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Endowment Definitions

Common terms found in our reports and endowment agreements

Endowment Fund

A fund established with a gift or gifts from one or more donors to the Purchase College Foundation and Charitable Entities, including the Friends of the Neuberger Museum of Art, to exist in perpetuity. An endowment is invested to generate financial support for a purpose or purposes mutually agreed to by the organization and the donor(s). (See also: Endowment Agreement)

As mandated by accounting standards, each endowment fund is divided into three components:

  1. Corpus
    The gift(s) made to establish an endowment fund as well as any additional gifts made to increase the endowment. The corpus is held in perpetuity and is not intended to be spent. The corpus is invested according to policies set by the Purchase College Foundation and Charitable Entities and in keeping with state law.
  2. Total Return
    The interest, capital gains, and dividends less fees and the budgeted spending amount over a fiscal period, such as a year.
  3. Spending Amount
    The amount available to be spent for the endowment’s agreed-upon purpose(s) in a fiscal year.

    The spending amount is calculated based on the Foundation’s approved distribution rate for a fiscal year, which is currently 5% of a twelve-quarter average of the market value of the fund. Once calculated, the spending amount is transferred to a separate spending account. Once transferred, funds to be spent do not earn interest for the endowment. If the spending amount is not fully spent in the fiscal year in which it is allocated, the remainder is available in subsequent years. If the balance in the spending account exceeds three years of distributions, then the excess is reinvested. (See also: Spending Policy)

Endowment Agreement
The written and signed document stating the mutually agreed-upon purpose(s) for which a specific endowment’s distributions can be spent. Distributions cannot be spent for purposes not included in either the fund agreement or donor-approved amendments to the fund agreement.

Fiscal Year

The Foundation’s fiscal year is a 12-month period that begins July 1 and ends on June 30 of the following year.

Market Value
Current value of the fund in today’s market. This includes the corpus plus the total return for the life of the endowment fund.

Spending Policy

The rules governing how much of an endowment’s total return will be made available for distribution in a given fiscal year.
For example, the Foundation’s current spending policy defines an annual spending amount allocation equal to five percent (5%) of the endowment’s average market value over the most recent three-year period. The five percent (5%) allocation is known as the “distribution rate.” The distribution rate is decided by the governing Purchase College Foundation board.

The distribution calculation occurs annually and is based on the market value of the fund at June 30 of each year.
Additionally, an endowment is assessed an administrative management fee that covers expenses related to securing, raising, investing, and administering endowment funds in accordance with policies and procedures of the Foundation in effect at the time. The annual fee (currently 2.25%) is assessed monthly to the market value of the endowment at the start of each month.

Quasi or Board-Designated Endowment

A fund established by the board to function as an endowment. The board has the authority to determine the use and may terminate the fund at any time.

Underwater Endowment
An endowment fund is “underwater” when its market value falls below the value of the corpus.

More Information
For more information about establishing an endowed fund, or if you have questions about an existing fund, please contact Jason Soto, Interim Executive Director of the Purchase College Foundation and Charitable Entities (914.251.6040;