Endowment spending formula and income available to spend
How to read a fund’s balance information. Click to view full size screenshots with tips.
The Foundation will calculate income available to spend as 4.5 percent of the average value of the pooled endowment funds for the previous 16 quarters (4 years). Each individual fund owns shares in the pooled endowment. The distribution remains relatively stable because it is based on a 4-year history.
- In rising markets, the available income will be less than 4.5 percent of current value because current value is more than the 16-quarter average.
- In falling markets, the available income will be more than 4.5 percent of current market value because current value is less than the 16-quarter average.
You can reinvest income available to spend if you don’t expect to spend it, but it will become part of the fund principal and subject to market fluctuations. You should not reinvest if you plan to spend the income within three years.
You may be able to spend dollars out of either your endowment “32” accounts or expendable “12” accounts.
“12” accounts
The balance in your “12” funds may be made up of gifts and other deposits. The fund balance earns income when the fund balance, not including new gifts, is more than $20,000 at the end of a month. Balances also may include special deposits, which include stock proceeds, refunds or dividends.
The amount available to spend from a stand alone “12” account is listed as cash balance in Campus Access. If an endowment “32” fund is linked to the “12” account, the cash balance indicate funds that are being held until they are transferred to the endowment at the end of the quarter. In that case, the cash balance in the “12” should not be spent.
“32” accounts
How is an endowment’s income available to spend different than the endowment principal?
Imagine each endowment fund is a bucket, and the assets in that bucket are invested.
The endowed principal stays in the bucket while income available to spend is calculated according to the spending plan and removed quarterly to become spendable income.
The Foundation uses a spending plan to determine the amount that will be allocated to each endowment’s available balance for the next quarter. The spending plan is calculated as a fixed percentage of the endowment pool’s moving 16-quarter, average market value. Each “32” account has purchased units in the pool and receives spendable income based on those units.
By using a 16-quarter average value, the spending plan provides more predictable income that is not subject to short-term fluctuations in the economic markets.
The amount available to spend from a “32” account is listed as “Income Available to Spend” in Campus Access. The application includes a FAQ section and Help Desk to answer specific questions.