Endowment FAQ

Endowments at Augustana University.

No form of investment is more important to Augustana’s long-term success than its endowment. The endowment provides a reliable, long-term financial resource that makes it possible for the best and brightest students to enroll.

Frequently Asked Questions

Q. What is an endowment?
Q. When will an endowment gift start to provide funding?
Q. How is the endowment payout amount established each year?
Q. When is the endowment payout distributed?

Q. Is it possible for the actual payout amount to differ from the formula?
Q. What is Augustana University’s fiduciary responsibility to the donor of an endowment?
Q. How is Augustana’s endowment invested?
 

Q. What is an endowment?
A. An endowment provides support to Augustana over an extended period of time. The principal of the gift is invested and a portion of the return is used to support programs as designated by the donor. The principal of the gift is held in perpetuity. Gifts from multiple donors are pooled together for investment purposes. Each individual endowment shares in the gains or losses of the investment pool. New endowments can be established with a minimum gift of $25,000, depending on the type of endowment. Additions to an existing endowment can be made at any time, in any amount. Current gifts of cash, securities or real estate are acceptable or an endowment can be funded through a deferred gift, such as a will, trust, insurance policy or other instrument.

Q. When will an endowment gift start to provide funding?
A. All new endowments are invested for a minimum of nine months before a distribution is made. Gifts to existing endowments are added into the funding formula.

Q. How is the endowment payout amount established each year?
A. Payout is the term used to describe the amount of endowment earnings transferred to the program specified by the donor. The endowment spending policy determines how much may be paid out in a given year. Augustana uses a five percent payout rate applied to each fund’s average quarterly market value over the last three years. Any excess of the actual return over the payout amount is retained in the endowment and helps the fund grow over time, enabling it and future payouts to keep pace with inflation.

Q. When is the endowment payout distributed?
A. The endowment payout is distributed in the first quarter of Augustana’s fiscal calendar (August through July).

Q. Is it possible for the actual payout amount to differ from the formula?
A. When an individual endowment fund’s market value share has fallen below the amount of the original gift, the current spending policy limits the payout to current interest and dividend income. A fund in this situation is referred to as being “underwater.”

Q. What is Augustana University’s fiduciary responsibility to the donor of a scholarship endowment?
A. The University has a fiduciary responsibility to ensure that the gift and income from an endowment gift are properly invested and available today and in the future. If a program changes so that the fund can no longer be used in the manner the donor intended, Augustana staff will work with the donor to revise the terms of the fund.

Q. How is Augustana’s endowment invested?
A. Perpetual is a long time and your lasting gift is being invested for the long term. Our investment objective is to earn enough to provide for annual needs consistent with your direction and to maintain the purchasing power of your endowment. Thus the long-term earnings objective is five percent plus inflation. To achieve this, the portfolio is governed by an investment committee appointed by the Board of Trustees and is professionally managed with the assistance of an independent investment advisor.

Contact a development director in the Office of Advancement to get started.