LONG-TERM INVESTMENT FUND

- ENDOWMENT FUND -

Budget Analysis & Review Committee’s (BARC) Financial learning Series

GENERAL TAKEAWAYS There is only one investment account

Minimum to get started - $25,000*

An endowment can be used to or support multiple purposes

Establishment of an endowment should be part of the budget process, unless established from a gift, donation or fundraising campaign.

See General Fact Sheet on Treasurer’s Pagehttp://ala.org/ala/aboutala/governance/financialdata/treasurerspage.cfm

*Discussions are currently underway by the Endowment Trustees to raise the minimum to $50,000

CONCEPT #1 – WHY START AN ENDOWMENT?

To Honor Someone Dedicated to the Profession of Librarianship or a Library Activity

- Leo Albert - William Morris - Betty Turock - Life Membership - Arthur Curley - FYAN - T. Geisel (ALSC)

To Support an Association, Division, Roundtable Initiative or Special Interest

- Spectrum - Boyd Military - Cultural Communities - AASL - ALA General Scholarship - GBLTRT - YALSA Leadership

CONCEPT #2 – HOW CAN PROCEEDS BE USED?

Programs - YALSA’s Teen Read Week Project ($14,917) - PLA Leadership Development & Webinars

General Operations - Division Activities (PLA - $26,373) - Division Activities (ALTAFF - $3,631)

Scholarships and Awards - Schneider Family Book Award ($5,000) - Rozkoszka Award ($3,000) - Spectrum Scholarships ($142,5000)

New Initiatives - Membership Campaign - Continuing Education Course Development

CONCEPT #3 – HOW DOES THE ENDOWMENT WORK? THE GENERATION OF REVENUES AND EXPENSES

One Investment Account - Merrill Lynch Consults Program (Investment Advisor)

- Endowment Trustees

- Finance Staff

Investment Performance is Impacted by Numerous Factors - General Economic Conditions i.e. GDP growth, interest rates etc.

- Asset Allocation in the Portfolio as Determined by Endowment Trustees

- Performance by Portfolio Managers (12) i.e. stock picking

All Income*, Capital Appreciation** and Portfolio Bank Fees are Allocated Proportionately to Your Endowment in the portfolio

- There are 72 individual funds within the endowment fund

*Interest/Dividends **Realized/Unrealized Gains and Losses

CONCEPT #4 – WHAT DOES IT TAKE TO START AN ENDOWMENT?

Minimum to Start an Endowment - $25,000* - This amount will generate a modest amount of income and barely cover bank

fees.

- The higher the corpus i.e. principal the greater the income

Need a Defined Purpose for the Endowment - Why is the endowment being established?

How Will the Funds Will be Used?

Are Earnings Enough to Meet spending Needs Without Invading Principal?

- See ALA Spending Policy 8.5.1

*Currently under discussion by the Endowment Trustees to be raised to $50,000

CONCEPT #5 – PRINCIPAL NEEDED FOR A SCHOLARSHIP OR AWARD

Net Asset Balance

% of Net Asset Balance* Earnings

Bank Fees**

Award or Scholarship Amount

Balance After Fees and Award/Scholarship

$45,000 3% 4% 5% .77% 3% 4% 5%

$1,350 $1,800 $2,250 $346.50 $1,000 $3.50 $453.50 $903.50

$135,000 3% 4% 5% .77% 3% 4% 5%

$4,050 $5,400 $6,750 $1,039.50 $3,000 $10.50 $1,360.5

0$2,710.5

0

$225,000 3% 4% 5% .77% 3% 4% 5%

$6,750 $9,000 $11,250

$1,732.50 $5,000 $17.50 $2,267.5

0$4,517.50

*Spending rate determined annually by Endowment Trustees ranging from 3% - 5%. **Approximately

CONCEPT #6 – ENDOWMENT CLASSIFICATION ASC* 958 REPORTING REQUIREMENTS

Unrestricted Assets - No limitation on the use of funds

Temporarily Restricted Assets - The use of funds are limited until certain conditions/restrictions

are met.

Permanently Restricted Assets - Use of funds are restricted by explicit donor imposed

requirements

*Accounting Standards Codification

ADDITIONAL FINANCIAL REFERENCES

Questions can be submitted on ALA Connect. To find additional information on this webinar and any other financial related information, please go to the Treasurer’s web page look under the heading of “Financial learning.” Other topics include:1. Budget Cycle & Process2. Operating Agreement3. Organizational Structure –

Roles & Responsibilities