Jeffrey J. West
Associate Vice President
Financial & Accounting
Services
801.581.7520
I'm writing to see if an
item could be added to the agenda of the Draft
Committee
to Revise the UMIFA. For some time, we have
struggled with
the lack of language within
UMIFA to address "under-water" endowments -
especially as pertaining to the
spending policy. I have talked with
several people from throughout
higher ed on this issue, and I am still
unsatisfied with current practice. Larry Goldstein has told me that (to his
knowledge) neither the AICPA, FASB or GASB have
addressed this issue - primarily because it's assumed to be a function of State
law. He stated that Elliott Spitzer (NY
state attorney general) has proclaimed that
The simple question is this
- what spending policy prevails when
distributing "earnings" to an
endowment that is under-water? Our own
practice here is NOT to distribute
the full spending rate to these
endowments, but rather to distribute
only the "current income" - or the
income attributable to dividends
and interest only (not appreciation).
I think current practice is
all over the map. Some schools
distribute
nothing to under-water endowments;
others distribute something, but not
the full amount (like
public and independent
institutions. I would argue that for those of us
who administer endowments as
part of a unitized endowment pool, the
mechanics of the pool accounting
process "level" the amount distributed
to under-waters, and that they
should get the full spending rate, just
like any other endowment. But I don't think my view is embraced by many.
Thanks. Jeff
Jeffrey J. West
Associate Vice President
Financial & Accounting
Services
801.581.7520