ENDOWMENT FUND GUIDELINES AND INVESTMENT POLICY
The purpose of these guidelines is to provide a basis for the Mid-Plains United Way to properly discharge its responsibilities with respect to the maintenance and enhancement of the Endowment Fund, and to ensure donors of careful stewardship and prudent investment of endowment gifts and bequests.
II. Purpose of Endowment Fund
The Endowment Fund enhances traditional Mid-Plains United Way fund raising methods by offering donors new gift opportunities. As service to donors who wish to perpetuate their support of this community and its needs, the Mid-Plains United Way will serve as a custodian of endowment gifts, ensuring that each donor’s individual philanthropic goals are realized under the careful guidance of an experienced steward.
To achieve this purpose, Mid-Plains United Way provides flexible fund arrangements. Donors may give an unrestricted gift, allowing Mid-Plains United Way volunteers to allocate distributable income to those programs that meet identified community priorities. Donors may also designate the annual income from their endowment to a particular health or human-service area.
The Endowment Fund is designed to be a permanent source of supplemental support, in addition to the annual Mid-Plains United Way campaign. As public demand for health and human service programs steadily increases, the limitations on government funding make it imperative that the voluntary sector plays a greater role in delivery of essential social services. To effectively respond to growing community needs, Mid-Plains United Way must increase its resources and funding flexibility.
The necessary additional funding and flexibility can be found in the Endowment Fund which will generate dependable annual income for new or additional services and programs. The endowment will allow United Way to maintain its leadership position in community problem solving, and its ability to carry out its mission into the future.
Ill. How the Endowment Fund Will Be Used
The Mid-Plains United Way conducts community needs assessments. This is accomplished with the input of volunteers, human-service providers, educators, business and civic leaders, and service recipients.
These assessments identify not only existing needs, but also emerging needs, which could grow to crisis proportions. Armed with this information, local human service providers are able to develop the most appropriate services and programs to help solve these problems before they reach crisis levels.
Mid-Plains United Way’s role in this process is ongoing:
1. Identify community needs;
2. Making specific recommendations for community action;
3. Mid-Plains United Way is uniquely positioned for coordinating efforts and evaluating program effectiveness and efficiency; and
4. Ensuring that the appropriate programs and services become a reality by providing leadership and expertise in program development and evaluation, and coordination among all local health and human service providers, both public and private.
The Endowment Fund will be an important additional source of funds for such program development.
IV. Types of Gifts within the Endowment Fund
The Endowment Fund is a vehicle for accumulating and managing permanent gifts to Mid-Plains United Way. It is Mid-Plains United Way’s goal to serve donors by providing flexible fund arrangements that reflect the individual donor’s interests, balanced with the community’s need for an unrestricted Endowment Fund. Thus, Mid-Plains United Way offers two flexible gift arrangements:
A. The General Endowment Fund
This is a fund for unrestricted endowment gifts. The Mid-Plains United Way Board of Trustees will allocate income from these gifts. Flexibility makes these gifts most valuable to the community.
B. Designated Funds
Alternatively, donors may establish a Designated Endowment gift and direct the use of income from their endowment to health and human service areas or specific programs of special concern to them:
C. Endowed gifts to the Annual United Way Campaign
Donors may perpetuate their annual support of Mid-Plains United Way.
D. Specific Area of Health and Human Services
Separate endowment funds may be established and the income designated for use in specific areas of health and human service needs, such as the welfare of children or the elderly, hunger and homelessness, youth issues, health, family and neighboring services.
E. Designations to Specific Agencies
Donors may choose to direct income from their endowment gift to one or more qualifying health or human service agencies that are of special concern and interest to them.
V. Process for Allocating Endowment Fund Income
All future one-time contributions, which are designated by the Board of Trustees, unless directed by the donor, should also be placed in the permanently restricted fund.
The investment income from the permanently restricted fund should be allocated in the following manner:
A. 1% plus the published rate of annual inflation will be reinvested as permanently restricted funds.
B. The balance of the earned and realized investment income will be available for distribution if deemed prudent by the Board of Trustees. If the balance, during the Fiscal year is not distributed the amount would be reinvested but not permanently restricted. It would be available for distribution in future periods at the discretion of the Board of Trustees.
C. 3% of the net asset value will generally be the amount allocated for annual Venture Grants
1. At the December Board meeting the Finance Committee will submit a report to the Board of Trustees using 3% of the net asset value as of November 30 as the amount available for Venture Grants.
2. Following the guidelines listed in the Venture Grant Policy, the Allocation Committee will review all grant requests and distribute the available funds.
VI. Accountability and Responsibility
The Mid-Plains United Way Board of Trustees established specific investment policies regarding the Endowment Fund. The Finance Committee of the Board shall prepare a detailed annual status report on the Endowment Fund including: the amount of distributable funds, the specific guidelines employed in the management of Endowment Fund assets: and the prior year’s results compared to goals.
VII. Acceptance Policy
Gifts of cash and marketable securities will be retained so long as retention of such gifts is in accordance with Endowment Fund investment goals and policy. All outright gifts and gift arrangements involving assets other than cash and marketable securities will be evaluated on a case-by-case basis for acceptance and retention.
When a gift to the Endowment Fund involves a donor originated restriction as to use, when there is a liability attached to a gift, or when not readily marketable property is involved, acceptance of the gift requires approval as follows:
Mid-Plains United Way may accept any Endowment Fund gift, that involves donor-originated conditions or restrictions, unless the conditions or restrictions are illegal in intent or purpose, violate the United Way charter, or are inappropriate to the purpose and mission of Mid-Plains United Way and its Endowment Fund.
All restrictions shall be in writing, and in the form of an “Endowment Agreement” between Mid-Plains United Way and the donor. The donor’s intent and purpose in the restriction shall be carried out according to the written agreement. Whenever a restriction becomes impractical, impossible, or inconsistent with the primary purpose of the Mid-Plains Untied Way, the restriction on the use will be modified so as to continue to implement the original intent of the donor. No change will be made which will affect the deductibility of the gift under the Internal Revenue Code and Regulations. In any conflict, the Internal Revenue Code and Regulations dictate.
Each written agreement shall include a clause allowing amendment to any donor originated restriction that is no longer practical or no longer in compliance with the mission and purpose of the Mid-Plains United Way such as: “The parties recognize the perpetual nature of this agreement and agree to amend as necessary in compliance with the mission of Mid-Plains United Way.”
VIII. Investment Philosophy
The Mid-Plains United Way acts as the steward of Endowment Fund assets for the donors and the community. The investment philosophy of the Mid- Plains United Way Endowment Fund is based upon the Total Return Concept, and because of the perpetual nature of the Endowment Fund, the time horizon is very long. It is recognized that, although distributions from the endowment may be necessary in some years to meet current operating needs, enough should be reinvested so that over the longer period, the purchasing power of the endowment will be preserved against inflation. Future actual growth in endowment principal must come from the increase in market value of its equities combined with the addition of new gifts.
Endowment Fund assets should be invested in fixed income securities such as bonds issued by the United States and divisions thereof, equity and debt securities of publicly held businesses — those companies whose shares of stock trade on the major national stock exchanges including the over the counter (OTC) market, and in money markets. The Finance Committee may consider it prudent to make investments in other investment vehicles which are appropriate and acceptable for an endowment fund.
IX. Investment Goals
Based on the stated philosophy, the goals of the investment policy shall be:
1. To provide annual distributable funds based on 3% of the net asset value as of November 30 each year.
2. To provide sufficient income to achieve endowment purposes, while preserving the endowment principal through prudent investments.
3. To provide growth in the Endowment Fund through the addition of new gifts, and the retention of income in excess of distributions.
4. To maintain a flexible investment policy to achieve these goals and
meet the future needs of Mid-Plains United Way.
X. Investment Policy
The investment policy for the Mid-Plains United Way Endowment Fund reflects the directives of the Finance Committee to those given the responsibility for investment management.
Return. The fund is to provide a total return over a period of time consistent with agreed levels of risk. Long-term stability of total return is important and desirable.
Risk Tolerance. The need for a total return that is relatively stable will necessarily limit the risk tolerance of the Endowment Fund. Most specifically, the Fund must be concerned with the continuity of the total return on both an absolute and inflation-adjusted basis.
Liquidity The liquidity requirement will be such spending rate as is established annually by the Finance Committee and such liquidity requirements as may be communicated to the investment managers.
Time Horizon The total return objective is stated in terms of a three to five year
Regulatory Requirement. Any legal restrictions relating to the Endowment Fund will be communicated to those responsible for the investment management for their compliance. In addition, the prudent man principle will apply within the portfolio context.
Tax Considerations The Endowment Fund is not subject to income and capital gains tax considerations. Other tax consideration, if applicable, will be communicated to those responsible for investment management.
Unique Needs and Considerations At all times, the Endowment Fund will be aware of its social responsibilities regarding investments. Certain investments may be deemed inappropriate for the Endowment Fund in cases of social or fiduciary concern. Any such investments will be communicated in writing to the investment managers.
The management of the Endowment Fund and any part thereof will be monitored on a quarterly basis and reviewed by the Finance Committee on a quarterly basis to ensure compliance with the investment policies and guidelines. The Finance Committee shall be responsible for presenting to the Board annually a comprehensive performance report on the total endowment. Investment managers may also be requested to report on portfolio performance at that time.
Performance will be judged over a three to five year time horizon established for the portfolio. The primary performance measure will be the total return—defined as dividends and interest earnings plus any changes in the market value—consistent with agreed on levels of risk and income needs. The total Endowment Fund will strive for total returns that, overtime, are better than an appropriate market benchmark to be determined by the Finance Committee.
Policy first approved on November 16, 2006
Revised August 24, 2011