Accounting Guidelines: Restricted Expendable Gifts and Endowment Funds

LAST UPDATED: August 28, 2018

Departmentally Managed Expendable Gift & Endowment Funds


The most common accounting practice for restricted endowment (E Funds) and restricted expendable gifts (B Funds) is to use a unique Fund for recording activity, such as the incoming gift, transfer or assignments, and expenses. Gifts or endowments with very specific purpose restrictions are administered through a unique Fund, and do not allow Transfer Journals. By contrast, gifts or endowments with less specific purpose restrictions may be administered through a pooled Fund and/or may be eligible for Transfer Journals (less than $2500) under certain circumstances.    

Gifts or endowments that require a high level of donor reporting or stewardship are treated like those with very specific purpose restrictions. In these cases, the unique   Fund/no Transfer Journal principal is used to facilitate easier reporting to the donor.

Assignment Journals are used to move spendable balance (allocate revenues) to a different chartstring, without changing the source Fund.   Assignment Journals are preferred over Transfer Journals as it keeps the Fund in-tact allowing for easy tracking and reporting.   It has the added benefit of giving receiving areas visibility to Fund restrictions via the Fund Restriction/Designation by Assigned Chartstring Balance Report.   Maintaining the Fund helps to ensure expendable gift and endowed funds are spent in compliance with donor restrictions.   Since the Fund does not change, Assignment Journals do not require secondary approval by F&T.

Transfer Journals are used to move spendable balance (allocate revenues) to a different chartstring with a change to the source Fund.   Transfer Journals are generally only allowed for moving small balances (under $2500) where the administrative burden of tracking multiple chartstrings outweighs the benefit of keeping a Fund in-tact.   A Transfer Journal may not be allowed regardless of dollar amount based on donor or University restrictions.   A Transfer Journal requires secondary approval by F&T Funds Management.   The Fund Restriction/Designation by Assigned Chartstring Balance Report should be reviewed (for sending and receiving Funds) prior to initiating a Transfer Journal to determine allowability.

Allocating monies to another chartstring – Prime Journal Decision Tree:   see Choose the Right Journal for more information : .

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The guidelines below provide examples of restriction language that typically appears in gift instruments to help the reader determine whether purpose restrictions are so specific as to rule out Transfer Journals. The first section gives examples and guidelines for those funds which have very specific purpose restrictions and the second section provides examples and accounting guidelines for funds that have less specific purpose restrictions.

I. Endowment Income and Term Gifts Restricted to a Very Specific Purpose Within a Given Department, or Which Require A High Level of Donor Reporting or Stewardship - 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 are not allowable on these Funds, and they are flagged as being “Restricted-Ineligible for Transfer”.   Examples include:

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 pieces of 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 and used to facilitate spending decisions. Each department head is responsible for the implementation of this control within his/her area.

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. Cost Transfer/Correction Journal   can be used to : a) to correct an expense that was erroneously recorded in the Fund or b) to move expenses to another qualifying   Fund.

II. Endowment Income and Expendable Gifts Restricted to a Less Specific Purpose - 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 are allowable if less than $2,500, although Assignment Journals would still be the preferred method of allocating spendable balance. (see decision tree above)

“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 also reviewed and approved by F&T 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 less than $2500 to or from this Fund may occur if the restrictions on the source fund permit,. The Fund that is receiving the monies also must not have other restrictions that do not allow for pooling of revenues.. For example, if the income being transferred is restricted to 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. Cost Transfer/Correction Journal   can be used to : a) to correct an expense that was erroneously recorded in the Fund or b) 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. The expense should simply be moved as would any expense correction by moving 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   Labor Accounting expenses need to be corrected via the LA System, they cannot be reclassed using Prime Journals.

There may be circumstances when a Standard Journal may be used to reclass expenses. Please see the following decision tree and/or review Choose the Right Journal website for more information:

IV. Fund Stewardship and Management - An Overview

It is the responsibility of individual department managers to ensure compliance requirements are being met at the individual fund level.   If a department assigns monies from a restricted endowment or a gift Fund to another department, the following best practices should be followed.

Receive Funds and Review Restrictions

  • Review reports (Spendable Balance) on a regular basis. If/when any new Funds are assigned, use the Fund Restriction/Designation by Chartstring Report to review specific Endowment (E) and Expendable Gift (B) Fund restrictions.
  • Since we rely on the Departments for stewardship of restricted funds, this responsibility and accountability should be shared across Department staff.
  • Knowledge of the balances and restrictions on your department’s Funds will help you plan ahead.

Expend Funds

  • All buyers should know restrictions and availability. It is best to charge an expense to the right place the first time.
  • When an expense meets multiple funds’ restrictions, spend the most restricted monies first.   This will help ensure the less restricted money is available for a variety of expenses at a later date.
  • When restrictions are met, be sure to spend your Endowment (E) & Expendable Gift (B) Fund money first.   This will help ensure Advancement can report back that donor money is needed and being utilized.
  • Post appropriate expenses directly to the Fund.  

Review Balances

  • Review spendable (remaining) balances on a regular basis to avoid over-spending and monitor spending on the Fund.  
  • Send spending/accounting report to originating department if required.

Assess and Address

  • If spendable balance remains, with no plan for further spending, return monies to originating departments if necessary (e.g. for one time events where not all assigned money was needed).
  • Carefully review those Funds that have deficit balances.   Reclass expenses off of the Fund or request additional assignment if appropriate.

Each department head is responsible for the implementation of this control within his/her area.


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