Accounting Guidelines: Restricted Expendable Gifts and Endowment Funds

Departmentally Managed Expendable (Term) Gift and Endowment Funds

The most common accounting practice for restricted endowment gifts (E Funds) and restricted expendable (term) gifts (B Funds) is to use a unique fund to record activity. This might include noting the incoming gift, its transfer or assignment, and expenses. Your choice of a journal will depend in large part on purpose restrictions. 

Restrictions Accounting Practice
Gifts or Endowments with Very Specific Purpose Restrictions These are administered through a unique fund, and do not allow the use of Transfer Journals.
Gifts or Endowments with Less Specific Purpose Restrictions These may be administered through a pooled fund and / or may be eligible for Transfer Journals (for amounts less than $2500) under certain circumstances.
Gifts or Endowments that Require a High Level of Donor Reporting or Stewardship These are treated like those with very specific purpose restrictions. The unique-fund / no-Transfer-Journal principle is used to facilitate ease of donor reporting.

Learn more about Prime Journals, and find helpful journal decision trees.

Restriction Language Guidelines

The guidelines below include examples of restriction language that typically appear in gift instruments. This will help you determine whether purpose restrictions are so specific as to rule out the use of Transfer Journals.

I. Endowment Income and Term Gifts Restricted to a Very Specific Departmental Purpose, or Which Require A High Level of Donor Reporting or Stewardship

Status: No Fund Transfers and Single Fund Administration

When a donor makes a contribution to the University with the stipulation that the funds must be used to support a very specific purpose within a particular department, all qualifying expenses are recorded directly to the unique fund where the endowment income or gift is deposited. Transfer Journals may not be used on these funds, and they are flagged as being “Restricted-Ineligible for Transfer.”

Type of Fund Example
Named Travel / Field Study Funds Charles Smith '99 Chemical Engineering Student Travel Fund
Named Seminar Funds Charles Smith '99 Memorial Seminar Fund
Named Senior Thesis Funds Charles Smith '99 Molecular Biology Senior Thesis Research Fund
Named Prize / Award Funds Charles Smith ’99 Senior Thesis Prize in German
Named Annual Lecture Funds Charles Smith ’99 Lecture Series Fund
Named Art / Book Collections Charles Smith ’99 Stereo optics Slide Collection Fund
Funds for Maintenance of Specific Equipment / Property Charles Smith ’99 Memorial Bench Fund

Spending Authority

All transactions against restricted funds must be authorized by an individual in the spending department who is familiar with the restrictions on the gift or endowment income stream, and who has appropriate authority. The Fund Restriction / Designation by Assigned Chartstring Balance Report should be reviewed to facilitate spending decisions. 

Each department head is responsible for the implementation of this control.

Accounting Guidelines for Very Specific Purpose-Restricted Gifts or Endowment Income

  1. Qualified expenses must be charged directly to the applicable restricted fund, using appropriate expense account(s).

  2. Transfer Journals to or from the fund are not allowable.

  3. A Cost Transfer / Correction Journal can be used to correct an expense that was erroneously recorded in the fund or to move expenses to another qualifying fund.

II. Endowment Income and Expendable Gifts Restricted to a Less Specific Purpose

Status: Fund Transfer Journals and Pooled Fund Administration Allowed

Many gifts and endowments have broad or general purpose restrictions that permit them to be used to support many activities in a department or area. Below are examples of more general restriction language. Transfer Journals can be used for amounts less than $2,500, although Assignment Journals are still the preferred method by which to allocate a spendable balance. 

  • “to benefit the department of [subject] at Princeton University ”

  • “the income to support faculty research in the department of [subject]”

  • “the income to support faculty research in the social sciences [subject]”

  • “the income to support the [named] seminar in [subject]”

  • “the income to support seminars in the humanities”

Spending Authority

Transfer Journals should be approved by an individual in the spending department who is familiar with the restrictions on the fund. As noted above, Transfer Journals are reviewed and approved by Funds Management.

Accounting Guidelines for Less Purpose-Restricted Gifts or Endowment Income

  1. Qualified expenses for moderately restricted funds should be charged directly to the applicable restricted fund.

  2. Transfer Journals for less than $2,500 to or from this fund may occur if the restrictions on the source fund permit. The fund that receives the monies must not restrict the pooling of revenues. For example, if the income being transferred is restricted to the support of faculty research, the income cannot be transferred to a fund that records both faculty and student research; the student research-restricted money should be kept separate from the faculty research-restricted money.

  3. A Cost Transfer / Correction Journal can be used to correct an expense that was erroneously recorded in the fund or to move expenses to another qualifying fund.

III. When to Use Cost Transfer/Correction Journals

Expenses should be reclassed when a distinct, qualifying expense has already been posted to another fund and needs to be moved. As with any expense correction, move the expense using the same expense account.

For example, if a student’s research travel was initially booked to a fund in the department, but you’ve now identified an endowed senior thesis research fund that can cover this expense, debit the travel expense code in the endowment-senior thesis research fund and credit (remove) the expense from the departmental fund using the travel expense account originally used to post the expense.

Note: Labor Accounting (LA) expenses need to be corrected via the LA System. They cannot be re-classed using Prime Journals.

There may be circumstances when a Standard Journal may be used to reclass expenses. Learn more about Prime Journals, and find helpful journal decision trees.

IV. Fund Stewardship and Management

Department managers are responsible for ensuring that compliance requirements are being met at the individual fund level. Review our complete guidelines related to receiving, reviewing, and expending funds; assessing balances; and addressing any issues. 

Financial Planning Guidelines

Establishing a financial plan within your department ensures that received funds under your control are properly spent, stewarded, and administered. Financial planning involves projecting annual expenditures and identifying those transactions and expenses which can and should be charged to the most narrowly restricted funds, ensuring their proper use. 

  • Use Restricted Funds First: It is the University's expectation that, when possible, monies in the most restrictive funds be used prior to those in less restrictive funds.

  • Establish a Plan Annually: At a minimum, you should establish a financial plan at the beginning of each fiscal year. This plan should be discussed with the chair / director of your department. 

  • Revisit as Needed: The financial plan should be re-evaluated as funding changes occur throughout the year.