Separately Invested Endowments

Large endowments — approximately $600,000 or more — that are not invested in the Alabama System Pool due to donor restrictions are separately invested. Separately invested endowments are managed by the Vice Chancellor for Financial Affairs, with the advice and assistance of the Investment Officer, Hewitt Investment Group, and subject to review by UAS legal counsel.

Separately invested endowments are identified in Oracle monthly account statements by one of the following asset object codes: 1201010, 1201020, 1201030, 1201040, 1201050, 1201060, & 1201070.

Fundraising accounts at UAB are used to house donated funds until a stated goal has been met for an endowment. University practice does not allow for deposit of funds to the pooled endowment fund without documentation that the minimum threshold for an endowment has been met or will be met through donor commitments. Until such time as the minimum threshold is obtained or documented commitments are in place, funds are held in a non-interest bearing account.

Since donors are giving toward an endowment effort, spending is not typically allowed from these accounts. A separate account should be established to accommodate event revenues and expenditures to keep everything as clean and clear as possible. Once the event is over, net revenue should be reclassified to the fundraising account. If spending will occur from a fundraising account (i.e. payment of scholarships while working toward the stated goal), then full disclosure must be made to any and all donors. This also includes informing the donor that his/her gift will be used to pay allowable event expenditures from the fundraising account if a separate event account is not established. Once the fundraising account has reached the stated goal, the funds will be moved to a pure endowment by a reclassification of gifts journal entry.

Note: It is important to state in all endowment solicitations that the goal is to obtain endowment status. It is also equally important to state how the funds will be used should the endowment goal not be obtained. This ensures that there is full disclosure to donors on the intended usage of all contributions to the fundraising effort and also ensures that the funds can ultimately be put to use should efforts to reach endowment status fail.

Frequently Asked Questions

Q: What is an endowment?

A: An endowment is an income-producing asset. The principal or corpus is maintained in perpetuity and only the investment earnings are spent. Endowments are considered permanent funds of the University. They are not spendable for the day-to-day activities of the University.

Q: What types of endowments exist?

A: There are three types of endowments:

  • Pure Endowment: Must be maintained in perpetuity as stated by the donor.
  • Independent Quasi-Endowment: Established by the Board of Trustees and the principal may be spent with approval from the Board.
  • Term Endowment: Principal may be spent after the donor's designated terms are completed.

Q: Are there minimum limits to establish an endowment?

A: Yes. Limits can be found on the UAB Giving site.

Q: How will endowment funds be invested?

A: All endowment funds must be invested in the University of Alabama Pooled Endowment Funds (UAPEF) (UAPEF absent donor restrictions to the contrary). Endowment funds not invested in the UAPEF, are held as Separately Invested Endowments or as Campus Endowments.

Q: How may I spend endowment earnings?

A: Endowment earnings are to be spent in accordance with the purpose(s) stated in the endowment resolution passed by the Board of Trustees.

  • Generally, earnings from endowed chairs may be used to support the direct UAB activities of the chairholder. This includes the chairholder's travel, support staff, dues and membership fees, subscriptions, etc. Earnings from endowed chairs may not be used to support general departmental expenses. The chairholder should benefit directly from the expense incurred.
  • Earnings from scholarship endowments should be used to pay scholarships.
  • Earnings from lectureship endowments should be used to pay the lecturer's expenses.
  • Earnings from research endowments should be used to support research designated by the donor.
  • Earnings from departmental support fund endowments can be used to support all departmental activity.

All expenditures must be in accordance with UAB Policies.

Q: From which endowment account can I spend?

A: Expenses are never paid from the endowment accounts (GL account string BAL segment begins with "50" - "59"). Instead, expenses are paid from the endowment earnings/spending accounts (GL account string BAL segments begins with "25" or "45").

Q: How do I know how much I have to spend?

A: The account balance in the endowment spending account reflects how much can be spent.

Q: How do I reinvest earnings received from the University of Alabama System Pool?

A: Earnings from the Pool may be reinvested as a lump sum or monthly. Once these earnings are reinvested, they are treated as endowment principal and are not spendable at a later date unless approved by the Board of Trustees.

If the lump sum option is selected, the minimum amount reinvested must be a least $2,000. A board resolution must be approved prior to reinvesting the lump sum amount back into the Pool. If a department wants to reinvest the earnings monthly, they may make this decision any time during the year. A board resolution will be prepared after the goal for monthly reinvesting has been achieved.