Endowment Policy Statement

Endowment Policy Statement

Produces a governance instrument for 501(c)(3) endowment management compliant with UPMIFA or applicable state law.

Prerequisites

Gather before drafting. Search uploaded documents (bylaws, gift agreements, financials, board resolutions) to pre-populate.

1. Organization — legal name, state of incorporation, fiscal year end, governing statute (UPMIFA or other)
2. Endowment structure — total AUM, fund categories (true/term/quasi), pooled vs. separate, donor-imposed restrictions
3. Investment profile — advisors/managers, risk tolerance, ESG/mission restrictions, prohibited investments, alternatives experience
4. Governance — Investment Committee composition and cadence, staff roles, delegation authority
5. Spending — target rate (%), averaging period (12 or 20 quarters), underwater philosophy, budget dependence
6. Special circumstances — unusual donor restrictions, pending gifts, legal matters, prior policy conflicts

Quick Start

1. Collect prerequisites above
2. Confirm governing statute — verify state UPMIFA adoption before drafting
3. Draft sections in order below, replacing all bracketed placeholders with org-specific data
4. Present for legal counsel review before Board adoption

Document Sections

Key Templates

Asset Allocation Table

Spending Formula

Annual Spending = Spending Rate × Average Market Value
- Spending Rate: [X]% (typical 4.0–5.5%)
- Average Market Value: mean of quarter-end values over [12 or 20] trailing quarters
- Calculation Date: [X] months before fiscal year start

Underwater Endowment Approaches

Roles Summary

Pitfalls & Checks

• UPMIFA factors — spending decisions must address all seven factors: fund duration/preservation, org and fund purposes, economic conditions, inflation/deflation, expected returns, other resources, gift instrument. Verify state-specific adoption.
• Jurisdiction — a minority of states have not adopted UPMIFA; confirm governing statute before drafting
• Quasi-endowments — clearly distinguish board-designated funds (revocable) from donor-restricted; require separate accounting
• IRS rules — IRC §§ 4943–4944 (excess business holdings, jeopardizing investments) apply to private foundations; confirm public charity status before relying on permissive standards
• Delegation — document any discretionary authority to managers in writing; Board retains ultimate accountability
• No placeholders in final — replace all bracketed fields with org-specific data before Board presentation
• Legal review required — counsel must review for alignment with state UPMIFA enactment, governing documents, and gift agreements