifts. Nor are rebate checks for products purchased in accordance with University procurement guidelines. The grey area occurs when the University “receives” money from the federal government or another sponsoring agency – in this case, a determination needs to be made as to whether the check is a grant or a gift.

Grants vs. Gifts According to University Financial Policy 2101 (“Administration of Sponsored Projects”), any project which meets any of the following criteria is considered to be a “sponsored project” and is administered through the Office of Research Services (BEN Financials fund 5xxxxx).  The project commits the University to a specific line of scholarly or scientific inquiry, typically documented by a statement of work  A specific commitment is made regarding the level of personnel effort, deliverables, or milestones  Project activities are budgeted, and the award includes conditions for specific formal fiscal reports and/or invoicing  The project requires that unexpended funds be returned to the funding source at the end of the project period  The agreement provides for the disposition of either tangible property (e.g., equipment, records, technical reports, theses or dissertations) or intangible property (e.g., inventions, copyrights or rights in data) which may result from the project

If you have a sum of money and are unsure as to whether it should be considered a grant or a gift, contact the Office of Research Services, P-221 Franklin Building, 3451 Walnut Street (215) 898-7293.

What is an endowment?

An endowment is a “permanent fund of property or money bestowed upon an institution or a person, the income of which is used to serve the specific purpose for which the gift was intended”.2 These gifts are invested, and the income derived from the investment is what is spent, not the gift itself. How endowment funds differ from gift funds is discussed in the Endowment Funds document.

2 Dictionary of Business Terms

…. Financial Training Department 4 Overview of the Gift Process

Development Officer Donor signs gift negotiates terms of agreement gift with donor

$ or pledge received

Development officer completes Gift Transmittal Form and forwards to Central Gifts Accounting and Administration (CGAA)

Does an existing fund meet the donor’s restrictions as defined in the gift NO School/center completes a agreement? New Fund Request Form (must be approved by Senior BA)

New fund is created in BEN Financials General Ledger

Trust sheet created by Investment Services and returned to originating school/center

Appropriate amount is credited to an existing fund by CGAA

…. Financial Training Department 5 Gift Agreements

Gift agreements should include the purpose and use of the fund, payment terms, investment instructions, and stewardship obligations. They provide immediate gratification for the donor, flexibility for the school, and contain required legal language. Generally endowment funds will have a formal gift agreement. Operating gifts may have a formal agreement or they may just have a letter from the donor. All original gift agreements should be submitted with a gift transmittal and new fund request (if appropriate) – see pages 8-11 for examples of these documents.

Sample Gift Agreement

The [donor name] Professorship

This Agreement entered into on [date], by and between [donor name] ("Donor") and The Trustees of the University of Pennsylvania ("University") is a gift for the benefit of [school] of the University of Pennsylvania (“School”) for the purpose of establishing the [donor name] Endowed Professorship Fund (“Fund”) at the [school].

The parties, intending to be legally bound, agree as follows:

1. The purpose of the Fund shall be to support the [donor name]Endowed Professorship (“Professorship” or “Chair”) at the [school], to be awarded to an outstanding scholar and teacher.

1.1 Appointment to the Professorship shall be in accordance with the University's standard guidelines for the appointment of chaired faculty.

1.2 Designation of the Professorship’s academic discipline will be at the discretion of the Dean of the School.

2. The Donor agrees to make a contribution of two million dollars ($2,000,000) in cash or readily marketable securities, payable over five years in accordance with the following payment schedule. Readily marketable securities shall be valued at the average of the high and low trades on the date of transfer to the University. The Donor may choose to accelerate this payment schedule, and may choose to make additional contributions.

May [year 1] $ 400,000 May [year 2] $ 400,000 May [year 3] $ 400,000 May [year 4] $ 400,000 May [year 5] $ 400,000

3. The University will invest the gift in an endowed Fund which it may pool and manage with its other endowed funds in accordance with regular University investment and management policies.

3.1 Net investment income generated from this Fund may be used, subject to application of the University's spending rule policy, in support of the chairholder.

3.2 All decisions relative to disbursements from the Fund will be made at the direction of the Dean of the School.

…. Financial Training Department 6 Gift Agreements (continued)

Sample Gift Agreement, continued

3.3 The University shall commence the search for the first chairholder when at least $1,000,000 of the total $2,000,000 commitment has been received.

4. A report on the expenditure of the Fund's income and the activities of the chairholder will be sent to the Donor annually.

5. The University shall announce the establishment of the Professorship when this agreement has been signed.

6. The University fully intends to use the net income from the Fund for the purposes outlined above. However, if any of the terms of this agreement become impracticable to carry out, the Dean of [school] shall have discretion to direct the use of the Fund to a purpose at the University as close as possible to the Donor’s original intent.

7. This gift is an irrevocable binding obligation of the Donor and his estate, upon which the University is relying. In the event the Donor should die prior to completing the contribution in accordance with Section 2, the unpaid contribution will be satisfied by a bequest in the Donor’s Will or Revocable Trust Agreement.

8. The validity and construction of the terms and conditions of this Agreement shall be governed by the laws of the Commonwealth of Pennsylvania.

9. This agreement is the final and entire agreement between the parties with respect to this gift and, except as set forth herein, there are no promises, representations, or understandings of any kind between the parties with respect to this gift.

The following parties have executed this Agreement on the date first written above.

THE TRUSTEES OF THE UNIVERSITY OF PENNSYLVANIA

______By: ______Donor Dean School University of Pennsylvania

By: ______President University of Pennsylvania

…. Financial Training Department 7 Gift Transmittal Forms

Once it has been determined that a donation is being made or pledged to Penn, the gift or pledge itself and all supporting documentation should be attached to a Gift Transmittal Form and submitted to Central Gifts Accounting and Administration (CGAA). Copies of this transaction and supporting documentation should be sent to Investment Services. In most schools and centers, the responsibility for completing gift transmittal forms rests with the development staff in that particular school or center.

A gift transmittal form is the primary source for tracking gifts that are given to the University. They provide a paper trail for auditing and tax purposes and an internal reference document for gift information. They also provide an assurance that donor’s wishes are carried out, that gifts and pledges are allocated properly and that the correct donors are properly recognized.

Gifts should not be deposited to the Cashier’s Office using BEN Deposits unless:  Cash is received  The amount received contains payment for a benefit in addition to the gift. A benefit is goods or services that the donor receives that is not part of the gift Example: If the donor writes a $200 check, $100 of which is for tickets to a dinner/lecture, the portion that is a gift is only $100. The entire $200 check should be deposited, with the benefit portion of the check being credited to a revenue (4xxx) object code, while the gift portion of the check should be credited to object code 1149.

In both of these cases, a gift transmittal must be completed, and a printout of the Deposit Summary screen from BEN Deposits should be attached to the gift transmittal.

CGAA runs a monthly gift transmittal training session. In order to register, contact Development and Alumni Relations - Human Resources.

…. Financial Training Department 8 Gift Transmittal Forms (continued)

Sample Gift Transmittal Form

Creating a New Gift Fund

…. Financial Training Department 9 If the donor’s restrictions as outlined in the gift agreement fall outside the bounds of existing gift accounts, a new fund will need to be established. The procedure to create a new gift account is as follows: 1. Complete the New Fund Request Form – see page 11 (http://www.finance.upenn.edu/comptroller/Forms/nfrf.pdf) 2. Gather all pertinent documentation that supports the need to create an account  IMPORTANT!!! Documentation supporting a donor’s intent is required to establish a permanently restricted endowment fund. In the absence of documentation an unrestricted endowment fund (Funds Functioning as Endowment) will be established 3. Obtain approval from:  Business Administrator responsible for the account  Senior Business Officer in school/center  Investment Services 4. Investment Services will assign an account number and notify the preparer, Senior Business Officer, and various central offices 5. Investment Services will provide Central Gifts Accounting and Administration (CGAA) with the account number and a copy of supporting documentation 6. The trust sheet (see sample on page 12) will be created, and a copy sent to the school/center.

Creating a New Gift Fund (continued)

…. Financial Training Department 10 Sample New Fund Request Form

…. Financial Training Department 11 Trust Sheets

Trust sheets, produced by Investment Services, are the official University documents that stipulate donor restrictions for a given fund in accordance with the conditions specified in the gift agreement. Sample Trust Sheet

You should have copies of trust sheets for ALL gift and endowment funds for which you are responsible. If you are missing trust sheets, submit a request to Trust Administration at [email protected].

…. Financial Training Department 12 Fund Attributes

When you receive the trust sheet for an account, you should verify that the gift fund was set up properly and that the fund’s attributes match the donor’s wishes. To look up fund attributes for gift or endowment funds, log in to BEN Financials and select the GL Inquiry Responsibility. Each segment in the Chart of Accounts has a list of valid values that may be used in that segment. For the FUND segment, Penn has defined a number of attributes to provide more descriptive information about a particular segment value.

 Click on COA Inquiry>COA Segment Values navigational path. Click on [Open] or double click on the path’s end.

 In the Find Value Set window, click on the LOV (List of Values) icon on the right hand side of the Segment Name

…. Financial Training Department 13 Fund Attributes (continued)

Value Set is selected

 Highlight the desired Segment Name, in this case the FUND segment  Click [OK]

 Enter a Value or Description or a portion of either using a wildcard (%)  Click on [Find]

…. Financial Training Department 14 Fund Attributes (continued)

 Tab through from the Value field or click on the ‘Values, Hierarchy, Qualifiers’ tab to open the first of the following Descriptive Flexfield boxes when the Fund is entered  Segment Qualifiers

Can quickly access the pop-up box below by clicking here first

Fund Attributes (continued)

…. Financial Training Department 15  Flexfield Segment Values  Use the scrollbar to the right to see additional information

Fund Attributes (continued)

The following fund attributes are relevant to gift accounts:

…. Financial Training Department 16 FUND ATTRIBUTE DESCRIPTION RESP ORG The four-digit ORG code for the Responsible Organization for the gift or endowment fund. This organization can see all activity related to the fund, regardless of what specific 26-digit account combination is used. FUND PURPOSE This code is assigned by Investment Services based on donor specifications about how the funds are to be spent. GRANT/GIFT ID In spite of the attribute title, this field is not used for gift or endowment funds. DATE FUND ESTABLISHED Date the university account was created RESTRICT RECLASS CODE Indicates how revenue will be reclassified (see Advanced Gifts and Endowments for detailed explanation about revenue reclassification) A = Automatic reclassification M = Manual reclassification T = Time-based reclassification DONOR RESTRICT–ORG Restrictions on what ORGs are allowed to use the fund, based on conditions in the donor gift agreement DONOR RESTRICT–PROG Restrictions on what program codes may be used in conjunction with this fund, based on conditions in the donor gift agreement DONOR RESTRICT–OBJ Restrictions on what object codes may be used in conjunction with the fund, based on conditions in the donor gift agreement INVEST REVENUE TREAT How investment revenue is treated 1 = True/Term Endowments – Income available to be spent 2 = [not used] 3 = True Endowment – Income reinvested until a specific date or dollar amount is reached 4 = Funds Functioning as Endowment (Quasi-Endowment) 5 = True Endowment – Gains reinvested INTERNAL DESIGNATION Restrictions placed on the fund by the trustees, not the donor PENN RESTRICT–PROG Restrictions on what program codes may be used in conjunction with this fund, based on conditions specified by the Trustees or other officers internal to Penn. PENN RESTRICT–ORG Restrictions on what ORGs may be used in conjunction with this fund, based on conditions specified by the Trustees or other officers internal to Penn. FUND DESCRIPTION A brief description of the fund (the fund “name”) SFS CATEGORY CODE If the gift/endowment account is for student aid, this is an internal code used by Student Financial Services to determine the category of that aid.

…. Financial Training Department 17 Note: The general ledger entries outlined below are all recorded by central offices or automated processes. Individual departments should not Receiving and Recording Gifts generate these transactions.

Recording Cash, Check, or Credit Card Gifts Cash, check, or credit card gifts are recorded in the BEN Financials General Ledger as follows: Debit (DR) Credit (CR) Object Code 11XX Object Code 4400 (Gift Revenue General) (appropriate Cash object code) -or- (if gift was previously recorded as a pledge) Object Code 1230 (Contributions Receivable)

Recording Gifts-in-Kind and Securities (Stock) Gifts Gifts of stock, securities, or other assets are recorded in the BEN Financials General Ledger as follows: Debit (DR) Credit (CR) Object Code 17XX-19XX Object Code 4400 (Gift Revenue General) (appropriate “Other Asset” object code) -or- (if gift was previously recorded as a pledge)- Object Code 1230 (Contributions Receivable)

Recording Pledges (Promises to Give) The Financial Accounting Standards Board (FASB) requires the recording of unconditional promises to give (written or oral agreements to contribute cash or other assets) as revenue.  These pledges must be recorded as revenue in the period that the promise is made, not when the gift is received. They are recorded in the BEN Financials General Ledger as follows: Debit (DR) Credit (CR) Object Code 1230 (Contributions Receivable) Object Code 4400 (Gift Revenue General) Object Code 1238 (Net Present Value Discount)

 As with any other gift, pledges are recognized in the appropriate net asset category (NAC) according to any donor-imposed restrictions  0 – unrestricted  1 – temporarily restricted  2 – permanently restricted).

Receiving and Recording Gifts (continued)

…. Financial Training Department 18 Net Present Value Net Present Value compares the value of a dollar today versus the value of that same dollar in the future after taking inflation and return into account. The advantage of this approach is that it takes the time value of money into consideration. The University is required to record pledged contributions at their Net Present Value (NPV), unless they are expected to be collected within one year, in which case they may be recognized as revenue with no discounting. Penn calculates NPV on multi-year pledges of $25,000 or more. Pledges of less than $25,000 are recorded at face value.

Example: Object Code 1230 (Contributions Receivable) $100,000 Object Code 1238 (Net Present Value ($35,000 Discount) ) Value Today $65,000

Writing Off A Pledge Since the University recognizes gift pledges in its financial statements, together with an allowance for those ultimately deemed uncollectible, it is necessary to have a procedure to write off such amounts. In order to write off pledges of $25,000 or greater, written approval from both the Vice Presdient for Development and the Senior Vice President for Finance is required. Gift pledges of less than $25,000 may be written off at the direction of the development officer. In both cases, the Office of the Treasurer and Office of the Comptroller should be notified and provided with the appropriate information necessary to effect the write-off (i.e., donor name, pledge amount, reason for write-off, etc.). Write-offs are recorded in the BEN Financials General Ledger as follows:

Debit (DR) Credit (CR) Object Code 1239 (Contributions Receivable, Object Code 1230 (Contributions Receivable)/ Allowance for Uncollectible) Object Code 1238 (Net Present Value Discount)

Accessing Gift Information in BEN Financials

…. Financial Training Department 19 Central Gifts Accounting and Administration maintains a gift system which contains information relating to gifts received by the University. This system tracks pledges and produces receipts for donors. Donor names and other gift information are fed from this system into the BEN General Ledger and recorded along with the accounting entry for all gift transactions. To look up information regarding a gift, log in to BEN Financials and select the GL Inquiry Responsibility.

 Click on Inquiry> Account navigational path. Click on [Open] or double click on the path’s end.

Accessing Gift Information in BEN Financials (continued)

 Enter the range of Accounting Periods to include in your query:

…. Financial Training Department 20  Leave the Primary Balance Type tab set at the default, Actual

Click in this grey field to bring up the Find Accounts Dialog Box.

 Click in the grey Accounts box in order to bring up the Find Accounts dialog box

 Enter the FUND number and the appropriate gift object code o 4400 (Gift Revenue) o 1230 (Pledges)

 Click [OK]

…. Financial Training Department 21  The system will return the full 26-digit account number associated with any gifts that were recorded against the object code that you entered:

 Place your cursor on the appropriate line (the bright blue box indicates where your cursor is located)  Click [Show Journal Details]

…. Financial Training Department 22  The donor name will appear in the “Line Description” field

Donor Name

Note feeder name “GIFTCASH” – if we had searched on object code Horizontal 1230, the feeder would say Scrollbar “GIFTPLDG” indicating that it was a pledge and not an actual gift.

 Use the horizontal scrollbar to scroll to the right in order to retrieve the journal line number from the “Line” field  Write down or copy the journal line number

Journal Line Number

…. Financial Training Department 23  Click [Show Full Journal] to show the entire gift journal

Donor Names

 Position cursor on Line 1; click on View > Find

 Enter the line number of the journal in the Line Numbers From and To fields

…. Financial Training Department 24  Click on [Find] to see the results of your query within the line block

Donor Name

Context Box  Tab to or click in the [] field to get the journal Context Box information, which will contain additional information about the gift that was recorded in BEN Financials by the gift system:

Revenue Reclassification

Each gift or endowment fund has assigned to it a Restricted Income Reclass Code (see the RESTRICT RECLASS CODE Fund Attribute on page 17). This code determines how revenue is reclassified among the

…. Financial Training Department 25 various net asset classes when donor’s restrictions are met. The three types of reclassifications that can occur in a gift fund are:

1. Automatic Reclassification Restrictions which the University normally meets in the due course of business: restricted income is reclassified as soon as the income is earned.

For gift (6xxxxx) funds, at the end of the month in which the gift was received, the full amount of the gift is reclassified from NAC 1 to NAC 0. In NAC 1 the object code in which the gift was recorded is debited, and in NAC 0, object code 4811 is credited. Overhead is applied at this time (a debit to object code 4402).

2. Manual Reclassification Restrictions which are so specific that the University only recognizes that the restriction has been met when valid expenditures are directly incurred against the fund: restricted income is reclassified only when expenditures that meet the restriction criteria are made and only up to the amount of the expenditure and associated overhead

At the end of the month, if there are any expenses in NAC 0, the system transfers income and overhead from NAC 1 to NAC 0 to balance (“zero out”) this expense. Unless the fund is overspent, or funds are spent from an inappropriate account combination, NAC 0 activity should net to zero.

3. Time-Based Reclassification Restrictions which are time-based, i.e., the restriction is met by the passage of time or the occurrence of an event: restricted income is reclassified when the time has elapsed or the event has occurred.

Budgeting Gift Funds

Budgeting is necessary for new gift funds or gift funds that have surplus cash balances and will have expenses or other activity occurring in the unrestricted net asset class. Budgets can only be created in

…. Financial Training Department 26 NAC 0. Budgets that are not created and uploaded in the original Pillar budget load at the beginning of the fiscal year must be created in BEN Financials through the Budget Journal Entry responsibility.

The total available resources in gift funds basically consist of two components: carry-forward balance and anticipated current income.

Carry-forward Gift (6xxxxx) funds allow surplus or deficit balances to be “carried forward” to the next fiscal year. New gift funds will not have any balance from prior years, so this situation only needs to be taken into consideration when budgeting existing gift funds. Carry-forward balances appear on BEN Financials reports under the label “Prior Year (Surplus)/Deficit”. As the label indicates, surplus balances appear in parentheses, because they are negative, or credit, balances. Deficits appear as a positive number. If you have a deficit balance, you will not be able to budget the full amount of expected current income, because you will need to reserve an amount sufficient to cover the deficit carry-forward balance. Similarly, if you have a surplus balance, you can budget additional money over and above what you anticipate receiving in current-year income, up to the amount of the surplus balance.

Important: If you are submitting a budget for the next fiscal year prior to the end of the current fiscal year, and you estimate the amount of carry-forward funds available, you will need to adjust the budget next year if there are any differences between the amount you estimated and the actual balance.

Several BEN Financials reports exist which give you information on “Prior Year (Surplus)/Deficit” (carry- forward) balances. Those are described more fully in the report section of this document, but include the 10X.ORG, 205.SCH, and 300.BUD reports.

Anticipated Current Income The more complex component of determining what is available to be budgeted in gift funds is determining what the anticipated level of income is in the fund for the current fiscal year. Both existing and new gift and endowment funds may receive some amount of income during the current fiscal year.

Budgeting Gift and Endowment Funds (continued) Anticipated Current Income, continued

…. Financial Training Department 27 For operating gift funds (6xxxxx funds), this figure is the amount of gifts you expect to receive in the current year, less any overhead charges. The University generally charges an administrative fee of 20% on all gifts received by the University – this charge is called overhead. In certain rare instances funds may be exempted from overhead charges; in most cases those involve gifts funding fellowships or scholarships for students. Financial Policy #1606 states that waiver of the overhead charge can be granted only by the dean or director of the responsibility center with the concurrence of the Senior Vice President for Finance. All of this overhead charge is returned to schools/centers to allocate back to academic programs within their responsibility center.

Overhead Example: You are anticipating receiving $10,000 in gifts during the current fiscal year, all of which will be deposited into your department’s gift fund. The amount you could spend from these gifts is $10,000 - $2,000 (20% overhead), or $8,000. You would budget the $10,000 gift in object code 4400 if the gift goes directly to NAC 0 (annual giving). If the gift is recorded in NAC 1, only NAC 1 will see activity in object code 4400 – this activity will be reclassified to object code 4811 in NAC 0, so 4811 should be budgeted for $10,000. $2,000 overhead is budgeted in object code 4402, and $8,000 may be budgeted in whatever current expense (5xxx) object codes are appropriate to the purpose of the gift.

When budgeting gift and endowment accounts, it is important to remember that the University is required to record pledges to be received as well as actual gifts received. While actual gifts and pledges will both appear as part of the total available resources in your funds, it is generally wise not to budget a gift until it is actually received. In certain circumstances, where expectations of the gift are extremely high and certain expenses must be incurred immediately, you may budget pledges, but be aware that by doing so you are subjecting the University to risk – if the gift is subsequently not received, other sources of unrestricted money will need to be found to cover any expenses charged against that gift or endowment fund.

Monitoring Income and Expense Activity

Once you have established a budget for your gift or endowment fund, you need to monitor it on a regular basis to make sure that revenue and expense entries that occur in the fund are appropriate and follow all applicable University policies and procedures. Several BEN Financials reports exist to assist with this process, and will be discussed in the next section of this document. Closing a Gift Fund

…. Financial Training Department 28 At some point, unless a gift fund receives recurring donations, the gift will eventually be spent. At this point the gift fund should be closed. This should be done in consultation with the senior business administrator in your school or center. In order to close out a gift fund, the balance in the fund must be zero. Once this is accomplished, contact the senior business administrator in your school or center, and have them ask Trust Administration to close the gift fund. This request may be submitted via email at [email protected].

Appendix A: Common Acronyms and Abbreviations

…. Financial Training Department 29 AIF Associated Investments Fund BBA Budget Balance Available BEN Business Enterprise Network CGAA Central Gifts Accounting and Administration CNAC Center Net Asset Class – first segment of a BEN account number COA Chart of Accounts CREF Center Reference – seventh (last) segment of a BEN account number FASB Financial Accounting Standards Board FFE Funds Functioning as Endowment; a “Quasi-Endowment” FY Fiscal Year FYTD Fiscal Year to Date GL General Ledger NAC Net Asset Class OH Overhead OBJ Object Code – fifth segment of a BEN account number; defines what type of transaction is occurring ORG Organization – second segment of a BEN account number; “Department” PROG Program Code – sixth segment of a BEN account number RESP ORG Responsible Organization TIF Temporary Investments Fund

Appendix B: Glossary of Terms

Account Refers to any 26-digit chart of account combination that can be used with a given fund

Carry-forward Surplus or deficit balance from a prior fiscal year

Encumbrance Money set aside in the budget for a transaction that has not yet occurred

Endowment Donor has stipulated as a condition of the gift instrument that the principal is to be maintained inviolate and in perpetuity and invested for the purpose of producing present and future income

…. Financial Training Department 30 Fund Refers to the six-digit BEN Financials FUND number

Gift Voluntary transfer of things of value where the University makes no commitment of resources or services in return for gifts, other than agreeing to put the gift to use as the donor designates

Grant A transfer which is designed to support a specific project which involves a specific commitment by the University and may require formal reporting, disposition of property or the return of unexpended monies.

Overhead A charge for administrative costs

Pillar University budget and resource planning system

…. Financial Training Department 31 Revision History

Date Page Number(s) Topic

April 14, 2004 2 & 18 Pg 2: Added Trust Administration contact information. Pg 19: Corrected OBJC 1238 Net Present Discount from DB to CR column

December 18, 2003 All New User Guide

…. Financial Training Department 32