DISTRIBUTION AND ACCOUNTING OF MEMORIAL AND ENDOWMENT FUNDS
The purpose of this section is highly technical in order to explain the accounting and distribution policies relating to the Memorial and Endowment Funds (“Restricted Funds”). These guidelines defined below are followed by most colleges and non-profit organizations that have endowment funds.
A) Endowment Fund: A donation to Holy Resurrection Serbian Orthodox Cathedral wherein the donor has requested that the investment income earned on the principal be used pursuant to the donor’s wishes. The authorized uses range from “no restrictions” to specific purposes such as the needy fund, or capital building projects.
In every endowment fund, one will find language that the principal (corpus) cannot be used. This preserves the legacy.
B) Frozen Corpus: The Cathedral will follow a policy of annually increasing the corpus of each endowment by the cost of living percentage (“CPA”) as of November 30th, reflecting the preceding 12 months. The resulting endowment balance then becomes the new corpus amount which we refer to as “the frozen balance.”
The amount donated to the Cathedral to establish a new endowment, or increase an already established endowment, beginning on or after January 1, of the subsequent year will be designated as ‘’frozen corpus’’ or additional frozen corpus for those endowments already established.
C) Investment Income Accounting: This represents the unit of income earned during the current year; or income accumulated from prior years which is available for distribution pursuant to the donor’s wishes at the time the endowment was established. All income or no less than 5% earned less the annual CPI adjustment shall be available for distribution.
Income will consist of the following components:
- Interest Income
- Dividend Income
- Gains from security sales or redemptions
- Increase in fair-market value (FMV) on December 31st of the current year – compared to the FMV on December 31st of the prior yearIncome will be reduced by the following: Losses from securities sales, Decrease in the FM Von December 31st of the current year, compared to the FMV on December 31st of the prior year, Other expensesThe result of adding the income and deducting the losses will be the income or loss for the current year, which will be allocated to each endowment account in relation to its percentage of the total of all endowments.
D) Calculation of the 5% annual distribution: In January each year the restricted funds accountant will compute the amount of that year’s distribution by multiplying the value of the endowment as of January 1st of the prior year times 5%.
The 5% annual withdrawal will only be from endowment accounts which were in place on January 1st of the prior year. This means that 5% will not be withdrawn from the endowments established during the previous year.
Under no circumstances can a distribution be withdrawn from an endowment if the amount withdrawn would reduce the balance of the endowment below its frozen balance as of December 31st of the previous year or as of December 31st of any subsequent year if new or additional principal has been contributed as this would be considered an invasion of the principal.
E) Annual Distribution of Income to the Cathedral: Each year in January the restricted funds accountant will transfer to the Cathedral’s Endowments Distribution Account the 5% distribution relating to the following groups of endowments:
• Memorial Funds
• Stewardship Endowments
• Education Endowments
• Other Restricted Endowments
At any time afterwards, the Executive Board may request distribution from this account as long as the purpose for which it is being distributed meets the donor’s requirements.
Endowment funds and trusts are highly regulated within the financial sector and we are fully committed to managing them efficiently and in accordance with the law and the intents and wishes of the fund benefactor.