Endowment Distributions

Endowment distributions are based on a sophisticated calculation to maximize current grant dollars available, while protecting the principal in perpetuity.

The spending policy determines the spending rate, or more plainly, how much the Foundation grants/distributes annually out of most every endowment fund it owns. To smooth out the fluctuations of markets and ensure more consistency in the grant dollars available to spend, this policy is calculated using an average of the fund balances of 20 previous quarters.

The spending policy is structured so that, in times of economic downturns, the Foundation is able to provide relatively consistent funding to the community, especially when it needs it most, while protecting the long-term needs of an endowment (by setting a ceiling and floor to the spending policy). The spending policy calculation is complex, but it exists to allow all of us time to plan, adapt and protect our long-term needs as well.

Currently, the spending policy for endowment funds is 5 percent of the previous 20 quarters’ average of quarter-end fund balances, subject to a floor of 4 percent of the year-end fund balance, and a ceiling of 5.5 percent of the year-end fund balance.

Spending Policy  How it Works

Example 1:
A stable fund balance

Assume a fund has a $10,000 balance over 20 quarters:

Baseline spending policy calculation:
The average fund balance over the
previous 20 quarters (five years): $10,000.00

Spending Policy ($10,000 * 0.05) = $500.00

Fund amount available for spending     $500.00

Example 2:
When a fund balance increases

Assume a fund has a $10,000 balance over 19 quarters and, in the last quarter, $5,000 had been added to the fund. The calculations would be as follows:

Baseline spending policy calculation:

The average fund balance over the
previous 20 quarters (five years): $10,250.00

Spending Policy ($10,250 * 0.05) = $512.50

Floor calculation:
Balance as of 6/30
$15,000.00
Floor Calculation ($15,000 * 0.04) = $600.00

Ceiling calculation:
Balance as of 6/30
$15,000.00
Ceiling Calculation ($15,000 * 0.055) = $825.00

Fund amount available for spending     $600.00

Example 3:
When a Fund Balance decreases:

Assume a fund has a $10,000 over 19 quarters, and in the last quarter, $5,000 had been distributed from the fund. The calculations would be as follows:

Baseline spending policy calculation:

The average fund balance over the
previous 20 quarters (five years):
$9,750.00

Spending Policy ($9,750 * 0.05) = $487.50

Floor calculation:
Balance as of 6/30
$5,000.00
Floor Calculation ($5,000 * 0.04) = $200.00

Ceiling calculation:
Balance as of 6/30
$5,000.00
Ceiling Calculation ($5,000 * 0.055) = $275.00

Fund amount available for spending    $275

*Please note: Spending policy determinations are separate from administrative fees. Administrative fees are calculated and charged on the balance as of 6/30 of any given year, and charged separately. Some might say: spending policy is 5%, from which the administrative fee of 1% is also taken, therefore the average grant is 4%. While this is a generally acceptable approximation, this oversimplification does not accurately describe the calculations or the nuances involved in each process.

Endowment Distributions