HR Board of Trustees Policies
Effective Date/Last Revision Date
July 1, 2005
January 4, 1897
October 22, 1999
October 27, 2003
April 21, 2001
This page was last updated on October 27, 2006.
Lincoln University Board of Trustees Charge to Committees
Educational Policy & Academic Affairs
Evaluate core competencies and ways to maximize them
Work with the University to review and revise the tenure process
Consult with the President on the Strategic Planning Process
Develop sound fiscal policies for Board action which help manage short-term financial challenges but are forward thinking in planning for the University's future financial vitality
Planning & Development
Develop a framework for identifying how each Trustee can be helpful in securing major financial contributions for the University's priorities
Put together a plan for the inauguration of Dr. Nelson
Work with the Development Office as it sets priorities for fundraising and "friend raising activities"
Buildings & Property
Focus the Committee's attention on the state of the historic and aging buildings on campus
Ensure that particular attention is given to resolving problems in student dormitories and living quarters
Determine the suitable housing for any special art, artifacts or books housed on campus
Trustees, Degrees & Nominations
Fill vacancies on the Board
Develop Board contributions policy for adoption by the Board
Present nominees for Honorary Degrees to the Board
Establish a stable new Board member orientation program and a Summer full Board planning program
Develop a Board policy manual
Continue meetings that include students
Work closely with the Buildings & Property Committee and the Ad Hoc Committee on Technology and the Library to ensure that the plant and technological needs of the students are being addressed
Consult with Dr. Nelson on the development on his measurable goals consistent with the Presidential Priorities approved by the Board
Begin to work with the University in preparing the Board of Trustees for the University wide strategic planning process
Make recommendations on how to measure the Board's effectiveness
Focus on the review and follow up of recommendations from the University's outside auditor and audit statements
Ensure that the fiscal policies adopted by the Board are executed in a manner consistent with standard accounting procedures
Monitor and provide oversight of the follow up by the University and where appropriate, the Board, To resolve audit findings from the commonwealth of PA auditor General and any other governmental audits
Technology & Library
Identify a qualified focal point for the University's operations
Set up technology goals, related policies and priorities that will enable the University to operate more efficiently and the students to receive education in a more effective, innovative manner
Provide guidance on policies regarding the library and innovative ways to leverage resources we currently have in the building
Look at the physical plant challenges relative to the IT infrastructure as well as the actual housing of books, periodicals and information
Ad Hoc By-laws
Review the Board By-laws and present a package of By-law revisions to the Board for action no later than the November, 1999 meeting
Recognizing the importance of the University in the Commonwealth’s and the Nation’s system of higher education, the University, acting through its Board of Trustees, promulgates this Code of Conduct. Unless otherwise indicated, the various provisions of this Code apply to all officers, administrators, faculty and full-time or part-time employees of the University. Because certain University functions such as procurement have a particularly high level of vulnerability, they are dealt with in greater detail. This policy is not meant to detract from or amend any collective bargaining agreement.
Conflicts of Interest
- General. It is essential that everyone within the University community including trustees, officers, and employees act only in the best interests of the University at all times and avoid behavior that involves either a real conflict of interest, or any appearance of a conflict of interest, especially under circumstances where personal use of a University affiliation may or appears to be a means of furthering personal gain. A conflict of interest occurs when a member of the University community uses the authority of his office or employment or any confidential information received in holding the office or employment for his private pecuniary benefit or for that of a member of his Immediate Family or a business with which he or a member of his Immediate Family is associated. Immediate Family includes a parent, spouse, child, or sibling.
- Conflicting Financial Interests (General). If an officer or employee has any power to Approve or Disapprove a Transaction proposed to be entered into between the University and any Entity that has a Significant Relationship to that officer or employee, or his Immediate Family, he has a potential conflict of interest and may not participate in the process of leading to the Approval or Disapproval of the Transaction unless the underlying facts giving rise to the potential conflict of interest are disclosed and approval for participation is obtained in writing from the individual’s supervisor. Disclosure shall be in writing to the supervisor and the officer or employee can continue to participate in the Transaction only on terms approved in writing by the supervisor. A Transaction includes a contract, purchase order or similar commitment of funds or resources by the University. Approve or Disapprove means execution or a decision not to execute a University Purchase Requisition, Check Request, Purchase Order of Contract. An Entity includes an individual, corporation, partnership, association or similar legal Entity. A Significant Relationship exists if a person is a director, trustee, officer or employee of, a partner or member in, or has a Material Financial Interest in the Entity in question. A Material Financial Interest is subject to review but, at a minimum, would include a situation where the employee or officer owns more than 1% of the outstanding capital (whether debt or equity) of a firm or corporation or has any interest in a partnership or association.
- Acquisition from Related Parties. The University shall not knowingly solicit or acquire goods or services from any supplier or contractor that has a Significant Relationship to any officer or employee that Approves or Disapproves a Transaction with the supplier or contractor, or any employee in the Purchase Department with authority to contract or his Immediate Family. The President of the University must approve any exception in writing of any Transaction from a related party prior to the issuance of a Purchase Order or other financial commitment on the part of the University. If the President is the officer involved in the Transaction, approval of an exception must be by the Board of Trustees.
In general, no officer of employee shall have outside employment that is inconsistent with his status as an officer or employee of the University. Moreover, no officer or employee may work for a supplier or contractor of the University. See also Conflicts of Interest, #3, Acquisition from Related Parties. The University will, in the final analysis, determine what outside employment is inconsistent with University interests. Extramural activities by the Faculty is specifically covered by the Collective Bargaining Agreement between the University and the Faculty.
- Except as noted in paragraphs #2 & #3 below, no officer or employee shall accept entertainment, gifts or favors provided by any person with whom the University has business dealings under circumstances, which would suggest that the donor intends to influence the judgement or conduct of the University officer or employee. Gifts or favors should never be solicited by a University officer or employee. Business dealings include not only present dealings but also where the person seeks to have business dealings.
- Officers or employees may accept unsolicited advertising or promotional materials, such as pens, pencils, notepads, calendars and other similar items of nominal intrinsic value. In addition, tickets to entertainment events (offered without the expectation of compensation or special consideration) may be accepted, provided that approval of acceptance by the officer of employee is received in writing from his supervisor. Under such circumstances, the supervisor shall determine whether there appears to be or there is the possibility of there being any influence on any existing or potential business dealings before acceptance is approved.
- Acceptance of food and refreshment of nominal value on an infrequent, reciprocal basis in the ordinary course of a meeting is permitted.
- University departments may provide a gift to an officer or employee or an officer’s or employee’s Immediate Family based upon the University officer or employee relationship under the following circumstances:
- The departure of a long-time officer of employee.
- Retirement of the officer or employee.
- Illness of an officer or employee requiring hospitalization.
- Death of an officer of employee or the officer’s or employee’s Immediate Family member.
- Recognition of outstanding performance.
- No University officer of employee may accept the use of supplier or contractor property, transportation, travel packages, seminars (except those open to the general public), or similar favors unless prior supervisory approval has been sought and received in writing. In the case of the President, prior supervisory approval is by the Board of Trustees. Supplier or contractor includes not only current suppliers or contractors but those seeking to become suppliers or contractors. Officers and employees may receive bona fide reimbursement for actual expenses for travel and necessary subsistence when it is compatible with other restrictions set forth in this Code of Conduct and for which no reimbursement is received from the University. However, an officer or employee may not be reimbursed for excess personal living expenses, gifts, entertainment, or other personal benefits, nor may an officer or employee be reimbursed for travel while on Official University business.
- Reimbursement of Faculty expenses for attendance and participation at professional conferences or meeting is addressed in the Collective Bargaining Agreement between the University and the Faculty. Faculty reimbursement for transportation, subsistence lodging and registration fees is also addressed in the Collective Bargaining Agreement between the University and the Faculty.
- As a leading academic institution, the University encourages its members to participate in various extramural activities outside the employment setting that may bring professional and personal growth to the University, its departments and the individual. Whenever the University’s name is attached, intentionally or otherwise, to the pursuit of these activities, there is at least the potential for portraying the University in an unfavorable light. For example, improperly suggesting that the University lends its support to a commercial endeavor. When in doubt, individuals are expected to contact their supervisor or department head before making commitments that may later have to be disavowed.
Use of Confidential Information
A conflict of interest exists when an officer or employee or his Immediate Family use for personal gain or for the benefit of others any confidential information obtained by the officer or employee as a result of his employment with the University. Information related to Transactions is particularly sensitive. Designs, operational procedures, technical information and pricing practices of suppliers and contractors with the University constitute commercial assess of those entities and as such, any direct or indirect use or disclosure of a supplier or contractor’s protected data by a University officer of employee, except for official business, is unethical and prohibited by this Policy.
Misuse of University Property and Misappropriation of Business Opportunities
No officer or employee of the University shall use any University equipment, supplies, or property for his own private gain or for other than officially designated purposes. Officially designated purposes include occupancy by the President of the official residence and unrestricted use of an automobile. In addition, a conflict of interest exist when an officer of employee, without the knowledge and consent of the University, appropriates to himself or to another, the benefits of any business venture, idea, opportunity or potential opportunity about which such officer or employee learned or developed in the course of his employment, which is related to the current or prospective business of the University.
Special Provisions for Officers & Employees in the Purchasing Department
All officers and employees in the Purchasing Department are required to have a particularly highly developed sense of professional ethics. This is because these officers and employees are in a position to commit substantial University funds or to withhold substantial funds and rewards from suppliers or contractors who service the University. Officers and employees in the Purchasing Department, in addition to this Code of Conduct, should review and follow the Code of Ethics established by the National Association of Educational Buyers (“NAEB”), which is attached hereto and made a part hereof. The 12 tenants of the NAEB Code of Ethics repeat and reinforce many of the specific concepts contained in the University’s Code of Conduct.
Statement of Financial Disclosure
All officers of the University and employees in the Purchasing Department with authority to commit University funds are required annually to file with Counsel for the University, a Statement of Financial Disclosure. The officer positions of the University are included as an attachment to this Code.
Any officer or employee, who refuses or fails to comply with this Code of Conduct, including the filing of a Statement of Financial Disclosure, where required, shall be subject to disciplinary action including, but not limited to, reprimands, suspensions and termination. Every officer or employee subject to this Code of Conduct shall be required, on an annual basis, to read the Code of Conduct and sign a statement to that effect. Each newly appointed officer and employee hired shall do the same at the time of appointment or hire.
This Statement of Investment Policy defines the investment policy, guidelines and performance objectives applicable to the assets of the Lincoln University Endowment Fund, hereafter referred to as the “Fund”. The purpose of this document is threefold. First, it will constitute the plan for investing the assets. Second, it will serve as a communications tool between the Board of Trustees Investment Committee, hereafter referred to as the “Committee”, and the Investment Managers, hereafter referred to as the “Managers”. Third, these guidelines will provide a framework to measure the ongoing progress of the investment.
Within the constraints imposed by these policies, the Managers, who are Registered Investment Advisors, will have full discretionary powers consistent with the “Prudent Investor” rule and shall manage the assets according to their professional judgment and fiduciary obligations.
II. INVESTMENT GOALS
The purpose of the University leads to three long-term investment goals (the “Goals”):
- A. To protect the principal of gifts to assure continuation of the University’s mission.
- B. To obtain a stable investment return that provides cash flows to meet the scholarship, educational support and other needs of the University.
- C. To obtain growth of investments to mitigate the effects of inflation on the assets.
III. STATEMENT OF RESPONSIBILITY
The Board of Trustees of Lincoln University, hereafter referred to as the “Board”, has overall fiduciary responsibility to ensure that all investable assets of the Fund are invested prudently and in conformance with the Prudent Investor Rule and applicable law and with the requirements, if any, of the donor. The Board has delegated certain responsibilities, as defined below in paragraphs 1 through 7, to the Committee and certain officers of Lincoln University, hereafter referred to as the “University”. The Board approved this Statement of Investment Policy on April 21, 2001.
- A. The Committee oversees the following responsibilities and not limited to, but including:
- 1. Defining the various sources of funds that can be invested.
- 2. Establishing clear and reasonable investment objectives, policies, guidelines and goals, which includes making recommendations for changes in the Statement of Investment Policy and Objectives (the “Statement”) to the Board.
- 3. Hiring a minimum of three Managers who have an investment philosophy that is consistent with the philosophy of the University, and who can be reasonably expected to adhere to the investment guidelines (set forth in VI below the “Guidelines”) and meet the investment objectives (the “Objectives”) as established by the Committee from time to time.
- 4. Communicating to the Managers the Committee’s current and future changes in its role and responsibilities, including the Goals, the Objectives, Guidelines to which it must adhere and cash flow requirements of the University. The Managers will be provided with a current copy of this Statement.
- 5. Terminating Managers who do not adequately discharge their duties, including, but not limited to, the failure to meet the investment Goals and Objectives, failure to adhere to the investment Guidelines, or failure to adequately communicate with the University’s Treasurer and Vice President for Fiscal Affairs or designated member(s) of the Investment Committee.
- 6. Evaluating the performance of each Manager with regard to the investment Goals, Guidelines and Objectives. Institute appropriate action if Objectives are not being met or guidelines are not being followed and report quarterly to the Board the Fund’s investment performance.
- 7. Approve qualified custodian(s) for the Fund’s assets.
- B. Investment Managers. The Committee holds the Managers responsible for the following:
- 1. The Managers are responsible for the day-to-day investment of the Fund’s assets assigned to them. Within the Goals and the Objectives, and consistent with the Prudent Investor Rule, the Managers are to exercise full discretion as to all buy, hold and sell decisions for each security under management, subject to the Guidelines specified below.
- 2. Within the scope of these Guidelines, the Managers have discretionary authority to determine the allocation of investments among economic sectors, industries, individual securities, but in accordance with the prescribed acceptable “non-restricted” conditions and asset class allocation percentages described in the forthcoming paragraphs.
- 3. This statement should be used by the Managers as the guideline for investing the Fund’s assets assigned to them. The Managers are expected to meet the investment Objectives and adhere to the investment Goals and Guidelines.
- 4. On a quarterly basis, each of the Managers will provide the University’s Treasurer/Vice President for Fiscal Affairs with a list of the assets and assets classes held in the portfolio, transactions that occurred during the quarter and year-to-date, a listing of capital gains and losses, the costs of management including trading fees and a summary of the investment performance compared to recognized market measures as stated by the Committee.
- 5. The Managers will present annually before the Board and provide an annual commentary and analysis explaining their performance, the current and future investment environment, a description of the portfolio strategy, including emphasis on security selection and industry weighting, lastly as it pertains to mutual funds, a listing of the top ten (10) positions held by any mutual fund in which assets of the Fund is invested.
- 6. The Managers shall promptly report to the Committee any material changes in their firm’s ownership, financial condition, organizational structure, investment personnel and investment style/approach and any other event, happening or occurrence that may be perceived or realized by the University and/or Fund as a short or long-term negative collateral asset affect on monies the Managers direct at the behest of the University as its fiduciaries.
- 7. The Managers shall meet with the Committee at least annually unless excused by the Committee.
- 8. The Managers must comply with all rules and regulations regarding a fiduciary’s responsibilities in discharging its duties, which include, but are not limited to, the discharge of its duties in a prudent manner and in full compliance with all applicable laws.
- 9. The Manager must provide a written statement acknowledging acceptance of the assignment with the investment Goals, Objectives, Guidelines and performance measurement standards set forth in this document.
IV. INVESTMENT PERFORMANCE REVIEW AND EVALUATION
- A. The assets of the Fund shall be invested in a manner consistent with the primary focus of Lincoln University, the Prudent Investor Rule and the Goals. The emphasis shall be on consistency of performance and protection of the portfolio from excessive volatility in market value from year to year.
- B. The purpose for reviewing the investment performance of the portfolio and the Managers is to determine if the Managers are meeting the Fund’s Goals and Objectives and to determine if the Managers are adding value through management.
- C. The portfolio will be measured on a risk adjusted total rate of return basis and will be evaluated in comparison with recognized market indices as specified by the Committee. Total rate of return is defined as the annualized rate of return measured over a specified period, inclusive of realized and unrealized gains and losses, plus income, minus investment fees including trading costs.
- D. The Treasurer and/or Vice President for Fiscal Affairs will review the Managers’ performance on a quarterly basis. Generally, the performance period will be over a three to five year period. The Investment Committee will be provided with monthly statements.
- E. The Committee may specify specific performance objectives for funds as required by the gift provisions.
V. ASSET ALLOCATION POLICY
- A. Recognizing that the Fund has both current and long-term obligations, the Committee will periodically review the asset allocation guidelines established in this Statement in an effort to achieve the Goals and Investment Objectives, while diversifying among asset classes to limit risk. Individual investment funds may have different asset mixes and quality as required by the provisions of the gift. However, the overall mix will recognize the historical advantage of equities for appreciation and bonds for return. The primary attributes of suitable asset category alternatives are: fundamentally sound reasons for expected returns to approximate past returns over the Fund’s planning horizon, correlation characteristics among asset categories that reduce variability of rates of returns in the total portfolio; adequate liquidity; adequate value determinations; and systematic investment management processes for alternatives within each category. The target mix (asset allocation between equities and bonds) shall be established by the Treasurer/Vice President for Fiscal Affairs and approved by the Committee, and be reviewed at least annually. (In General the asset allocation mix should fall within the following ranges).
Equities (including cash securities and international issues)
Fixed Income (including cash equivalents and international issues)
These actions (establishing and revising the asset allocation) shall be noted in the minutes of the Investment Committee.
VI. INVESTMENT GUIDELINES
The quality of the individual investments shall recognize the importance of safety of principal.
- Fixed income securities shall be at least investment grade (BBB/Baa to AAA/Aaa) as rated by Standard & Poor’s or Moody’s. In the case of un-rated securities, the Managers must demonstrate that it would qualify for an investment grade rating.
- Equity investments shall be listed and traded on a recognized exchange and be priced daily.
- Short-term investments must carry the highest rating by two nationally recognized rating agencies.
- he Managers shall promptly bring to the attention of the Treasurer/Vice President for Fiscal Affairs any investment that fails to meet the quality Guidelines, along with a recommendation of retention or disposal.
- Restrictions: The following categories of securities or types of transactions are not permissible for investment and should not be part of the Fund’s portfolio:
- Ø No Short sales
- Ø No put and call options without prior approval by the Committee, however, covered call writing can be permitted with prior approval of the Committee
- Ø No margin purchases
- Ø No private placements without prior approval by the Committee
- Ø No commodities
- Ø No securities of the asset manager, the custodian, their parent or subsidiaries (excluding money market funds)
- Ø No junk bonds
- Ø Equities – (a) No more than 2.0% of the Managers’ portfolio at cost, and 6.0% at market value, shall be invested in any one company. (b) No more than 8.33% of the Managers’ portfolio at cost, and 20.0% at market value, shall be invested in any one sector (as determined by the weightings in the S&P 500).
- Ø Fixed Income – No more than 5.0% of the Managers’ portfolio shall be invested in securities of any one issuer. There shall be no limit on direct obligations of the United States Government.
- Permissible Investment Universe
- Ø Equities – Common stocks (including convertible preferred stocks and convertible bonds) listed on either the New York Stock Exchange, American Stock Exchange or the over-the –counter market with the requirement that such stocks have adequate market liquidity relative to the size of the investment.
- Ø Fixed Income – Debt securities that are guaranteed by the United States Government, its agencies or instrumentality’s (including mortgage-backed securities). Corporate bonds, debentures, other forms of corporate debt including asset-backed securities and equipment trust certificates. Indexed notes, Floaters, variable rate obligations, etc. Yankee Bond and other dollar denominated obligations.
- Ø Equities – Only securities classified as investment grade are permissible. (Convertible securities must be rated single A or higher.)
- Ø Fixed Income – The portfolio should not purchase any security carrying a rating less than “A” by either Standard & Poor’s or Moody’s. If issues are downgraded so as to violate these guidelines, the manager must either seek written permission from the “Committee”, or should judiciously liquidate them.
- Ø Equities – There shall be no specific guidelines with regard to turnover. The Managers are given flexibility to alter the asset mix and security selection to adjust to changing market conditions.
- Ø Fixed Income -
- (a) The market value weighted average maturity of the bond portfolio shall not exceed 9 years, and no holding may have an absolute maturity of more than 12 years at the time of purchase.
- (b) The “Managers” may seek written permission from the “Committee” to exceed these limits.
- Ø Fixed Income -
- Cash Equivalents – Consist of fixed income securities such as certificates of deposits, commercial paper, U.S. treasury bills and other similar instruments with less than one year to maturity and/or money market funds.
VII. PERFORMANCE MEASUREMENT STANDARDS
- The manager is expected to achieve on average a targeted total rate of return of:
- Ø Absolute Goal – Over a market cycle, currently defined as 3-5 years, the total fund should earn a total return equal to a nominal return target range of 2% to 7%, i.e. less inflation.
VIII. COMMONFUND FOR NON-PROFIT ORGANIZATIONS
The following guidelines are specific to the monies invested in the CommonFund by the University and are intended to replace the general Investment Guidelines and Policies to the extent assets of the Fund are invested in the CommonFund.
The CommonFund is a conglomerate of individual funds managed by individual managers under the policies and direction of CommonFund management. As such, the CommonFund enjoys the advantages of diversification among a wide variety of investment vehicles with varying investment grade guidelines. Recognizing that in a broadly diversified investment program like the CommonFund, individual investments may not meet the general investment guidelines described above. Therefore, the Committee will not apply the general quality guidelines to individual CommonFund investments. The asset allocation mix will be implemented by allocating funds among the equity and fixed income funds within the CommonFund.
Careful review and monitoring of The CommonFund investments and performance by the Treasurer/Vice President for Fiscal Affairs shall be sufficient to meet the quality Guidelines for the CommonFund investment.
- Ø All investments are to be made in a prudent manner
- Ø It is expected that the Manager(s) will manage the assets so that the results meet the Goals, Objectives, Guidelines and performance standards discussed in this document.
- Ø This statement is to be used as a flexible guideline rather than a rigid document. However, it is anticipated that any important deviation will be brought to the attention of the Committee and/or certain officers of the University as defined within this document.
agent. An entity acting for and on behalf of a principal, which may be either a resource provider or a beneficiary.
Authorized Trustee Banks. Custodian.
charitable lead trust. A trust established in connection with a split- interest agreement, in which the donor or a third-party beneficiary receives specified distribution during the agreement’s term. Upon termination of the trust, a not-for-profit organization receives the assets remaining in the trust.
contribution. An unconditional transfer of cash or other assets to an entity or a settlement or cancellation of its liabilities in a voluntary non-reciprocal transfer by another entity acting other than as an owner
corpus. The principal amount of a gift or trust. Usually refers to the portion of a split-interest gift or an endowment fund that must be maintained over a specified period or in perpetuity.
designated net assets. Unrestricted net assets subject to self-imposed limits by action of the governing board. Designated net assets may be earmarked for future programs, investment, contingencies, purchase or construction of fixed assets, or other uses.
donor-imposed restriction. A donor stipulation that specifies a use for the contributed asset that is more specific than broad limits resulting from the nature of the organization, the environment in which it operates, and the purposes specified in its articles of incorporation or bylaws, or comparable documents for an unincorporated association. A restriction on an organization’s use of the asset contributed may be temporary or permanent.
endowment fund. An established fund of cash, securities, or other assets to provide income for the maintenance of a not-for-profit organization. The use of the assets of the fund may be permanently restricted, temporarily restricted, or unrestricted. Endowment funds are generally established by donor-restricted gifts and bequests to provide a permanent endowment, which is to provide a permanent source of income, or a term endowment, which is to provide income for specified period. The portion of permanent endowment that must be maintained permanently – not used up, expended, or otherwise exhausted – is classified as temporarily restricted net assets. An organization’s governing board may earmark a portion of its unrestricted net assets as a board-designated endowment (sometimes referred to as funds functioning as endowment or quasi-endowment funds) to be invested to provide income for a long but unspecified period. A board-designated endowment, which results from an internal designation, is not donor-restricted and is classified as unrestricted assets.
equity/equities. An asset class that refers to ownership, i.e., common stock, preferred stock.
fixed income. An asset class that refers to being a creditor of the entity, i.e., U.S. government securities, U.S. agency securities, corporate bonds, mortgage securities--Ginnie Mae, Fannie Mae.
funds functioning as endowment. Unrestricted net assets earmarked by an organization’s governing board, rather than restricted by a donor or other outside agency, to be invested to provide income for a long but unspecified period. A board-designated endowment, which results from an internal designation, is not donor-restricted and is classified as unrestricted net assets. The governing board has the right to decide at any time to expend the principal of such funds. (Sometimes referred to as quasi-endowment funds.)
fund raising activities. Activities undertaken to induce potential donors to contribute money, securities, services, materials, facilities, other assets, or time. They include publicizing and conducting fund raising campaigns; maintaining donor mailing lists, conducting special fund raising events; preparing and distributing fund raising manuals, instructions, and other materials; and conducting other activities involved with soliciting contributions from individuals, foundations, governments, and others.
funds held in trust by others. Resources held and administered, at the direction of the resource provider, by an outside trustee for the benefit of the organization, frequently with the connection with a split-interest agreement or permanent endowment.
income. Includes net interest; net dividends; and net appreciation, over the historic dollar value realized or unrealized, in the fair market value of the assets.
interest and dividend income. Includes net interest and dividends earned, but not net appreciation over the historic dollar value realized or unrealized, in the fair value of the assets.
net assets. The excess or deficiency of assets over liabilities, classified according to the existence or absence of donor-imposed restriction.
net asset class(es). The classification of net assets based upon the existence or absence of donor-imposed restrictions.
permanent restriction. A donor-imposed restriction that stipulates that resources be maintained permanently but permits the organization to use up or expend part or all of the income (or other economic benefits) derived from the donated assets.
permanently restricted net assets. The part of the net assets of a not-for- profit organization resulting from (a) contributions and other inflows of assets whose use by the organization is limited by donor-imposed stipulations that neither expire by passage of time nor can be fulfilled or otherwise removed by actions of the organization, (b) other asset enhancements and diminishments subject to the same kinds of stipulations, and (c) reclassifications from (or to other) classes of net assets as a consequence of donor-imposed stipulations.
principal. Assets of the fund not distributed under the terms of this Statement in contrast to corpus, which is the original value of gift.
remainderman. The recipient of the corpus (remaining principal) of a trust upon termination.
restricted support. Donor-restricted revenues or gains from contributions that increase either temporarily restricted net assets or permanently restricted net assets.
risk. Can be regarded as the amount of variability in principal value or uncertainty of the total rate of return.
spending-rate. The portion of total return on investments used for fiscal needs of the current period, usually used as a budgetary method of reporting returns of investments. It is usually measured in terms of an amount or a specified percentage of a moving average market value. Typically, the selection of a spending rate emphasizes (a) the use of prudence and a systematic formula to determine the portion of cumulative investments return that can be used to support fiscal needs of the current period, and (b) the protection of endowment gifts from a loss of purchasing power as a consideration in determining the formula to be used.
stipulation. A statement by a donor that creates a condition or restriction on the use of transferred resources.
temporary restriction. A donor-imposed restriction that permits the donor organization to use up or expend the donated assets as specified and is satisfied either by the passage of time or by actions of the organization.
temporarily restricted net assets. The part of the net assets of a not-for-profit organization resulting from (a) contributions and other inflows of assets whose use by the organization is limited by donor-imposed stipulations that either expire by the passage of time or can be fulfilled and removed by actions of the organizations pursuant to those stipulations, (b) other assets enhancements and diminishments subject to the same kind of stipulations, and (c) reclassifications to (or from) other classes of net assets as a consequence of donor-imposed stipulations, their expiration by passage of time, or their fulfillment and removal by actions of the organization pursuant to those stipulations.
term endowment. A donor-restricted contribution that must be maintained for a specified term.
total return. A measure of investment performance that focuses on the overall return on investments, including interest and dividend income as well as realized and unrealized gains and losses on investments. Frequently used in connection with a spending-rate formula to determine how much of that return will be used for fiscal needs of the current period.
unrestricted net assets. The part of net assets of a not-for-profit organization that is neither permanently restricted or temporarily restricted by donor-imposed stipulations.
unrestricted support. Revenues or gains from contributions that are not restricted by donors.
Prudent Investor Rule
(a) General rule. A fiduciary shall invest and manage property held in a trust as a prudent investor would, by considering the purposes, terms and other circumstances of the trust, and by pursuing an overall investment strategy reasonably suited to the trust.
(b) Permissible investments. A fiduciary may invest in every kind of property and type of investment, including, but not limited to, mutual funds and similar investments, consistent with this chapter.
(c) Considerations in making investments and management decisions. In making investment and management decisions a fiduciary shall consider, among other things, to the extent relevant to the decision or action:
- the size of the trust;
- the nature and estimated duration of the fiduciary relationship;
- the liquidity and distribution requirements of the trust;
- the expected tax consequences of investment decisions or strategies and of distributions of income and principal;
- the role that each investment or course of action plays in the overall investment strategy;
- an asset's special relationship or special value, if any, to the purposes of the trust or to one or more of the beneficiaries;
- to the extent reasonably known to the fiduciary, the needs of the beneficiaries for present and future distributions authorized or required by the governing instrument; and
- to the extent reasonably known to the fiduciary, the income and resources of the beneficiaries and related trusts.
Subject to the donor's intent the objective of the Lincoln University Endowment Fund's (the "Fund") management of its investments is to provide a consistent level of support for current and future beneficiaries. By establishing an endowment spending policy, the Fund will aid Lincoln University (the "University") in creating a means for greater predictability in forecasting spendable income and gradual, steady growth.
The Board of Trustees of Lincoln University (the "Board"), in accordance with Section 5548 of the Non-Profit Business Corporation Law, will use the total return method to define income. The latter income is defined as being derived from capital appreciation (realized or unrealized), earnings or both as a percentage, not less than 2% or more than 7% of the Fund's assets at fair market value averaged over a period of three preceding years. Under this spending policy the spending percentage between 2% and 7% approved by the Board will be determined based on the total income as defined by the latter statement. The proposed percentage must be submitted in writing annually for the Board's approval.