Approval Date: 2016-10-05
Effective Date: 2016-10-18
Review Date: 2017-05-01
Vice-President (Administration and Finance) though Financial and Administrative Services. Authority to acquire by purchase, exchange or otherwise and to sell, assign and transfer at any time, all or any, stock shares, bonds, debentures, debenture stock or other securities on behalf of the Memorial University of Newfoundland, subject to the terms and conditions governing such matters in the Memorial University Act, has been vested in the Director of Financial and Administrative Services, subject to the guidelines established by the Investment Policy or as a direction from the Investment Committee.
To define the nature of the various categories of University trust funds, and the procedures for the establishment of these funds. This policy will also provide the means for the University, through the Finance Committee and the Investment Committee of the Board of Regents, to discharge its responsibilities for the maintenance and enhancement of trust funds.
Applicable to all trust funds bequeathed, donated or otherwise obtained for purposes of scholarships, bursaries, student loans, endowment or research and education development, or for such other purposes as are determined from time to time by the Board of Regents.
Restricted Capital - Restricted capital is that portion of each trust fund which has been established by the terms of the particular trust as being indispensable. Income not expended at the end of each academic year will be added to restricted capital.
Restricted Fund– A trust fund that has limitations placed on the expenditure of the principal and the related earnings from the investment of the funds.
Trust fund - a general term used to describe all funds donated, bequeathed or otherwise obtained by the University for purposes of:
a. Issuing undergraduate scholarships, bursaries, loans or the like. The Deputy Provost (Students) and Associate Vice-President (Academic) Undergraduate Studies is responsible for the control of such trust funds.
b. Issuing graduate fellowships, scholarships, bursaries, loans or the like; the Dean of Graduate Studies is responsible for the control of such trust funds.
c. Providing funds for guest lecturers; such trust funds come under the jurisdiction of the Dean or applicable Associate Vice-President at Grenfell Campus or the Marine Institute who is assigned responsibility for the particular trust fund.
d. Providing funds for development of education or research purposes; such trust funds come under the control of the Dean or applicable Associate Vice-President at Grenfell Campus or the Marine Institute who is assigned responsibility for the particular trust fund.
e. For any other purpose as occasionally determined by the Board of Regents of Memorial University.
Trust fund classifications - There are five classifications of trust fund. The type of classification will be determined once items three to eight in Procedure for Trust Funds have been completed. Basically, the classifications are:
Scholarship / Bursary - These are restricted endowment funds in that the principal is not expendable and all revenue on the principal has a restricted use as defined by the terms and conditions of the trust.
Loan - These are restricted funds in that the principal plus any interest is to be used for restricted purposes as defined by the terms and conditions of the trust.
Endowment - These are restricted endowment funds in that the principal is not expendable and all revenue on the principal has a restricted use as defined by the terms and conditions of the trust. Expenditures are controlled by “Guidelines for Endowment Funds”. See below.
Faculty Research and Education Trusts - These are restricted funds in that the principal plus any interest is to be used for restricted purposes as defined by the terms and conditions of the trust. Expenditures are controlled by “Guidelines for Faculty Research and Education Trusts.” See below.
General university endowment fund - This account is a restricted fund in that the interest is to be used for restricted purposes as approved by the President or his designate as defined by the terms and conditions of the trust. The capital portion is only to be used with the authority of the Finance Committee of the Board of Regents upon the recommendation of the President.
a. Unrestricted capital is that portion of each trust fund that can be expended for the purposes of the fund. In the majority of cases, this will be generated from interest income earned during the current or prior year.
b. Unrestricted capital cash balances will receive monthly interest at the rate earned by the true savings account of the University.
c. For Faculty Research and Education Trusts, the unrestricted capital will include donations and other capital contributions to the trust.
d. Interest income not expended will become part of restricted capital periodically, unless otherwise directed by the terms and conditions of the trust.
Unrestricted Fund - A trust fund that has no limitations placed on the expenditure of the principal and the related earnings from the investment of the funds.
Establishment of Trust Funds
a. All trust funds are established by approval of the Board of Regents upon recommendation by the Finance Committee of the Board.
b. In order to be established as an individual trust fund for the issuance of scholarships, bursaries or the like, the initial restricted capital of the fund should be at least $10,000. Exceptions will be made where it is expected that the total donations will exceed the $10,000 minimum within a reasonable period of time.
c. Donations for scholarships and donations of unspecified amounts less than required to establish an individual trust will become part of the Memorial University Scholarship Fund. Individual donor accounts will be maintained within this fund and published periodically in the University Calendar.
d. All proposals for the establishment of trust funds should be routed through the Office of the President for submission to the Finance Committee of the Board of Regents in accordance with Procedure for Trust Funds.
e. It is recommended that all trust funds contain a provision permitting the Board of Regents to change the terms of the trust to maintain the intention of the donor.
f. It is recommended that all trust funds contain a clause permitting the University to pool the available funds for investment purposes in order to maximize the possible interest income going to the trust fund.
Reimbursements for Faculty Research and Education Trusts
Expenditures under $5,000 may be approved by the appropriate Dean or applicable Associate Vice-President at Grenfell Campus or the Marine Institute. Expenditures over $5,000 will require the approval of the applicable Vice-President.
The Investment Committee will review annually and update the trust fund investment policy recommendations, suggest money managers and provide ongoing performance analysis. Policy recommendations of the Investment Committee are subject to the approval of the Finance Committee.
Financial Statement presentation
The activities of the various trust fund accounts will be reported upon annually as part of the annual financial statements of the University in accordance with accounting principles generally accepted by universities for trust funds.
a. Many of the trust fund restricted capital accounts may be pooled for the purposes of investing the funds in various long term investment vehicles as approved by The Memorial University Act.
b. The purpose of this activity is to attempt to generate returns in excess of what can be obtained on the University savings account and to ensure an even flow of income overthe life of the trust funds.
c. Investment earnings from the pool are distributed to various participating funds on the basis of the assignment to each fund of a number of units calculated on the market value of assets in the pool at the time of entry of each fund into the pool. This procedure is known as the "current valuation method" of accounting for investment pools.
Guidelines for Trust Funds
1. Guidelines for the current valuation method of accounting for trust funds
The following are the guidelines to be followed for the pooling of investments under the current valuation method:
a. Pool entry/exit: Trust funds can only enter or leave the pool at the end of each month.
b. Portfolio valuation: A current market valuation is required at the end of each quarter, or whenever there are additions or deletions to the pool.
c. Cost per unit: The cost per unit will initially be $1,000 for the trust funds which started the pool. Thereafter the cost per unit will be calculated based upon the current market value of the portfolio (prior to any changes) divided by the number of units outstanding.
d. Revenue distribution: Revenue from the portfolio will be distributed periodically to the individual trust funds participating in the pool based upon the weighted average total number of units outstanding for the period for each trust fund.
A weighted average is calculated to make adjustments for units held for less than a full year or period.
Current revenue will be reduced by the costs of commissions and other expenses related to investment activity.
e. Portfolio disposals: At times, investments will be liquidated in whole or in part from the portfolio without an immediate repurchase of another investment. When this occurs, the extra cash will be accounted for in a separate account for the pool and given interest at the current daily interest rate on the savings account. This interest will be distributed to the pool as per "Revenue distribution" above.
At this time, there will be a realized gain or loss on the capital investment. This gain or loss will be recognized immediately by adjusting the value of each trust fund's contribution to the pool on a per unit basis.
f. Withdrawal from pool by trust fund: This type of transaction will be rare. When it does occur, one of two courses of action has to be taken:
i. Disposal of a portion of the portfolio in order to reimburse the trust fund.
ii. Locating another trust fund or funds capable of contributing to the pool to prevent having to sell part of the portfolio.
Whichever action is taken, the withdrawing trust fund will receive reimbursement based on the number of units for which reimbursement is being made times the current market value per unit.
The balance left in the individual trust fund pooled investment account will represent a gain or loss to that trust fund.
Disbursements from the fund may be made in accordance with the specific wishes of the donor so long as they meet University regulations and guidelines and are authorized by the Dean/Director of the faculty or school designated and in the case of endowed research chais authorized by the Provost and Vice-President (Academic) and the Vice-President (Research).
The capital amount of an endowment fund will usually be sufficiently large so that the annual interest may be used to meet one or more of the following purposes:
i.To provide part or all of the salary for an endowed Chair (see the Research Chairs Policy) or a distinguished professorship. A professorship may be on a long term basis or on a visiting basis.
ii. Where appropriate, a portion of the available funds may be applied to travel and/or research in the chosen area of the professor to whom an award is made under Category i.
iii. The construction of a (named) building or portions of a building. In such instances, a portion of the interest derived from the endowment may be devoted towards particular aspects of maintenance or designated purposes of the facility.
Somewhat smaller amounts to the foregoing may be allocated to the following:
i. Salary support for faculty members, research associates, fellows and/or students.
ii. Grants-in-aid to faculty members for research and/or other approved academic endeavours.
iii. Equipment grants for initial development of research and/or where anticipated, grants from external agencies have not been received or are insufficient.
3. Guidelines for Faculty Research and Education Trusts
The Faculty Research and Education Trusts of a faculty/school/department or institute may be derived from:
ii. Residual balance remaining on research contracts or other projects that may produce residual income that has been transferred through the Operating Fund from research and contracts.
Expenditures under $5,000 may be approved by the Dean or applicable Associate Vice-President at Grenfell Campus or the Marine Institute. Expenditures over $5,000 will require the approval of the applicable Vice-President. As these funds are for the general use of each academic unit concerned, all staff members in a particular academic unit have the same right to apply for use of the funds.
c. Payment for Salary, Wages, or Honoraria
Under no circumstances may any payments from these accounts take the form of salary, wages, or any form of honoraria unless prior arrangements have been made with the Dean or applicable Associate Vice-President at Grenfell Campus or the Marine Institute who has ascertained that these payments are for research assistants or secretarial help, student support, etc., and are in support of research.
It is expressly understood that any equipment, etc., purchased with these funds is at all times the property of Memorial University of Newfoundland.
e. Continuing Commitments
No continuing commitments are to be made from these funds.
f. Eligible expenditures
Expenditures from these funds are intended to enrich the academic activities of the University to a level that may not be possible through the use of funds available from other sources. For example:
i. Equipment and other resources necessary for optimal functioning of the Department, School or Faculty but not available from the University budget or research granting agencies.
ii. Seed money for faculty research.
iii. Fellowships, bursaries and other student awards.
iv. Faculty travel related to research and other academic activities, but not available from the University budget or research grants.
v. Receptions, luncheons or similar functions of a public relations nature.
vi. Faculty retreats or similar workshops or conferences designed to meet educational objectives of faculty members.
vii. Publication of annual reports and faculty brochures, approved in accordance with the University policy on publications and for which there may not be adequate provision in the University budget.