Endowment Payout Calculation and Distribution

Q:    When is endowment payout distributed?

A:    Endowment payout for the whole fiscal year is distributed to regular university operating departments in the July accounting period, at the end of the calendar month. In rare cases, noted below, payout will change during the fiscal year after this initial July distribution.

Q:    Why does my endowment payout sometimes change during the fiscal year?

A:    Endowment payout normally does not change after the July posting. However, in cases where new gifts are added to endowment principal after the fiscal year starts (or, in rare cases, principal is liquidated), endowment payout is adjusted on a quarterly basis to reflect the principal change.  See the Endowment spending example for calculations and timing for funds that experience unit changes during the fiscal year.

Principal changes:

  • in July through September (Q1) are reflected in payout changes posted in the October accounting period;
  • in October through December (Q2) are reflected in payout changes posted in the January accounting period;
  • in January through March (Q3) are reflected in payout changes posted in the April accounting period; and
  • in April through June (Q4) are reflected in payout changes posted in the June accounting period, during the third close.

Payout also may change in cases where an approved change in the distribution chartstrings or amounts has occurred. The Budget Office will be in touch with the department manager about any chartstring or distribution rule changes that your office or the Provost’s Office directs.

Q:    How can I see endowment payout and balances on my operating reports?

A:    Endowment payout is visible on a number of standard Prime Financials reports:

  • Fund restriction/designation by initial department payout ‐‐ by source fund and receiving chartstring. This report shows the current annual payout from a selected endowment fund(s), as well as restrictions and current principal values.
  • Spendable Balance—in the “revenue/expense budget” column when a receiving endowment fund is selected.
  • Revenue and Expense ‐‐ in the “Investment Income” account category; or on Account “4471‐ Invest Inc‐Distr‐Primary Pool” when running the “account details” version of the report.
  • Monthly Actuals ‐‐ on Account “4471‐Invest Inc‐Distr‐Primary Pool”. This view allows you to see endowment payout over three fiscal years for the selected departments/funds.
  • Ledger Detail ‐‐ on Account “4471‐Invest Inc‐Distr‐Primary Pool” for as many years as the viewer selects.

Q:    How can I see the book and market value for endowments that my department manages?

A:    In Prime Financials, run the “Fund restriction/designation by initial department payout” report for the fund(s) in question. The right‐hand columns show the latest principal values, and allow the viewer to drill into prior‐period book and market value history.

Q:    My endowment’s payout did not change by the same rate as the reported endowment performance for the year. Why not?

A:    Endowment fund payout is governed by the payout per unit rate approved by the Trustees each year, not by the change in endowment market value or reported performance. In normal years when no special endowment payout change is announced, payout per unit changes from year‐to‐ year by the standard Payout Inflator Assumption, currently a 4% per year increase.

Q:    What is the IAC?

A:    The “IAC” is the Infrastructure and Administrative Charge. It will help offset some of the central costs that the University incurs to support endowed activities, such as building maintenance, administrative services, information systems, and financial systems. This is a common cost accounting practice that was reviewed and approved by our Office of General Counsel. The Princeton University Board of Trustees approved the establishment of the Infrastructure and Administrative Charge at its January 2011 meeting. Review the full Infrastructure and Administrative Charge Policy.

Q:    How do you charge the IAC?

A:    The IAC is deducted centrally before payout is distributed to departments for spending. Thus, you see only the net spending distribution in your departmental endowment chartstrings.

Q:    What is the IAC rate?

A:    The current IAC rate is 8% of gross annual endowment payout. See the IAC Policy for an illustrative calculation of the IAC and net endowment payout.

Q:    What happens if I withdraw principal from a fund during the fiscal year?

A:    The payout posted at the beginning of the fiscal year is based on the principal balance at that time. However, as noted above, payout will be adjusted downward following any quarter in which principal is liquidated. Any liquidation of principal and its effect on payout will be discussed by the Budget Office and affected departments, and is exceedingly rare.

Q:    Payout from an endowment fund flows to a department and/or program that I want to change, so that I do not have to re‐assign the balance to another string each year. How do I make that permanent change?

A:    Contact the Operating Budget Director to request a change in the “receiving chartstring” for the endowment in question.

Q:    If I have any other questions about endowment‐related matters, who can I call?

A:    Please contact Steve Semenuk, Operating Budget Director, in the Office of Finance and Treasury: [email protected] or (609) 258‐5523.