Private sector support is critical to The University of Texas System. Contributions from individuals, foundations, corporations, and other entities are vitally important to the fulfillment of the institution's mission and to the provision of high-quality educational opportunities. The purpose of these procedures is to clarify and facilitate the process for making gifts to the U. T. System and the U. T. institutions (collectively referred to hereafter as "U. T.").
As authorized by the Board of Regents' Rules and Regulations, Rule 60101 these procedures are designed to outline administrative processes associated with the acceptance, administration, and investment of gifts processed or administered by the Office of Development and Gift Planning Services (ODGPS), as the designee of the Vice Chancellor for External Relations in a prudent and efficient manner, with fundamental fiduciary responsibilities kept firmly in mind. These procedures also cover gifts given for current purposes, including gifts of securities, gifts of family limited partnerships, bequests, trust distributions, personal property, life insurance and retirement plan assets. These procedures are also intended to ensure that staff members are able to function in a timely, effective, and professional manner in the context of institutions that are engaged in energetic and comprehensive fundraising efforts. When these procedures do not indicate an appropriate course of action or if they are inappropriate in light of all aspects of a specific situation, staff members are directed to consult with the relevant offices as outlined in these procedures to establish an appropriate course of action.
Item 3 provides definitions for terms used throughout the Gift Acceptance Procedures.
The Acceptance of Gifts Conforming to Policy Matrix summarizes the review and acceptance process.
3.1 Donor's Expectations. U. T. staff should make reasonable efforts to be aware of and sensitive to donors’ expectations.
3.2 Legal and Professional Advice. U. T. representatives shall not provide legal and/or tax advice and will advise all prospective donors in writing to seek such advice from their own counsel and professional consultants. Each U. T. representative should be knowledgeable about gifts and should disclose to the donor advantages and disadvantages that could reasonably be expected to influence the decision of the donor to make a gift to U. T. In particular, planned gift items that may have adverse tax implications to the donor or are subject to variability (such as market value and income payments) should be discussed fully.
3.3 Donor's Best Interests. U. T. will not knowingly accept a gift that it believes to be contrary to the donor's best interests and there must be a reasonable expectation that accepting the gift will ultimately benefit U. T.
3.4 Appraisals and Valuations. U. T. will not furnish property appraisals or valuations to donors for tax purposes or any other purpose. U. T. will not knowingly participate in a transaction in which the value of a gift is inflated above its true fair market value to obtain a tax advantage for a donor.
3.5 Written Acknowledgment and Disclosure. In accordance with best stewardship practices and the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and related regulations, U. T. will provide a timely written statement or acknowledgment of a donor’s contribution that includes the institution’s name; amount of cash contribution or description (but not value) of non-cash contribution; and a statement that no goods or services were provided by the institution in return for the contribution (if that was the case) or description and good faith estimate of the value of goods or services, if any, the institution provided in return for the contribution. The U. T. System and the U. T. institutions are agencies of the State of Texas and are described in Sections 170(b)(1)(A)(v) and 170 (c)(1) of the Code. Contributions to the U. T. System and the institutions are deductible by donors under Section 170 of the Code provided such contributions are made exclusively for public purposes. Gifts or grants that must be given to a 501(c)(3) organization may be made to The University of Texas Foundation, Inc.
3.6 Tax Filing. In accordance with the provisions of the Code, and related regulations, proper gift records will be kept and required tax returns filed by the Office of External Relations (OER) or its designee, the ODGPS, for all gifts processed and/or administered by the ODGPS, as designee of the Vice Chancellor for External Relations. The Vice Chancellor for External Relations or the Vice Chancellor's designee(s), or, with respect to real property, the Executive Director of Real Estate, shall execute all necessary Internal Revenue Service (IRS) forms that relate to gifts processed or administered by the ODGPS, including IRS Forms 8283 and 8282. Forms 8283 and 8282 will otherwise be executed by the Chancellor or the appropriate officer at the beneficiary institution.
3.7 Confidentiality. U. T. staff will adhere to strict confidentiality with regard to any information, records, and personal documents pertaining to donors and gifts. All gift records will be released only when authorized by the donor or as required by law. A limited exception to the disclosure of the name of the donor is provided in Section 552.1235 of the Texas Government Code.
3.8 Anonymity. U. T. shall respect the wishes of donors wishing to support U. T. anonymously and will take reasonable steps to safeguard those donors’ identities.
4.1 Authority to Accept Gifts. The authority to accept gifts to U. T. is vested in the Board of Regents of The University of Texas System (Board) and delegated by the Board as specifically set out in Board of Regents' Rules and Regulations, Rule 60101. Except as provided in Rule 60101 or any other Rule in the Regents’ Rules and Regulations or approved institutional policies, no member of the staff of any U. T. institution has the authority to accept gifts. All gifts must be made payable or placed in the name of the Board, The University of Texas System or a U. T. institution as applicable. Gifts made payable to a U. T. employee are not deductible as a charitable contribution and benefit the employee personally, not U. T.
4.2 Designate a High Level Responsible Receipt Party. The President of each U. T. institution and the Vice Chancellor for External Relations must appoint a Designated Receipt Executive. It is anticipated the Designated Receipt Executive will usually be the Chief Development Officer of each institution. The Designated Receipt Executive may designate another staff member to assume day-to-day responsibility for the receipting process. Each institution must develop written receipt procedures. The Designated Receipt Executive shall ensure all gift receipts are handled in accordance with the receipt procedures set out by each institution without exception.
4.3 Procedures. The institutions shall submit for consideration gifts to be processed or administered by the ODGPS to the ODGPS as soon as practical, following the procedures outlined below. Prior to acceptance by the ODGPS, the ODGPS must review all gift assets processed or administered by the OER, other than cash or marketable securities. Such review will be done in conjunction with other U. T. System Administration offices and, as appropriate, with The University of Texas Investment Management Company (UTIMCO) or other financial managers authorized by the Board. Each proposed gift shall be reviewed to determine whether it should be accepted, including consideration of any required cash expenses, liabilities, contingent liabilities, unrelated business income taxes, donor requirements that may result in risk of loss, and other sources of funds available to cover expenses and liabilities. This review process shall determine whether the economic risks are appropriate prior to acceptance of the gift. Examples of assets requiring review include limited partnership interests, stock of closely-held corporations, stock of S Corporations, stock options, warrants, and intellectual property.
4.4 Unrelated Business Income Tax. Assets to be processed or administered by the ODGPS that create potential unrelated business income tax liability must be reviewed by the ODGPS and the institution’s chief business officer (CBO) in conjunction with UTIMCO for economic implications and by the Office of General Counsel (OGC) for legal implications.
4.5 Real Property. Gifts of real property shall comply with the Board of Regents' Rules and Regulations, Rule 60103, Guidelines for Acceptance of Gifts of Real Property and the U. T. System Environmental Review for Acquisitions of Real Property, UTS161. These and additional documents may be found on the Real Estate Office's (REO's) website at http://www.utsystem.edu/reo.
4.6 Signatures. Any gift agreement or other gift documentation to be signed by a representative of the Board shall be signed by a properly delegated representative, after review of the gift as provided in these procedures and any applicable institutional policy.
4.7 Institutional Policies. The presidents of the institutions must develop and implement Handbook of Operating Procedures policies consistent with these procedures for the review and acceptance of gifts for which responsibility for acceptance has been delegated to presidents.
4.8 Nonconformance with Procedures. Recommendations regarding the acceptance of gifts or other actions that do not conform to these procedures shall be made through the Vice Chancellor for External Relations to the Board after review by appropriate offices of the terms of the gifts, the nature of the donated assets, and/or the requested action.
U. T. will comply and all gifts will be counted in accordance with Council for the Advancement and Support of Education (“CASE”) gift counting guidelines as published in the CASE Reporting Standards & Management Guidelines for Educational Fundraising, 4th edition, and subsequent editions. Before entering into a capital campaign, a U. T. institution must develop written campaign counting guidelines, which conform to CASE. U. T. System will follow CASE standards as the official guide for campaign counting and for reporting progress to CASE and to the public toward institutional campaign goals. This will allow for parity when measuring performance against institutional peers involved in campaigns.
6.1 Cooperation. Institution business offices and development offices, the Office of Academic Affairs (OAA), the Office of Health Affairs (OHA), the Office of Business Affairs (OBA), the REO, University Lands (UL), the OER, the ODGPS, and the OGC will cooperate as necessary to process proposed gifts promptly.
6.2 Valuation. Gifts are valued as of the date transferred to the Board in accordance with the provisions of the Code and applicable regulations. The amount received from the sale of a noncash gift may be more or less than the value of the gift.
6.3 Real Property. Gifts of real estate must be reviewed and evaluated by the REO and/or UL as provided in the Board of Regents' Rules and Regulations, Rule 60103, Guidelines for Acceptance of Gifts of Real Property.
6.4 Securities. Gifts of securities that are donated to an institution must be reviewed and processed by the ODGPS. The Board of Regents' Rules and Regulations authorize only certain U. T. System Administration and UTIMCO personnel to purchase, exchange, sell, assign, and transfer securities on behalf of the Board. No other person or entity may execute or instruct others to execute a transaction involving any securities in the name of the Board. When securities are to be given to an institution, the institution shall contact the ODGPS immediately for instructions, even if the gift is for current purpose use at the institution. For current purpose gifts, sale proceeds will be transferred to the institution after receipt and processing by the ODGPS.
Sale of the security will take place as soon as possible after the transfer. The ODGPS will notify the institution of the receipt and sale of securities as early as practicable. Acknowledgment of the gift shall be provided to the donor by the institution that the gift benefits, and will be in compliance with the provisions of the Code and regulations thereunder.
6.5 Gifts of Closely-Held Stock.
(a) An effort should be made to obtain nonbinding repurchase provisions when the gift involves securities for which the donor or related parties are the primary market.
(b) To the extent applicable, the following criteria, in addition to those outlined in Section 6.4 above, must be met for the ODGPS to approve or accept gifts of closely-held stock:
6.6 Gifts of Interests in Limited Partnerships.
(a) The ODGPS or the institution's president, as appropriate, may accept gifts of interests in limited partnerships, subject to a thorough analysis of all available information by the ODGPS, with the assistance and advice of the institution’s CBO, the OGC, and UTIMCO. At a minimum, the U. T. System Administration should receive copies of the limited partnership agreement, the proposed assignment of interest, and financial documentation sufficient to describe the assets of the partnership and their valuation.
(b) The ODGPS, the OGC, the CBO, and UTIMCO will analyze a proposed gift of an interest in a limited partnership to confirm that there is a real benefit to be derived by the institution that is commensurate with any potential risks and costs associated with the gift. Among the factors that will be considered are the following:
(c) All confidentiality requirements must allow release of information as required by the Texas Public Information Act.
(d) The U. T. System should receive a full accounting for the partnership annually, as well as copies of any tax returns filed or required to be provided to partners pursuant to the Internal Revenue Code.
6.7 Gifts of Interests in General Partnerships or Joint Ventures. U. T. will not accept interests in general partnerships or joint ventures due to the State constitutional limitations on incurring State debts and the risk of future liability or debt.
6.8 Gifts of Personal Property (Other than Outdoor Works of Art). Gifts of personal property, other than outdoor works of art, donated to an institution must be reviewed for approval and processed by the ODGPS prior to acceptance only if used to establish or make additions to an endowment or charitable remainder trust. Gifts of outdoor works of art must comply with Board of Regents' Rules and Regulations, Rule 60101, Section 4.1.
6.9 In some instances, gifts are made to U. T.-affiliated external entities for benefit of the U. T. System Administration or a U. T. institution. Such gifts include charitable gift annuities, those that must be given to a 501(c)(3) organization, or others that the Board, as a state agency, cannot accept or process. Such gifts must be handled exclusively by the external entity, from deposit of the funds to acknowledgment. Any gift agreement, receipt or other gift documentation must be signed by an authorized representative of the external entity. No member of the staff of any U. T. institution has the authority to accept gifts made to an external entity.
In general, current purpose or expendable gifts are accepted by the institution president, or his/her designee, or by the Chancellor, or his/her designee, for such gifts made to U. T. System Administration. Exceptions include, but are not limited to, marketable and closely-held securities, partnership interests, and real property. These gifts must be reviewed, evaluated, and processed by the appropriate U. T. System office as set out in Sections 4 and 6. Current purpose gifts of real property are accepted by the Executive Director of Real Estate. Gifts of securities are accepted by the ODGPS via delegated authority from the respective institution president. For further information regarding the acceptance process for current purpose gifts, please contact the ODGPS.
U. T. may consider gifts of personal property, which can be tangible or intangible. Gifts of personal property, other than outdoor works of art, given for current purpose use are accepted by the U. T. institution president, or his/her designee. Exceptions include, but are not limited to, marketable and closely-held securities and limited partnerships, which must be reviewed, evaluated, and processed by the appropriate U. T. System office. In addition, OER and ODGPS have exclusive authority to handle matters related to estates and trusts, including those that provide for a current use gift for a U. T. institution.
The Development or University Advancement Office at each U. T. institution must be made aware of all personal property gifts, also known as gifts-in-kind. The president or chief development officer shall provide instructions to staff campus-wide regarding proper procedures for handling gifts of personal property. The U. T. institution must agree to be responsible for any carrying costs associated with the gift (e.g., the cost of insuring a gift of art that will be retained).
The IRS requires that donors seeking to claim a charitable tax deduction for a personal property gift with a fair market value in excess of $5,000 obtain a qualified appraisal. To avoid any conflict of interest, a U. T. institution can neither pay for nor reimburse a donor for his or her appraisal costs. The qualified appraisal must be completed no earlier than 60 days prior to the date of the gift and must be received no later than the date of the filing of the donor’s gift tax return for the year of the gift. If no appraisal is required for the donor’s purposes, a U. T. institution may seek its own independent appraisal of the property. In such case, the U. T. institution will bear all costs of the appraisal for U. T. institution purposes only.
Appraisals are not required for gifts of $5,000 and less, but the donor may obtain a qualified appraisal if he or she chooses. The institution may value the gift based on the donor’s appraisal, a value declared by the donor (a copy of either a paid bill of sale or invoice and a copy of a check or credit card statement showing payment is recommended), or a value determined by a qualified expert on the faculty or staff of the institution. This value should be used for the institution’s purposes only.
IRS Form 8283, Noncash Charitable Contributions, is required to be submitted to the donee organization for signature when the donation is greater than $5,000 and consists of property other than publicly traded securities. It is the responsibility of the donor to complete all applicable sections of the form except for the Appraiser and Donee acknowledgement sections. Once the donor has completed the applicable sections, the form should be submitted to the appropriate U. T. institution officer, as set out in the U. T. institution’s Handbook of Operating Procedures, for completion of the Donee acknowledgement section.
IRS Form 8282, Donee Information Return, is required to be completed by a donee that sells or disposes of a non-cash gift within three years of the receipt of the donation by the organization. This includes any donated property (other than money or publicly traded securities) if the claimed donation value exceeds $5,000 per item or group of similar items donated by the donor to one or more donee organizations.
The term “gift-in-kind” is generally used for personal property, both tangible and intangible, that will be retained and used by a U. T. institution, rather than sold. Retained property must complement the core mission of the U. T. institution. Gifts in kind shall be valued at their full fair market value. Gifts with fair market values in excess of $5,000 will be reported at the values placed on them by qualified independent appraisers as required by the IRS. Gifts of $5,000 and under may be reported at either the value declared by the donor or the value placed on them by a qualified expert on the faculty or staff of the U. T. institution. If a price is not determined, the value shall be recorded at $1.
Examples of tangible assets include, but are not limited to:
Examples of intangible assets include, but are not limited to, various intellectual property such as:
For equipment and software gifts, report the educational discount value if one is offered, i.e., the value the U. T. institution would have paid had it purchased the item outright from the vendor. Many software donations are licenses and are not be considered as gifts. The U. T. institution must ascertain whether the software is a gift, partial interest or exchange transaction according to the IRS. Partial interests and exchange transactions are not gifts and, therefore, are not countable/reportable. A donor must irrevocably transfer ownership of the property to a U. T. institution for the property to be considered a gift. Gifts of hardware and software may only be counted if they are irrevocable.
Endowments will be established with gifts that have been completed for tax purposes or with a combination of such gifts, pledges, and other funds at a minimum funding level of $10,000. Endowments may be established to fund scholarship programs and other educational activities as well as the endowed academic positions specified in the Board of Regents’ Rules and Regulations, Rule 60202 concerning endowed academic positions. All endowments must be reviewed and approved by the ODGPS and must meet minimum funding levels as set out in Board of Regents’ Rules and Regulations, Rule 60101 and Rule 60202. With the approval of the appropriate Executive Vice Chancellor and Vice Chancellor for External Relations, each institution may set minimum funding levels that are higher than those set by the Board. The required minimum funding level will be determined by the total value of gifts from donors and transfers of funds, valued as of the gift date or date of transfer, respectively. Reinvestment of endowment distributions, which would be considered a transfer of funds, may be used to determine the total funding value.
Example: A donor contributes $20,000 a year for five years to fund a professorship at a total contribution value of $100,000. At the end of the five-year period, the endowment may have reached a market value of $250,000 due to capital appreciation. However, the contributed value remains at $100,000. This endowment cannot be redesignated as a distinguished professorship until the contribution amount reaches $250,000 from additional gifts or transfers of funds.
Negotiations and fundraising for an endowment are permitted prior to its formal approval and establishment by the Board or its designee(s). However, an endowment will not be announced as having been established prior to its approval by the Board or its designee(s). New endowments shall not be created and existing endowments shall not be increased using accumulated distributions from existing permanent endowments. However, under rare and special circumstances, such distributions may be used to create or add to an endowment with the approval of the Vice Chancellor for External Relations, provided the terms of the new endowment(s) are consistent with the terms of the endowment agreement governing the existing endowment.
9.1 Endowment Agreements.
(a) A written endowment agreement signed by the donor(s) is required for each new permanent endowment established. (See Item 5 for sample endowment agreements.) This instrument must, absent compelling reasons, include the following language:
(b) In cases where an endowment is established pursuant to an institution's solicitation or campaign, the solicitation letter or document sent to prospective donors may be used as the endowment agreement to evidence the donative intent and purposes. If the solicitation materials do not contain the provisions required in bulleted paragraphs above, a separate gift agreement memorandum containing the required provisions and signed by the appropriate institution representative should be provided to the ODGPS by the U. T. personnel responsible for the solicitation.
(c) A gift agreement memorandum should also serve as the endowment agreement in situations where funding is from multiple donors with no primary donor or donors. (See Item 5 for a sample endowment agreement entitled “Newly Created Endowment with Multiple Donors.”)
9.2 Custody of Assets. The assets donated to fund a new endowment may be delivered to the ODGPS or UTIMCO for custody and investment by UTIMCO pending acceptance. A request for acceptance of the endowment should be submitted to the ODGPS by the institution as soon as possible after delivery of the assets. Once an endowment has been officially established, the donated assets must be delivered to the ODGPS or UTIMCO as soon as possible for custody and investment by UTIMCO.
9.3 Selection Criteria for Scholarship and Fellowship Recipients.
(a) A donor may specify or require that
(b) If consistent with the Board of Regents' Rules and Regulations, U.S. Department of Education regulations, Office of Civil Rights recommendations, and interpretations of the Texas Higher Education Coordinating Board, the donor may specify certain other selection criteria as a preference for recipient selection, but not as a restriction. U. T. will make reasonable efforts to honor preferences specified by a donor as provided in this paragraph; however, as provided by applicable law, no person shall be excluded from participation in, denied the benefits of, or be subject to discrimination under, any program or activity sponsored or conducted by the U. T. System Administration or any U. T. institution, on the basis of race, color, national origin, religion, sex, age, veteran status, or disability. It is not appropriate to provide scholarships based on a student’s position on a political or social issue.
(c) Endowed scholarship or fellowship awards should be based on the funds distributed from the endowment, rather than a specific amount. The size and number of awards will be determined by the appropriate scholarship committees at the institution or under the scholarship program applicable to the endowment. Scholarship or fellowship amounts may also be referred to in more general terms such as "tuition and required fees" in the endowment agreement.
(d) The IRS will not recognize a contribution for charitable tax deduction if the donor retains control over the gift funds or how they are used. In accordance with that understanding, the donor may not participate in the final selection of scholarship recipient(s), name a non-U. T. employee to any final selection committee, or structure the criteria so narrowly as to limit selection to a small population comprised solely or primarily of individuals related to the donor or that the donor would choose. In rare and special circumstances, such as gift funds contributed by a foundation, an exception to this provision may be granted by the Vice Chancellor for External Relations.
9.4 Endowed Academic Positions. There are six categories of endowed and named academic positions with minimum funding levels as set forth in Board of Regents’ Rules and Regulations, Rule 60202. With the specific approval of the Board, an endowed academic position may be established without the required minimum funding level only in accordance with agreements recommended by the Chancellor, the appropriate Executive Vice Chancellor, and the Vice Chancellor for External Relations.
No initial appointment will be made to an endowed academic position without prior approval as a Request for Budget Change by the president of an institution after review and approval by the appropriate Executive Vice Chancellor. Subsequent new or continuing appointments to endowed academic positions may be approved as a part of the annual operating budget. As the IRS will not recognize a contribution for charitable tax deduction if the donor retains control over the gift funds or how they are used, a donor may not participate in the final selection of the appointment or name a specific individual as the holder of an endowed academic position. In rare and special circumstances, such as gift funds contributed by a foundation, an exception to this provision may be granted by the Vice Chancellor for External Relations.
9.5 Pledge Policy. Pledges from donors that follow these procedures may be accepted to fund endowments of any level recognized by the Regents' Rules and Regulations.
(a) At least 20% of the donor's total required minimum funding amount prior to the acceptance of an endowment must be received prior to the acceptance of an endowment, i.e., before the endowment will be established.
(b) The pledge for payment of the remaining required minimum funding shall not extend beyond five years after the date of execution of the endowment agreement; however, with the approval of the Vice Chancellor for External Relations, the pledge period may be longer than five years under rare and special circumstances. A pledge for any amount beyond the required minimum funding is not bound to a five-year pledge period. As an example, for an endowed scholarship that is fully funded with a $25,000 gift, an additional $75,000 pledge may be extended reasonably longer than five years.
(c) All funds that otherwise would be distributed from the endowment will be reinvested as a permanent addition to the endowment until the endowment is funded with the then required minimum funding level for the endowment or is dissolved as provided in Section 8.5(e) below, except in the case of endowed academic positions with the approval of the Vice Chancellor for External Relations or the Vice Chancellor's designee.
(d) Funding levels will not be determined by the amount of net sale proceeds received from a noncash gift or by the current market value of the investment held in an endowment. As an illustration, a donor gives a gift of stock valued at $10,000 to create a new endowment. The stock is sold for net sales proceeds of $9,500. The $10,000 endowment may still be created because the donor contributed a gift valued at $10,000, although the endowment's value is only $9,500.
(e) If the donor is unable to fulfill the pledge by the end of the five-year period, the institution shall notify the ODGPS to determine an appropriate course of action. Typically, the endowment will either be dissolved or redesignated as follows:
All quasi-endowments must be reviewed and approved by the ODGPS and must meet minimum funding levels as set out in the Board of Regents' Rules and Regulations, Rule 60101 and Rule 60202. The required minimum funding level will be determined by the total value of transfers of funds to the endowment, valued as of the date of transfer. Reinvestment of endowment distributions may be used to determine the total funding value. An endowment will not be announced as having been established prior to its approval by the Board or its designee(s). New endowments shall not be created and existing endowments shall not be increased using accumulated distributions from existing permanent endowments. However, under rare and special circumstances, such distributions may be used to create or add to an endowment with the approval of the Vice Chancellor for External Relations, provided the terms of the new endowment(s) are consistent with the terms of the endowment agreement governing the existing endowment.
A written agreement, signed by the institution's president or the appropriate dean or department head, is required for each new quasi-endowment established. (See Item 5 for a sample endowment agreement entitled “Newly Created Quasi Endowment.”) This instrument will, absent compelling reasons, include the following language, as applicable:
11.1 Permanent and Quasi-Endowments. When mixed sources of funds (both gifts given specifically for endowed purposes and current funds) are used to establish an endowment, separate but related permanent and quasi-endowments will be created. (See Item 5 for a sample endowment agreement entitled “Newly Created Quasi/Perm Endowment.”) Each endowment account must be funded with at least the minimum endowment funding level of $10,000, (i.e., there would need to be at least $20,000 total to establish separate endowment accounts). If the endowment is initially funded with less than $20,000 from mixed sources (both endowed and current funds), the entire endowment will be classified as a permanent endowment. When funding permits, a separate but related quasi-endowment shall be created.
11.2 Additional Contributions. If only a permanent endowment account is in existence at the time of an additional contribution to an endowment established with mixed sources of funds, the institution will review the source(s) and amounts of funds to be added to determine if a separate, but related quasi-endowment account should be established. Administrative approval of the related quasi-endowment is not needed if there is no re-designation of endowment level or other amendment. Alternatively, if only a quasi-endowment is in existence at the time of an additional contribution, administrative approval of a related permanent endowment is not needed if there is no re-designation of endowment level or other amendment.
11.3 Additional Contributions to Separate Accounts. If separate permanent and quasi-endowment accounts exist at the time of an additional contribution, the institution will review the source(s) of funds to determine the correct allocation.
11.4 Transfer of Current Funds. When a transfer of current funds is to be combined with a donor’s pledge, the ODGPS will consider the total of the donor’s pledge, rather than the amounts of payments received, to determine whether separate permanent and quasi-endowment accounts should be established.
11.5 Reinvestment of Distributions. Any reinvestment of endowment distributions will be classified in the same manner as the corpus of the endowment.
11.6 Permanent Endowment Funds. Notwithstanding any of the above, any additional funds from any source will be classified as permanent endowment funds where the existing permanent endowment is governed by a donor-executed endowment agreement that contains language that “all future additions to the endowment, made by the donor or others, including those made by the Board of Regents or the institution, shall be subject to the provisions of the endowment agreement and shall be classified as permanent endowment funds.”
12.1 UTIMCO. As authorized by law, the Board has contracted with UTIMCO to invest all funds donated to U. T. that are under the sole control of the Board.
12.2 Investment Restrictions. No matching funds or other funds of U. T. may be held or managed by a party selected by the donor. No endowment shall be accepted in which the donor directs the investment transactions or holdings or may approve investment policy or strategy or on which the donor places any other investment restrictions.
12.3 Standard for Investment Decisions. The primary and constant standard for making investment decisions for endowments shall be "that standard of judgment and care that prudent investors, exercising reasonable care, skill, and caution, would acquire or retain in light of the purposes, terms, distribution requirements, and other circumstances of the fund then prevailing taking into consideration the investment of all the assets of the fund rather than a single investment."
12.4 Collective Investments. All endowment gifts should be eligible for commingling for investment purposes with other endowment funds. The Board has established the U. T. System Long Term Fund, governed by and invested according to the U. T. System Long Term Fund Investment Policy Statement, to provide for the collective investment of endowment funds. This commingling permits enhancement of long-term investment programs, affords appropriate risk control through diversification, and provides for optimization of asset mix through time.
12.5 Long Term Fund. Specific language that allows endowment funds to be invested in the U. T. System Long Term Fund or otherwise pooled for investment purposes should be included in all endowment agreements.
12.6 Agreement Terms. An endowment agreement shall not include terms regarding endowment payout that conflict with either the payout policies established by the Board or the payout provisions of the Texas Uniform Prudent Management of Institutional Funds Act, as amended.
12.7 Charge of Certain Expenses. To acknowledge the Board’s ability to charge certain expenses against the endowment funds for administration, management, and compliance, the endowment agreement should specify one of the following:
(a) donor(s) acknowledge(s) and agree(s) that in connection with administration and management of the endowment funds, the Board may charge certain expenses against the endowment funds for administration, management, and similar charges; or
(b) the Board may not charge certain expenses against the endowment for administration and management.
12.8 Management of Payout and Reinvestment. To ensure the Board has the ability to manage payout and reinvestment policies, the endowment agreement should specifically allow the following:
(a) funds distributed during a year may be retained by the institution and expended for the purposes of the endowment in subsequent years; and
(b) the reinvestment of some portion of the payout as a permanent addition to the principal of the endowment at the discretion of the Board or institution’s administration.
12.9 Endowments Funded with Mineral Interests in Real Property. In accordance with the Texas Trust Code and the Uniform Principal and Income Act (UPIA), a certain percentage of mineral royalty proceeds must be allocated to endowment principal. Because complex and numerous depletion calculations would be required to determine the correct amount to allocate to endowment principal and consistent with requirements for the Permanent University Fund, 100% of mineral royalty proceeds, including bonuses, rentals, and royalties, should be allocated to principal for ease of administration. An institution may request a lesser allocation of principal by submitting a written request to the ODGPS. Such request must be reviewed and approved by the UL in consultation with the ODGPS and the OGC.
13.1 Authorization for Changes. Once a permanent endowment is created, the terms, purpose, or existence of that endowment may be changed only if authorized by the terms of the endowment agreement, Board policy, or applicable laws.
13.2 Review of Amendments. Any request received or initiated by an institution to amend the terms or purpose of a permanent endowment or to terminate an endowment must be sent to the ODGPS for review and approval with the legal advice of the OGC. The OGC will determine whether the endowment may be modified judicially or nonjudicially pursuant to the Texas Uniform Prudent Management of Institutional Funds Act or Texas Education Code Section 65.36(f).
13.3 Requests to amend or terminate a quasi-endowment must be sent to the ODGPS for review and approval. Upon termination of a quasi-endowment, the ODGPS will coordinate the disbursement of the endowment’s proceeds with UTIMCO.
U. T.'s interest in any endowment held and administered by an external trustee must be reviewed and approved by the ODGPS.
In addition to provisions set out in Sections 8, 9 and 12 above, to the extent practicable, the Board requires the following for endowments held and administered by external trustees.
14.1 Endowment Agreements. A written endowment agreement signed by the donor(s) is required for each endowment. Endowments held and administered by U. T.-affiliated external foundations must, absent compelling reasons, include language as set out in Section 8.1 above consistent with Board-held endowments.
14.2 Distributions. A predictable stream of distributions from an endowment held by an external trustee, consistent with the Board's endowment payout policy and not in conflict with the payout provisions of the Texas Uniform Prudent Management of Institutional Funds Act, as amended. U. T. System Administration prefers that any U. T. institution receives such payout on a quarterly basis, but no less often than annually.
14.3 Appreciation. That all appreciation from an endowment held by an external trustee be maintained in the endowment, except that distributed for the purpose(s) of the endowment.
14.4 Annual Reports. That the external trustee provides annual reports to the ODGPS that detail the value of the assets of the endowment and the annual receipts and expenditures.
14.5 Accounting Records. That separate accounting records be maintained for each such endowment so that investment performance can be accurately analyzed over time.
14.6 Appointments to Endowed Academic Positions. That all appointments to endowed academic positions be selected by the institution.
14.7 Acceptance of Interest. That a request for acceptance of U. T.'s interest in the endowment be submitted by the institution to the ODGPS as soon as possible after delivery of the gift to the external trustee or notification by the external trustee that the endowment has been established.
15.1 Solicitation and Negotiation.
(a) The OER, the ODGPS, and the OGC must review and approve
(b) Negotiation, execution, and acceptance of any planned gift shall follow procedures outlined in these procedures. All agreements shall include language previously approved by the OGC unless otherwise approved in accordance with the processes set forth in these procedures.
(c) It is the responsibility of each U. T. representative to keep detailed written notes to supplement written correspondence to demonstrate ethical practices in negotiations with each donor.
(d) The institution's representative working with a donor who desires to make a planned gift shall contact the ODGPS as soon as the institution's representative becomes aware of the potential gift.
(e) Payout rate guidelines for charitable remainder trusts are provided below in Section 15.4(d) for use by all U. T. staff members authorized to enter into negotiations concerning planned gift agreements to assist them during discussions with donors.
(f) Donors should be informed that payout rate guidelines may be adjusted if market conditions change significantly before an agreement is finalized.
15.2 Restrictions on Acceptance of Planned Gifts and Donated Assets.
(a) In accordance with Texas law, the Board cannot accept gift annuities and deferred gift annuities. Inquiries concerning gift annuities and deferred gift annuities will be referred to appropriate external foundations established to benefit the U. T. System or U. T. institutions.
(b) Consistent with Board policy, the Board may serve as trustee of trusts for which the donor retains the right to change the charitable beneficiary only if: (a) U. T. System or U. T. institution(s) will receive irrevocably at least 50% of the total funding of the trust; and (b) the value of the U. T. System or institution's irrevocable interest equals the minimum requirements established below in Section 15.4(d) for accounts that cannot be pooled for investment purposes.
(c) Consistent with Board policy, the Board may serve as trustee of trusts that allow for invasions of principal only if: (a) the standards for invasion of principal are objective and nondiscretionary; (b) the U. T. System or institution will receive irrevocably at least 50% of the total funding of the trust; and (c) the value of the U. T. System or institution's irrevocable interest equals the minimum requirements established below in Section 15.4(d) for accounts that cannot be pooled for investment purposes. To avoid conflicts of interest, the Board will not serve as trustee of a trust that allows income beneficiaries to invade the principal of the trust at the discretion of the trustee.
(d) Consistent with Board policy, the Board may serve as trustee of a charitable remainder trust with multiple charitable remainder beneficiaries only if: (a) the U. T. System or institution will receive irrevocably at least 50% of the remainder; (b) the value of the U. T. System or institution's interest will be at least the minimum trust gift levels established below in Section 15.4(d); and (c) the other charities agree to provisions deemed appropriate by the OGC.
As an example, a donor may fund a charitable remainder trust with assets that may not be pooled for investment purposes, such as real estate or restricted stock, name the Board as trustee and a 50% irrevocable remainder beneficiary for further benefit of one or more institution(s), and name a non-U. T. institution(s) as 50% remainder beneficiary(ies). In this instance, the Board would accept trusteeship if the trust terms were acceptable and the trust was funded at a minimum gift level of $100,000.
(e) To avoid conflicts of interest and to avoid liability issues, the Board cannot serve as the guardian of a person, or as an executor or administrator of an estate.
(f) Consistent with the Code and related regulations, the Board will not accept a planned gift that is known to have the potential to create unrelated business income tax liability for a charitable remainder trust.
(g) In accordance with the provisions of the Code and related regulations, the Board will not accept stock in an S Corporation to fund a charitable trust without the written consent of all other shareholders.
(h) Exceptions to the requirement that the U.T. System or U.T. Institution(s) will receive irrevocably at least 50% of the total funding of the trust that falls under Sections 14.2 (b), 14.2 (c), or 14.2 (d) must be reviewed by the ODGPS and UTIMCO and approved by the Vice Chancellor External Relations. Exceptions related to trusts containing real estate must first be reviewed and approved by the Executive Director of Real Estate.
15.3 Management and Investments.
(a) The ODGPS is not authorized to administer or manage trusts of which the Board is not trustee.
(b) The U. T. System may request reimbursement from charitable trusts of which the Board is trustee for any third party charges incurred by the trust. Such charges may include, but are not limited to, bank custodial fees, real estate expenses such as appraisals, surveys, environmental assessments, maintenance and repairs, and legal fees. In circumstances where it is deemed inappropriate for the affected trust to bear such expenses, the institution shall reimburse the trust. If multiple institutions are involved, then such costs shall be shared pro rata.
15.4 Types of Planned Gifts.
(a) Wills and Bequests.
(b) Charitable Remainder Trusts Held and Administered by the Board.
For annuity trusts and straight unitrusts with income beneficiaries:
Ages 55 to 69 5%
Ages 70 to 79 6%
Ages 80 and above 7%
For net income unitrusts with income beneficiaries:
All ages 5%
For term charitable remainder trusts: 7%
(c) Charitable Trusts Held and Administered by External Trustees.
(d) Charitable Lead Trusts.
(e) Gift Annuities. Since the Board cannot accept gift annuities and deferred gift annuities, these types of gifts may be referred to The University of Texas Foundation, Inc. for the benefit of U. T.
(f) Gifts of Retirement Plan Assets. The ODGPS or the institution's president, as appropriate, may handle gifts of retirement plan assets, such as IRAs and qualified pension or profit sharing plans, which name the Board as beneficiary, including processing remaining assets, and may execute all necessary documents. UT representatives should provide appropriate language for beneficiary designation forms to ensure proper and prompt receipt of assets. All retirement plan beneficiary designations should be made to the “Board of Regents of The University of Texas System for benefit of [the applicable UT institution]. This gift shall be used for the further benefit of the [specify] college/school/department and shall be used to [specify purpose].” A U. T. institution may be a primary or secondary beneficiary. If the latter, the designation is contingent as the gift depends on the occurrence of another event. A copy of the beneficiary designation form or the portion of the beneficiary designation that pertains to the U. T. institution or other documentation showing the U. T. institution’s interest should be requested. A current statement of value from the account or a statement of value signed by the donor may also be requested. Such gifts are revocable.
(g) Life Insurance.
(h) Pooled Income Fund.
(i) Gift of a Remainder Interest in Real Property with Retained Life Estate.
(j) Bargain Sale.
Any naming of facilities and programs must follow the Naming Policy as set out in Board of Regents’ Rules and Regulations, Rule 80307. Facilities and programs may be named to memorialize or otherwise recognize substantial gifts and significant donors or individuals designated by donors. Each institution shall develop guidelines for what constitutes substantial and significant donations to warrant a gift-related naming, which must be approved by the Executive Vice Chancellor for Academic or Health Affairs, the Vice Chancellor for External Relations, and the Vice Chancellor and General Counsel.
A written gift agreement signed by the donor(s) is required for each gift-related naming. The OER must be furnished with a fully signed copy of the gift agreement for every gift-related prominent naming. The agreement must, absent compelling reasons, include the following language:
The OER shall provide sample gift agreements to each institution and will review draft agreements prior to execution by the donor and the institution. In the case of a prominent facility or program corporate naming, the institution shall negotiate an agreement with the corporation using the Standard Corporate Naming Gift/Licensing Agreement prepared by the OGC. Any substantive variations to these gift agreements must be approved by the OER and the OGC. If the donor presents a gift agreement for use, its terms must be reviewed by the OER and the OGC to ensure the agreement contains all essential elements as set out above. See sample forms of Gift Agreement for Individual Prominent Facility Naming; Corporate Gift Agreement for Naming of Prominent Facility or Program; Corporate Gift Agreement for Naming of a Less Prominent Facility; and Corporate Gift Agreement for Naming of a Less Prominent Program.
Donors shall demonstrate reasonable and timely pledge payments before a naming is affixed. After a naming is attached, donors will continue pledge payments in accordance with the terms of the gift agreement. The institution shall inform the OER in writing if pledges are not paid on schedule. Upon receipt of such notification, the OER will consult with the institution to determine an appropriate course of action.
Under rare and special circumstances and with the approval of the Vice Chancellor for External Relations, the pledge period may be longer than five years. Removal will be addressed in the gift agreement.
Acknowledgment of a gift by posting a company logo on an institution’s website must comply with the terms and conditions of the institution’s policy on website solicitations and U. T. System Guidelines for Web Site Solicitations. Board of Regents' Rules and Regulations, Rule 80103 provides broad authorization for the placement of hypertext links to other websites from U. T. web pages, in accordance with U. T. System and institution guidelines that set forth the restrictions necessary to preserve the space so created for its intended purpose of acknowledging sponsorship, generating revenue, or avoiding costs.
A sample Corporate Gift Agreement Website Sponsorship shall be provided to each institution. The Executive Vice Chancellor for Business Affairs must preapprove both Exhibits A and B of the agreement. Any substantive variations to this agreement must be approved by the OER and the OGC. See sample form of Website Sponsorship Gift Agreement.
Administrative Approval Process - the procedure for accepting gifts to be approved by the Vice Chancellor for External Relations or his/her designee and that conform to U. T. System Board of Regents' policy.
Available University Fund (AUF) - distributions from the Permanent University Fund.
Bargain Sale - when an individual transfers an asset to charity and receives less than the fair market value in return.
Book Value - as pertaining to an endowment, the book value is the original value of all gifts and contributions made to the endowment, as well as reinvestment of earnings and any realized gains or losses resulting from the sale of noncash gifts.
Charitable Lead Trust - a trust in which distributions are paid to one or more qualified charities for a certain period of time, after which the charitable interest terminates and the trust remainder typically reverts to designated non-charitable beneficiaries.
Charitable Remainder Trust - a tax-exempt trust that provides for payment to non-charitable beneficiaries for life (or lives), or a term-of-years not to exceed 20 years, after which the trust remainder goes to one or more qualified charities.
Closely-Held Stock - a corporation the stock of which is held by a few shareholders, often the management or the members of a family. Some closely-held stock is publicly traded. Closely-held stock of a "closed corporation" is not publicly traded.
Completed Gifts - generally, a gift is complete when the donor has parted with dominion and control over the transferred property or property interest, as in the unconditional delivery of the gift to the donee or the donee’s agent, leaving the donor without the power to change its disposition, whether for the benefit of the donor or for the benefit of others. A gift that is subject to conditions may not amount to a completed gift at all.
Corporate Naming - the naming of any facility or program after a corporate or other business-oriented entity.
Current Purpose Gifts - non-endowed gifts to be expended for the purposes designated by the donor.
Deferred Gift Annuity - a charitable gift annuity for which payments to the annuitant(s) begin more than one year after property is transferred to the charity. (See Gift Annuity.)
Endowments Held and Administered by External Trustees - funds administered by a trustee other than the U. T. System Board of Regents, from which a U. T. institution receives distributions, or from which the institution will receive distributions at a specified time. Examples of such trustees are banks, individuals, or other charitable entities.
Facilities - all physical facilities and buildings.
Prominent Facilities - buildings; athletic facilities; other prominent facilities, such as wings of buildings, major components of buildings, large auditoria, concert halls, atriums, prominent outdoor spaces, and clinics.
Less Prominent Facilities - facilities such as laboratories, classrooms, seminar or meeting rooms, and patient rooms that the Vice Chancellor for External Relations, in consultation with the Executive Vice Chancellor for Academic or Health Affairs, determines are less prominent and therefore not within the category of Prominent Facilities.
Gift Annuity - a charitable giving device by which a donor transfers money or other property to a qualified charity in exchange for guaranteed lifetime payments, the present value of which is less than the amount transferred.
Gift Value - the value of a gift at the time it is made. Gifts are valued in accordance with the provisions of the Internal Revenue Code and regulations thereunder.
Individual Naming - the naming of any facility or program after an individual or noncorporate entity.
Intellectual Property - creations of the mind: inventions, literary and artistic works, symbols, names, images, and designs used in commerce. Intellectual property includes inventions, patents, trademarks, and copyrights. (More on intellectual property.)
Limited Partnerships - a limited partnership is an entity in which one or more persons, with unlimited liability (called General Partners) manage the partnership, while one or more other persons only contribute capital; these latter partners (called Limited Partners) have no right to participate in the management and operation of the business and assume no liability beyond the capital contributed.
Market Value - the price that an asset would bring in a market of willing buyers and willing sellers, in the ordinary course of trade.
Mineral Interest in Real Property - rights to gas, oil, and other minerals, whether joined to or severed from the surface estate.
Permanent or True Endowment - a fund created with gifts received from a donor with the restriction that the principal is not expendable. The gifts are invested in perpetuity and only the distributions are expended for the purposes designated by the donor.
Permanent University Fund (PUF) - a State endowment fund that was established by the Texas Constitution of 1876, and that supports 18 institutions and six agencies of The University of Texas System and The Texas A&M University System. The PUF consists of 2.1 million acres in West Texas and the portfolio of assets resulting from the investment of mineral royalties generated by the land. Fiduciary responsibility for managing and investing the PUF is constitutionally assigned to the U. T. Board of Regents. (More on PUF.)
Personal Property - anything other than real property that is subject to personal ownership (see CASE Reporting Standards and Management Guidelines, 4th edition, 1.2.5, Gifts-in-Kind). Personal property becomes a gift to a U. T. institution when a transfer of ownership has taken place. A written gift agreement signed by the donor(s) is required for gifts of personal property.
Programs - all nonphysical entities.
Prominent Programs - major entities, such as colleges, schools, academic departments, and prominent academic centers, programs, and institutes.
Less Prominent Programs - academic centers, programs, and institutes that the Vice Chancellor for External Relations, in consultation with the Executive Vice Chancellor for Academic or Health Affairs, determines are less prominent and therefore not within the category of Prominent Programs.
Prominent Naming - the naming of prominent facilities or prominent programs.
Quasi-endowment - institution funds functioning as an endowed fund that may be dissolved and returned to the institution with the approval of the U. T. System Board of Regents.
S Corporation - a form of corporation, allowed by the Internal Revenue Service for most companies with 100 or fewer shareholders, none of which can be partnerships, corporations, or nonresident aliens that enables the company to enjoy the benefits of incorporation but be taxed as if it were a partnership. Formerly known as Subchapter S Corporation.
Surface Interest in Real Property - any interest in the surface of real property and improvements, and all other property interests that do not constitute the mineral estate.
Term Endowment - funds for which the donor has stipulated that the principal may be expended after a stated period or on the occurrence of a certain event.
The University of Texas Foundation, Inc. (U. T. Foundation) - a nonprofit corporation established in 1967 to accept and manage gifts in support of U. T. The U. T. System and its institutions are the beneficiaries of the U. T. Foundation, but the Foundation functions independently under its own Board of Directors and pursues its own investment policies in the management of its portfolios. (More on U. T. Foundation.)
The University of Texas Investment Management Company (UTIMCO) - an investment management corporation created in March of 1996 solely for the purpose of managing the investment of assets under the fiduciary care of the U. T. System Board of Regents. The Board controls UTIMCO and appoints all nine members of the UTIMCO Board. (More on UTIMCO.)
The University of Texas System Board of Regents - the governing body for The University of Texas System. It is composed of nine members who are appointed by the Governor and confirmed by the Senate. Terms are of six years each and staggered, with the terms of three members expiring on February 1 of odd-numbered years. (More on the Board of Regents.)
The University of Texas System Long Term Fund (LTF) - an internal U. T. System pooled investment fund of privately raised endowments and other long-term funds of the 15 institutions of the U. T. System. (More on the Long Term Fund.)
The University of Texas System Pooled Income Fund (PIF) - a trust maintained by the U. T. System in accordance with federal tax laws in order to obtain favorable tax treatment for donors to the Fund. It is designed to receive gifts of cash and readily marketable securities, paying the income from pooled gifts to persons designated by the donors during their lives. At the death of the life beneficiary, a proportionate part of the principal of the trust is severed and distributed to the U. T. System or institution as designated by the donor.
Website Solicitations: Sponsorship Acknowledgments - a logo or identifier with a hypertext link to a person’s or entity’s website, placed on a U. T. web page to acknowledge the person’s or entity’s donation of services or products or financial or research support to U. T. System or to an institution or a college, school, department, unit, center, institute, or program of such institution.