Endowment Fund Accounting Procedures

Accounting Year: For purposes of determining earning for Endowment Fund assets, December 31 will serve as the end of the accounting year.  Additions to the Endowment Fund's principal will normally be made by board resolution to be effective January 1 of the following year. Lump sum contributions intended for named scholarship awards however will be added to the endowment fund principal immediately and begin earning effective the month following their receipt.

Earnings Determinations: Earnings will be determined at year-end based on moneys generated from income producing assets. Funds raised via activities such as membership drives, fundraisers, or other contributions shall not be considered earnings. The final authority in making earnings determinations rests with the board of directors.

Endowment Fund Co-Mingling of Assets: Assets designated as being part of the Endowment Fund will not necessarily be held in separate accounts.  However, each designated portion will be identified on a yearly basis for accounting purposes. This specifically applies to lump sum contributions intended to fund annual named scholarships.   The Treasurer/Secretary will notify all contributors of lump sum endowed funds of these earnings determinations and the remaining principal on a yearly basis.

Accounting for Scholarship Awards: Given existing program reimbursement procedures, designated assets remain in the Endowment Fund for purposes of earnings until December 31 the year they are awarded. 

Principle Appreciation/Depreciation: The endowment fund principal will be adjusted at year-end to reflect earnings and any appreciation/depreciation of earning assets.  For named scholarship lump sums within the endowment fund, their portion of principal will correspond to the percentage represented at the beginning of the accounting period.

For example, if a named lump sum began the accounting year representing 30% of the Endowment Fund, that principal would be adjusted at year-end based on that percentage.  If earnings were determined by the board to be 3% and appreciation of income generating assets was 2%, the principal amount would be adjusted upward by 5%.

Likewise, the endowment fund may experience a decline in principle in certain circumstances.  For example, if earnings were determined to be 3% and income generating assets depreciated 4%, the principal would be adjusted downward by 1%.   However, the board of directors has the power to not reduce named scholarship amounts due to a lack or earnings or asset depreciation.

Generally, the organization's operational expenses will be drawn from general fund assets.  However, the board of directors may also reduce the endowment fund principal, earnings or appreciation for certain expenses as they see fit.

(revised 12/31/2005)