WFAA Reinvesting Income for Endowed Funds Policy

Introduction

This policy is based on the obligations of the Wisconsin Foundation and Alumni Association (WFAA) as outlined in the Uniform Prudent Management of Institutional Funds Act (UPMIFA). The highest level of stewardship and fiduciary responsibility is vital to maintaining trust with our stakeholders/donors. WFAA must therefore carefully consider donor intent and the principles of prudence and reasonableness when evaluating requests to reinvest spendable endowment income.

Although endowment balances fluctuate, the Spend Plan Allocation seeks to provide a relatively stable stream of spendable endowment income, helping the university with annual budgeting and organizational planning. However, all funds invested in the endowment pool are subject to market risk, including any reinvested spendable endowment income. Given the variability in market returns over time, WFAA cannot guarantee annual returns or long-term averages.

Policy Details

Donors establish endowed funds with WFAA to advance the mission of the University of Wisconsin–Madison (UW) by providing a steady stream of funding to support UW students and programs. All endowed funds generate spendable endowment income per the WFAA Spending Plan. The spendable endowment income is utilized by campus to fulfill the purposes set forth and agreed on by the donors. It is the responsibility of both campus and WFAA to utilize donors’ gifts for their intended purpose, including spending endowment income in the present and not unnecessarily accumulating funds. However, WFAA understands that depending on the use, benefits, purpose, and duration of a fund, it may be prudent to reinvest the spendable endowment income rather than spend it in the present. WFAA does not automatically reinvest spendable endowment income but will consider campus-initiated requests to do so consistent with its legal obligations, policies, and business practices.

This policy applies to the reinvestment of spendable endowment income for all endowed funds including: permanently restricted (PERM), temporarily restricted (TEMP), and Unrestricted funds (UNRE).

Campus-Directed Reinvestment

All campus units interested in reinvesting must apply through the Reinvestment Request Form, which will be considered by the WFAA Reinvestment Committee. To request reinvestment, please fill out the Reinvestment Request Form located on the Gift and Fund Management website. The Reinvestment Request Form and any supporting documentation must be submitted to WFAA’s Gift and Fund Management Team. Dean/divisional business office approval is required before submission.

Requests will be evaluated for prudence based on the use, benefits, purpose, and duration of the fund. Based on the circumstances, the factors considered include but are not limited to:

• Fund purpose — The donor’s intent in establishing/contributing to the fund.
• Reasoning — The justification for the request to reinvest spendable endowment income.
• Fund financials — The current financial state of the fund, including any accumulated income to date, and projections as to the future financial sustainability of the fund.
• Strategy for future use — The strategy for future use of newly accumulated income consistent with donor intent. Requests with ongoing reinvesting with no instruction to cease reinvestment will be reviewed with higher scrutiny.
• Donor permission — When an original donor to a donor-initiated fund is living, written donor consent (email, signed letter, etc.) is required for reinvestment of endowment-generated income to be added to the fund’s principal, unless written into the Memorandum of Agreement. The WFAA development officer assigned to the respective campus unit is responsible for obtaining donor permission. When donor permission cannot be obtained because the donor is deceased or otherwise incapacitated, reinvestment requests may still be submitted through the Reinvestment Request Form and will be taken under consideration.

Completing and submitting the Reinvestment Request Form does not guarantee approval, and requests will be evaluated consistent with the above. Final decisions will be communicated to the requestor.

When reinvestment is no longer warranted, a request to stop reinvestment may be submitted. To initiate the request, please complete the Reinvestment Request Form and select the option to stop reinvestment. The Reinvestment Request Form along with any supporting documentation must be submitted to Finance via the WFAA Help Center.

Donor-Directed Reinvestment

Donors may choose to include reinvestment directions or consent in the Memorandum of Agreement (MOA) governing the fund. Donors may also initiate reinvestment requests with WFAA or the respective campus unit(s) through writing such as MOA amendments, emails, signed letters, etc.

To request reinvestment, Development staff must fill out the Reinvestment Request Form located on the Gift and Fund Management website. The Reinvestment Request Form along with donor authorization must be submitted to WFAA’s Gift and Fund Management Team.

When reinvestment is no longer desired, a request to stop reinvestment may be submitted. To initiate the request, Development staff should complete the Reinvestment Request Form and select the option to stop reinvestment. The Reinvestment Request Form along with donor authorization must be submitted to WFAA’s Gift and Fund Management Team.

Contact Information

Please contact WFAA with any questions.

Policy Owner: Finance
Applies to: All staff
Approved by: CFO
Effective Date: 7/1/2020
Revision History: 4/21/2020