Endowment and Expendable Funds
Endowment Funds
Endowment funds are established through donations of cash, securities, and property by individuals, corporations and foundations, and through endowed grants provided by the government. Each endowment is assigned a separate account to ensure that the endowment maintains its uniqueness for commitments, historical, ongoing and financial reporting purposes. The endowment capital is held and invested in perpetuity, and the investment earnings, a significant ongoing and reliable source of revenue, can be spent for the purposes intended.
Endowments are RESTRICTED FUNDS which must be used in accordance with the purposes specified by donors or by Governing Council. Endowments are NOT available for use in support of general operating activities.
Endowments are subject to spending restrictions relating to both the capital and to investment earnings. With regards to capital, endowments include externally designated endowment funds and internally designated endowment funds, which have been turned to endowments by the Governing Council in the exercise of its discretion. The Governing Council may have the right to subsequently remove the endowment designation; however the use of such funds may continue to be restricted. With regards to investment earnings, restricted endowments are used to support chairs, professorship, bursaries, scholarships, library acquisitions, research projects or other purposes as specified by the donor or Government. Unrestricted endowments are normally added to the University’s general endowment but may be designated for any purpose consistent with the University’s mission.
Endowment funds are invested in the University’s LTCAP. By grouping endowment funds, the pool allows for strategic investing in a manner that permits broad diversification with attendant protection of principal and stability of income. In addition, it permits economies in administration. While endowment capital is pooled for investment purposes, each individual endowment has its own account and separate unique identity.
The investment income from endowments must be used in accordance with the various purposes established by the donor or the Governing Council. As part of its fiduciary responsibilities, the University of Toronto ensures that all funds received with a restricted purpose or subsequently endowed for a particular purpose (and the investment income on such funds) are used for that purpose. There are several broad categories of restrictions – chairs and professorships, student aid, academic programs and research. Within these broad categories, each endowment has its own specific terms and conditions which govern spending of investment income.
Expendable Funds
Expendable funds are donations, grants or contracts that can be used directly to fund a particular or general activity. Donations not required immediately for disbursements can be invested on a quarterly basis to earn interest by “committing” these funds in EFIP. Grants and contracts are not eligible to be invested in EFIP since budgets for spending are set up before actual cash receipt from sponsors.
Last revision: October 5, 2006