Written by Brooke Labashousky.
Foundations Accounting and Investments (FAI) requests that colleges and units review unused endowment spending balances and return excess funds within the next year to the endowment principal to be invested in the long-term pool. This process can happen at any point within the year.
FAI also recommends reaching out to Michelle Phillips or Christopher Lemons with any questions or concerns regarding fund spending purpose and how individual funds can be spent. Often, misinterpretation of purpose can lead to unused spending balances.
The balances in endowment income (spending) projects roll forward from year-to-year and are known as unused endowment spending budgets. Responsible persons should regularly review unused endowment spending balances to determine if there are excess funds that can be returned to the endowment principal. FAI recommends returning unused budgets within the next year to the endowment principal for the following reasons:
Unused endowment spending budgets left in an income project:
- Roll over from year-to-year.
- Are not invested in the long-term pool.
- Can potentially create donor relation issues if not spent.
Returned unused endowment spending budgets:
- Will be reinvested in the long-term pool.
- Will increase the spending reserves and market value of the endowment.
- Will begin participating in investment earnings of the fund.
- Can signal to donors that endowment funds are being appropriately stewarded, even if funds are not currently needed/being spent.
- May be requested as a spending exception if funds are needed at a future date.
The unused balances in an endowment income project can be obtained by running a Fund Report for a foundation or the University Endowment Fund. The FAI Fund Type for endowment income projects is “F0.” The balances in these projects are the “unused spending” balances.
Please be thoughtful of upcoming budget needs during this process. If funds will reasonably be required to meet needs within the next year, we recommend they remain in the spending project.