Establishing Quasi-Endowments
To: Chancellors, Vice Presidents, Vice Provosts, Vice Chancellors, Deans, Directors, and Heads of Schools, Divisions, Departments and Offices
Fr: William E. Sullivan, Treasurer and Chief Financial Officer
Date: May 31, 2018
Re: Establishing Quasi-Endowments
For most of the fiscal year, there has been a moratorium on the establishment of new quasi-endowments as we have sought to gain a better understanding of the source of funds and use of corresponding distributions. Through the Business Process Re-Engineering project, the University is gaining greater transparency into the existing quasi-endowments, as well as to overall operating results for units and balances supporting their operations.
Historically, in almost all cases, quasi-endowments have been established as a separate account without considering the merits of consolidation with existing quasi-endowments. We believe there may be an opportunity to simplify and consolidate the number of quasi-endowments, given the time, effort and ongoing support needed to create, manage and monitor these investments. Simplifying this activity will be a focal point beginning in July, 2018.
In the establishment of a quasi-endowment, units are making a decision to move the funds out of an operating or reserve account to establish a quasi-endowment that will provide a stream of income into the future based on the endowment distribution policy. Funds transferred into quasi-endowments are invested, over the long-term, in a broadly diversified endowment pool, and are subject to the endowment distribution policy and a PRF Administrative Fee of 1.2% in support of the Office of Development. It is very important to note that, depending on investment returns and market volatility, the valuation of the quasi-endowment may drop below the initial valuation, potentially significantly.
With the preceding as a backdrop, the Treasurer’s area is implementing a new process for the establishment of, or addition to, quasi-endowments, with a minimum threshold of $100K required for consideration in creating a new quasi-endowment. Areas requesting to establish or add to a quasi-endowment in the future should complete a standard form located at https://www.purdue.edu/treasurer/documents/QUASI-ENDOWMENT-Form.pdf. This form is simple, can be completed electronically and captures the information necessary for consideration in establishing a new quasi-endowment or adding to an existing quasi-endowment. The form also ensures the unit head and appropriate business office representative have signed-off in the process.
Should you have any questions or comments, please contact me at 49705.