Calculating and Planning the Distribution of Endowment Income

PERMANENT UNIVERSITY FUND (PUF)

The PUF is a public endowment established with income from sources such as state iron ore taxes, royalties, and federal land grants. In 1985 the legislature mandated PUF to match private contributions to the University, the Minnesota Medical Foundation or the University Foundation with the goal of providing substantial financial support for endowed chairs and professorships throughout the University. The private contribution portions of each endowed chair and professorship is held by either the University, the University Foundation or the Minnesota Medical Foundation. PUF allocates a portion of its fund balance to each endowed chair and professorship matched, but all its assets are pooled together in the Consolidated Endowment Fund(CEF) for investment.

Accounting & Income Distribution
The accounting for PUF is the same as that done for CEF, it is on a unitized market value basis, i.e. additions are converted into units, the value of which is adjusted monthly as the overall value of CEF changes.

See "Current CEF Rate" in the Rates Section of Administrative Policy: Administering University Endowed Chairs for the CEF distribution rate.

The following guidelines apply to all PUF Chairs

1. PUF matches and private gifts are true endowments, and as such the original principal may never be spent.
2. When the chair is filled, PUF earnings are credited to targeted endowment accounts.
3. When the chair is unfilled or PUF earnings exceed needs, the PUF earnings are credited to a quasi-restricted endowment account. These earnings are available for future expenditure by having the department contact Accounting Services.
4. PUF matches may not be invested separately or in any other investment pool.

Distribution Procedures
When Planning to use the money available from the PUF endowments, departments should choose one of these two options.

1. They expect the position to be filled within 6 months and begin using the proceeds from the endowment.

   The department or Dean's office notifies the Foundation that a budget plan has been developed and expenses will be incurred or the chair has been filled. Funding will be forwarded to the Target Account consistent with the approved budget plan, accumulated expendable earnings and University policy. The Foundation will notify Accounting Services. Once the chair is filled, the regular quarterly distributions will begin.

   Note: Departments are encouraged to reinvest accumulated current account balances on unfilled chairs or when they expect scheduled endowment earnings distributed to the target account to routinely exceed expenditures. The Responsible University Administrator should contact Accounting Services in writing.

2. The expectation is that the chair will take longer than six months to fill.

   In this case the investment earnings are not sent to the target account. They will be credited to a quasi-endowment account until the chair is filled.