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					Endowment Module

Norm Peacock, Assistant Director ITS
   Indiana University Foundation

Mary Wheeler, Kuali Project Specialist
        Cornell University
Kuali Endowment Module (KEM)

Least “mature” of the Kuali Modules
Envisioned to cover
– transactions of the individual investments
– managing the unitized investment “pools”
– administering the funds that are the “owners” of
  the investments
               The Design Process
• Group of Endowment “Subject Matter Experts”
  (SME’s) from the six Kuali Partner institutions
• Demonstrations of 3 existing systems
   – Michigan State University
   – University of Arizona
   – Indiana University Foundation
• Developed a “high-level” list of requirements
       Kuali Partner (Differing) Needs
• Some record the individual security transactions in
  their systems – others record summary information
• Some provide information about competitive
  scholarships and prizes to their students
• Five follow GASB for financial reporting, one
  follows FASB
• The number of endowment and similar funds vary
  from less than 100 to more than 7000
          Kuali Partner (Similar) Needs
• All follow some form of the Uniform Management of
  Institutional Funds Act (UMIFA) or similar state laws
• All currently or plan to manage some form of a “unitized”
  investment pool or multiple pools
• All have “separately invested” securities, or non-pooled
  investments
• All need to provide information about donor restrictions,
  anticipated income, and available balances to their
  departments
• All need to provide appropriate stewardship information to
  their donors
                  Desired Requirements:
• Investment tracking and reporting
   – number of shares, book, par and market values, CUSIP number,
     investment category (stocks, bonds, real estate, etc.), and capital
     commitments.
   – purchases and sales of investments; income earned, collected,
     accrued; management and custodial fees and commissions; and
     other investment related data.
   – compare investment policy allocation targets to actual allocations
     and incorporate pending transactions (i.e. rebalancing).
   – track investment commitments for limited partnerships and
     contributions made against these commitments.
   – Maintain database of key information for each investment manger
     Desired Requirements (continued):
• Investment participation management and reporting
  including unitized transactions
   – Investment pool data (number of units, market value per unit) for
     all funds that participate in an institution's investment pool(s).
   – Quantify units purchased and sold, and calculate the gain or loss on
     withdrawal.
   – Record investment income, realized gains, unrealized gains, and
     fees to the various funds, either in the specific fund or in high level
     accumulation accounts.
   – Track the net asset balance of a true endowment fund between its
     components of historical book value and accumulated earnings.
   – Allocate either a budgeted payout to the income accounts affiliated
     with a principal account (based on pooled units), or actual income
     earned on separately invested endowment funds.
    Desired Requirements (continued):
• Enable formula and/or actual income
  projections
  – Project the budgeted payout (based on pooled units and
    an approved spending policy)
  – Project the anticipated actual income based on declared
    dividends, bond holdings, etc.
  – Update current year income projections
  – Create spending policy reports by fund, account #,
    college, dept, etc.
    Desired Requirements (continued):
• Access to donor instructions
  – Capture and electronically distribute the donor
    instructions for a gift or endowment fund
    Desired Requirements (continued):
• Scholarship Award System
  – summarized set of available income and donor
    instructions searchable for external parties
  – based on information from any agreement with a donor
    for a scholarship, whether endowed or expendable
  – separate searchable data elements for common
    qualification criteria
  – Ability for departments to grant, change or delete
    scholarship awards
  Desired Requirements (continued):
• Beneficiary disbursement process and tax
  reporting
  – For “split interest agreements” – disburse
    payments to beneficiaries
  – Provide data for annual tax reporting
  – Update the actuarial calculation of the liability
    for accounting adjustments.
               Out of KEM Scope:
• Gift Records System
  –   fund raising activity - campaign goals and results
  –   donor contacts
  –   pledges- both conditional and unconditional
  –   gift payments

 However, data elements that provide linkages between an
   external gift system and the Kuali Endowment Module
                      will be necessary.
      Outcome of Design Process

• The SME group was unanimous in its
  selection of the IU Foundation system.
  – viewed as the most organized and connected
  – contains nearly all of the processes and data
    identified in the requirements document
               Who is the Indiana University
                       Foundation?

• The Indiana University Foundation (IUF) is a not-
  for-profit corporation dedicated to maximizing
  private resources for Indiana University (IU).
• Chartered in 1936, we partner with IU to raise an
  average of more than $100 million annually in
  contributions for IU from more than 100,000
  donors.
• The majority of the monies we generate are held
  and invested by the Foundation for the benefit of
  IU.
                  The IUF Relationship with IU

• The IUF is independent of the university it serves.
• Approximately 5000 individual accounts are
  managed which benefit over 200 unique
  departments on 8 campuses.
   –   Endowments
   –   Expendable (Quasi) Endowments
   –   Operating/Discretionary
   –   Charitable Remainder Trusts and Charitable Gift
       Annuities
• Invested assets under management total over $1.1
  Billion dollars.
                    Business Functions of the IUF

• Development
   – Fund Raising
       • Campaigns, Annual Gifts, Major Gifts, Planned Gifts
   – Donor Relations
       • Reporting, Stewardship
• Investment Management
   – Cash and Non-Cash gifts
       • Pooled Investments, Real Estate, Stocks, Bonds
   – Charitable Trusts
• Account Administration
   – Account Management
       • Payments from accounts, reporting
   – Gift Administration
                       Operations at the IUF

• Trust Banking method of operation for more than 10 years.
• Automated daily sweep of cash into and out of an interest
  bearing fund.
• Automated periodic investment of cash and money market
  investments in long term investments.
• Automated distribution of income
• Ability to receive deposits of cash or securities
• Ability to distribute income automatically or on request.
• Daily pricing of marketable securities.
                    IU Foundation System Overview

                           Endowment & Trust
                           Accounting System

                               Transaction Processing
                                Account Maintenance            Daily Summary
  Daily Transfer                                                of Transaction
                            Automated Cash Investment
 of IUF gift totals                                            Totals (By Fund
    by account             Automated Income Distribution      and Object Code)
                                 Asset Management
                           Internal Management Reports




Gift System                                                General Ledger
                                   Pool Pricing and
                                  Underlying Asset /
                                                              General Ledger
Donor Database                    Income Allocation          Budget Accounting
Gift Processing                       Database               Accounts Payable
 (Both IU and IUF gifts)                                      Enterprise Funds
                                                               Fixed Assets
                                     Custodian
                                     Bank Asset
                                                            Management Reports
                                       Data
            IUF General System Requirements

• Flexible enough to change with our needs
• Offered functionality to support our
  business
• Generated automated recurring processes
• A single data source for endowment and
  trust information
• A fully relational database
• Capable of interfacing to any gift or general
  ledger system
                             Process Overview


                           OR
               DONOR                       DEPARTMENT




                                                     APPOINTS
                         CREATES
   GIVES



                                                              AUTHORIZED
                                    ASSIGNED TO
                                                               SIGNERS




                                                                           REQUEST




   GIFTS
                                                                    FROM         PAYMENTS


           DEPOSITED
              TO                   ACCOUNT


                                                                            DISBURSES
OTHER INCOME




                       PURCHASES   SELLS

                                                                                     CASH

                                                  DEPOSITED
                                                     TO
                           SECURITY
                                                                                      TO




                                                                                     PAYEE
                                                  CASH
                                               (Investment
                           PRODUCES             Income or
                                              Proceeds From
                                                   Sale)
                             Modular Design

        USER SECURITY




                                            SECURITIES,
                              ACCOUNT      HOLDINGS AND
                                               CASH

 RECURRING     INDIVIDUAL
TRANSACTIONS




                            TRANSACTIONS
                                        Modular Design

                            Create/                                    Create/
                            Maintain                                   Maintain
                            Account                                   Individual




                           UPDATES                                    UPDATES




                         Account Module         RELATES TO         Individual Module




           RELATES TO                     RELATES TO




 Recurring
Transactions             RELATES TO           Security, Holdings
   Module                                     and Cash Module
                                                                      UPDATES




 CREATES


                                                                       Create/
                                                                       Maintain
                          Transaction            UPDATES               Security
Transaction    UPDATES
                            Module

                                                                                       REFERS TO
                                      Accounts

• All relevant account administration data
   –   Open and close records
   –   Ticklers
   –   Account type
   –   Associations with Fund and Unit
• Instructions
   – Transaction Restrictions
        • Account Status, Agreement Documentation Status, Restrictions
          and authorizations
   – Investment Instructions
        • Automated Investing, Daily and Periodic
   – Fees
Accounts
Accounts
Accounts
Accounts
                Securities, Holdings and Cash

• Balances by account
   – Current and historical
   – Cash
   – Securities
      • Units, Carry Value, Market Value, Accrued Income
• Securities managed by the IUF
   – Current Values
      • Units, Carry Value, Unit Value, Market Value
      • Security type
      • Interest rates and dividend per share, payment schedule
• Pooled Investment fund data
   – Current and historical unit values and distribution
     amounts
Securities, Holdings and Cash
Securities, Holdings and Cash
Securities, Holdings and Cash
Securities, Holdings and Cash
                                   Transactions
• Unique transaction types
   – Cash, Asset and Liability
      • Purchases, Sales, Deposits, Disbursements
      • Increase, Decrease or Transfer
   – Special types
      •   Original Gift Value Adjustment
      •   Holding unit adjustment
      •   Corporate Reorganization
      •   Trust Asset Transfer
• Multiple entry methods
   – Recurring transactions
   – Imported Transactions
      • Gift transactions, Spreadsheets
   – Daily Processes
Transactions
Transactions
Transactions
                  Recurring Transactions

• Investment Models
  – Cash Sweeps (Money Market Investments)
  – Pooled Funds
• Scheduled transactions
  – Transfers, Trust distributions
• Automated Processes
  – Daily, Monthly, Annual
     • Pricing update, Transaction import, Accrual
       processing, Distributions, Sweeps and Investments
     • History table updates
Recurring Transactions
Recurring Transactions
                 Recurring Transactions

                      Other Income
                                              Cash Gift Deposit
   CASH IN               Deposit




                       ETA Income               ETA Principal
 DEPOSITED TO            Cash                      Cash




                   End of day, Invest In    End of day, Invest In
   SWEPT TO       Pooled Short Term Fund   Pooled Short Term Fund
                    (Whole Dollars only)     (Whole Dollars only)




                                           Pooled Short Term Funds
                                            Reallocated to Pooled
REALLOCATED TO                                 Long Term Fund
                                             (25th of each month)
Recurring Transactions
Recurring Transactions
                           Individuals

• Payees, Account Signers, Users
• Name and Address records
  – Home, Business, Campus, Seasonal
• 1099 reporting
  – Independent Contractor, NRA
• Bank Depository
  – ACH or Wire Transfer
• Associated Accounts
Individuals
                        User Security


• Screen level
  – Read, Write , Exclude
• Defined Groups
User Security
                     Automated Processes

• Interfaces
  –   Importing Gift Transactions
  –   Security Pricing
  –   Exporting General Ledger Entries
  –   Updating Database used for Web Inquiries
                      Automated Processes

• Daily
  –   Transaction Import
  –   Large Batch Posting
  –   Accrual Calculations
  –   Accrual Transactions
  –   Recurring Transactions
  –   Pooled Fund Distributions
  –   Automated Cash Investments
  –   Cash Sweeps
  –   Pooled Fund Accounts Summary Transactions
  –   Change Reporting
  –   Date Frequency Roll Process
                     Automated Processes

• Monthly
  –   Cash Balance Archive
  –   Holding Balance Archive
  –   Seasonal Address Update
  –   Fee Assessment Transaction Process
• Year-End
  – Update Original Gift Values
                Investment Tracking and Reporting

              HOLDING_TAX_LOT
                                                              SECURITY
PK,I1   ACCOUNT_NUMBER
                                        PK,FK1,FK3,U1,I2,I1 SECURITY_ID
PK,I1   SECURITY_ID
PK      REGISTRATION_CODE
                                                              SECURITY_DESCRIPTION
PK      HOLDING_LOT_NUMBER
                                                              SECURITY_TICKER_SYMBOL
                                                              SECURITY_UNITS_HELD
        HOLDING_ACQUIRED_DATE
                                                              SECURITY_ISSUE_DATE
        HOLDING_UNITS
                                                              SECURITY_MATURITY_DATE
        HOLDING_COST
                                                              SECURITY_RATE
        HOLDING_PRIOR_ACCRUED_INC
                                                              SECURITY_DIV_RECORD_DATE
        HOLDING_FOREIGN_TAX_WITHH
                                                              SECURITY_EX_DIVIDEND_DATE
        HOLDING_MARKET_VALUE
                                                              SECURITY_DIV_PAY_DATE
        LAST_TRANSACTION_TS
                                                              SECURITY_DIV_AMOUNT
        HOLDING_ACCRUED_INCOME_DU
                                                              SECURITY_INCOME_CHG_DATE
                                                              SECURITY_INCOME_PAY_FREQ
                                                              SECURITY_INCOME_NEXT_PAY
                                                              SECURITY_UNIT_VALUE
                                                              SECURITY_VALUE_DATE
              HOLDING_HISTORY1          FK2,U1                SECURITY_CLASS_CODE
                                                              COMMITMENT_AMOUNT
PK,I2          ACCOUNT_NUMBER                                 PREVIOUS_UNIT_VALUE
PK             SECURITY_ID                                    PREVIOUS_UNIT_VALUE_DATE
PK             REGISTRATION_CODE                              UNIT_VALUE_SOURCE
PK,I1,I2,I3    HOLDING_HISTORY_DATE                           SECURITY_CARRY_VALUE
                                                              LAST_TRANSACTION_DATE
               HOLDING_TOTAL_UNITS                            FOREIGN_WITHOLDING_PCT
               HOLDING_TOTAL_COST
               HOLDING_ANNUAL_INC_EST
               SECURITY_UNIT_VALUE
                                                             CLASS_CODE1
               HOLDING_MARKET_VALUE
               QTR_AVG_MARKET_VALUE              PK,I1   SECURITY_CLASS_CODE

                                                         SECURITY_CLASS_CODE_DESC
                                                         SECURITY_REPORTING_GROUP
                                                         SECURITY_ACCRUAL_METHOD
                                                         OBJECT_CODE
                                                         SECURITY_INCOME_POST_CODE
Investment Tracking and Reporting
Investment Tracking and Reporting
                          Investment Tracking and Reporting


                   TRANSACTIONS
                                                          TRANSACTION_SECURITY
PK,U4,U1,U2,U3,I1,I3 TRANSACTION_ID
                                                 PK,FK1    TRANSACTION_ID
U4,I10,I11,I1,I4    BATCH_ID
U4,I10,I1,I4,I5     TRANSACTION_CREATED_DATE               SECURITY_UNITS
I9,U4,I10,I1,I4     TRANSACTION_TYPE                       SECURITY_ORIGINAL_COST
U4,I10,I1,I4        TRANSACTION_ENTRY_STAFF_ID             SECURITY_PRICE_PER_SHARE
                    TRANSACTION_SUPER_STAFF_ID             SALE_SHT_TERM_GAIN_LOSS
                    TRANSACTION_SOURCE                     SALE_LNG_TERM_GAIN_LOSS
I12,U3,I2           ACCOUNT_NUMBER                         SALE_PROCEEDS
I12,I6              TRANSACTION_POSTED_DATE                DONOR_ID
I8                  TRANSACTION_STATUS                     REPRESENTATIVE
I12                 OBJECT_CODE                            DAILY_ACCRUAL_AMOUNT
                    OGV_AMOUNT                             HOLDING_LOT_NUMBER
                    OGV_INDICATOR                          OVERRIDDEN_CARRY_VALUE
I7                  INCOME_CASH_AMOUNT
                    PRINCIPAL_CASH_AMOUNT
                    TRANSACTION_DESCRIPTION
                    OLD_TAX_CODE
                    TRANSACTION_REVERSED
                    REVERSING_TRANSACTION_ID
U1,U2               SECURITY_ID
                    REGISTRATION_CODE
                    OVERRIDE_EXPLANATION
                  Investment Tracking and Reporting

•       Income Accrual Methods
    –     Automated Cash Management – This is the accrual mechanism for “money
          market” type accounts. It will calculate daily based on the holdings of each
          date and add the amount to the total interest due to the account holder.
    –     Dividend –The total dividend amount to be paid to the holder of a security
          based on the ex-dividend record date, units held, dividend amount and
          payment date. These accrual amounts will be calculated periodically, based
          on the ex-dividend date.
    –     Treasury Notes and Bonds – Daily accruals are calculated based on the
          number of days in the six months prior to the semiannual payment date.
    –     Discount Bonds – Accruals are calculated daily but will never be paid to the
          account holder until the security reaches maturity or is sold.
    –     [Mortgage Pass-Through 30 –This is not a true daily accrual. The total
          income due is recomputed daily. It assumes that payments are made one
          month in arrears (30 days) on the 15th of the month.
    –     Mortgage Pass-Through 60 – Like the previous method except that it
          assumes that payments are made 2 months in arrears (60 days) on the 15th
          of the month.]
    –     Time Deposits – Simple interest calculations, not compounded. Payment
          frequencies will vary depending upon the instrument
Investment Participation
      Management
Investment Participation
      Management
Investment Participation
      Management
Investment Participation
      Management
Investment Participation
      Management
Investment Participation
      Management
•   Account Management
•   Investment Management
•   Automated Functions
•   Relational Database
•   Multiple Reporting Options
    – ODBC
    – User-Designed Daily and On Demand Reports
    – Web Access
Endowment and Trust Accounting
                   Next Steps
Get into the details:
• Compare the requirements list to the IU
  Foundation system in more detail
• Identify gaps – if any
• Describe and prioritize enhancements
• SME group meeting October 12 and 13
               Additional Next Steps
Answer the following questions:
1. What changes will be required for the IU Foundation
    system to fit Kuali architecturally (technical and overall
    system design).
2. How would the Kuali Chart of Accounts need to be
    changed (if at all) to incorporate the IU Foundation
    design into the Kuali Endowment Module (KEM)?
3. What is the fit of the Kuali GL with the Kuali
    Endowment Module?
4. What changes will be required in the electronic
    documents, lookups, routing, etc. for the IU Foundation
    system to become KEM?
    Questions?

For progress updates
  www.kuali.org

				
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posted:11/24/2011
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