Overhead-General Operating

Account changes for general operating endowments and gifts

Beginning July 1, 2000, revenues from endowment and gift funds available for general budget support were budgeted on new ledger/class 11 joint use accounts. Accounts for recording the endowment spending distribution (payout) using budget 21 were created one per endowment fund each using a new fund number in the 10xxx fund series. The 10xxx fund series will be used only for general operating endowments. The 26xxx fund series will be used only for specific purpose endowments. General operating gifts will be recorded using budget 35 on accounts of the form 11-dddd-90991 where “dddd” is a department number. Expenditures, if any, related to these endowment and gift funds will be recorded in general operating ledger/class 12 accounts (that is, ledger/class 12 accounts that close to general reserves) according to the function benefited using the usual 9xxxx funds (or no fund numbers) as appropriate.

Note that while the School of Medicine is effecting these changes for FY 2001, Hilltop Schools and the CFU expect to implement these changes for FY 2002. For both campuses, accounting protocols and overhead procedures on specific purpose endowments (26xxx funds) and specific purpose gifts (3xxxx funds) are not changing.

New overhead policy

The following policy was approved by the Executive Faculty on May 3, 2000, to be effective July 1, 2000.

For consistency with other general operating activities, overhead on general operating gifts and endowment spending distributions in FY 2001 and after will be assessed on revenues instead of expenditures. The overhead expense will be charged to new budget/object codes 91-85 (endowment overhead) and 91-87 (gift overhead) in ledger/class 12 on fund 90991.

Overhead charges will be 10% of general operating endowment spending distributions and 10% of general operating gifts. This is intended to be revenue neutral to the Dean’s budget. Existing waivers of overhead on endowment funds will remain in force. Object codes on general operating endowment and gift revenue budgets will signify overhead rates in a consistent manner with other ledger/class 11 revenue budgets.

Funds remaining in general operating endowment fund balance accounts (ledger/class 25) at June 30, 2000, will be handled in one of two ways:

1) If no action is taken by the department, the funds will be subject to 10% overhead and the remainder transferred to the department’s general reserve (in ledger/class 15).
2) At the request of the Department Head, the funds may be reinvested (transferred to ledger/class 45 principal) and no overhead will be charged.

These two options are a one time benefit for distributions received but not spent during the period overhead was assessed at 50%. Note that the 50% rate on expense is equivalent to a rate of 16.67% on revenue when the reallocation of overhead is taken into account.

Procedures for investing funds from reserves (i.e. transfers from LC 15 to LC 45) remain much as they are now. A letter from the Department Head to the Dean requesting the amount to be invested and indicating the relevant account numbers is all that is required.

There is no change in the policy determining overhead on disendowments. Disendowment of funds created from departmental reserves will continue to be exempt from overhead when disendowed up to the amount of the original investment. Documentation of the original transfer will continue to be required to avoid being assessed overhead.