Miami 'Quasi-Endowments' Allow For Increased Department Spending

By MARIAH SCHLOSSMANN
Miami University journalism student

Five Miami University offices have new dollars thanks to the Miami Board of Trustees.

Miami University’s Board of Trustees approved what are called "quasi-endowments" for two of them this fall and the other three earlier in the year.

Under a new "quasi-endowment" policy approved in May 2015, the Board OK'd allocations during its last two meetings of:

• $100,000 to the Division of Student Affairs.
• $50,000 to the College of Arts & Science's Pre-Law Center.
• $50,000 to the Farmer School of Business Economics Department.
• $175,000 to the FSB Marketing Department.
• Approximately $6 million to FSB overall.

All specific spending will be decided by the dean of each division.

What is a quasi-endowment?

An endowment is a fund that is usually set aside in perpetuity, with some of the earnings spent for a specified purpose each year. Miami oversees both true endowments, that is those that have been established by a donor, and quasi-endowments, those that have been established by a governing body like the Board of Trustees.

The new quasi-endowments are unrestricted, meaning the university can determine how to spend the dollars. But because they are endowments, instead of outright gifts, their principle amount is protected and just the proceeds from their interest are spent.

“If you spend it, it’s gone,” said Bruce Guiot, chief investment and treasury officer at Miami. “But if you put it in a quasi-endowment, now you’ve established a revenue source that will allow you to keep supporting that project for longer."

Quasi-endowment policy

The Board of Trustees acted on the two most recent requests for quasi-endowments at its September meeting.

“Both the College of Arts & Sciences and the Division of Student Affairs came forward in request of these endowments,” said David Creamer, senior vice president for finance and business services and treasurer. “Once they submit that request, an approach on how to proceed will be provided for them to follow.”

Creamer said such requests used to involve a lot of planning and require a lot of different approvals. In early 2015, Miami streamlined the process for seeking quasi-endowments.

“We’ve had quasi-endowments for decades,” said Guiot. “We’ve just never had a formal policy around how to create them.”

Now, an applicant, usually the dean of a division, submits a memo to the provost and senior vice president of finance. The memo includes explanations of why the creator believes they should receive approval for a quasi-endowment, where the funding will come from, and how it will be used.

Guiot aids in writing the memos and drafting resolutions to present to the Board of Trustees.

“We want to encourage the creation of these quasi-endowments because it’s longer-term thinking,” said Guiot. “If it doesn’t make strategic sense, then hopefully we identify that before bringing a resolution to the board.

When adjusting the university’s policy on quasi-endowments, there was a specific intention to try and capture two pools of dollars.

The first includes unendowed gifts, especially unrestricted ones. The university wanted to make sure it was being thoughtful when spending that money.

“It raised a question of whether we wanted to just spend the gift and the money is gone, or do we want to be more strategic with it where we can set aside those funds to benefit a specific purpose over time,” said Guiot.

The second pool of money targeted in the policy change is for cases when there are some operating surpluses.

Guiot describes this pool as a sort of “rainy day fund.” Instead of just letting the money sit in surplus, the policy now allows for that money to be spent on a specific purpose for the benefit of a department or division within the university.

“Prior to the current policy, there was no strategic thought put into what we were going to do with the money,” said Guiot.

New budgeting policies

Other recent policy changes have likewise allowed the university to control its money on a less centralized level. The university changed its budgeting process in May 2015 to give deans and chairs more responsibility over their budgets.

“They are getting allocated the revenues from their credit hours and the expenses of their infrastructure,” said Guiot. “So now they are operating more like a business would in terms of revenue and expenses.”

This change happened shortly after the recession of 2008 as the university was trying to inspire better fiscal management.

“We wanted to make sure that we were allocating our funds strategically and to the places that needed them the most,” said Guiot. “We wanted to be efficient with resource distribution.”

Now that the policy changes have been implemented, Guiot said that the university has a much better handle on where it is spending money. The deans and department chairs have also been recognized for thinking more strategically about what they need to do to be more successful

Flexibility is key

The College of Arts & Science earmarked its quasi-endowment dollars for its Pre Law Center to leverage existing dollars.

“The College of Arts & Sciences had some gift money that was not endowed and was unrestricted,” said Guiot. “They are looking to do some supplemental fundraising to contribute to the money that they already have from a donor.”

The Division of Student Affairs established its quasi-endowment from budgetary surplus money that they had.

“We would have liked to spend our surplus money on various things, but because there are no specific accounts for those purposes, we were unable to designate the money there,” said Jayne Brownell, vice president for student affairs.

Brownell figured that setting up a quasi-endowment would be Student Affairs’ best bet to allow for more flexibility. The Board approved $100,000 for Brownell office for general support of Student Affairs' initiatives.

“I hope the money will go toward things such as staff development and other university expenses that we were unable to cover before with the restricted funds,” said Brownell.

FSB wins five funds

The Farmer School of Business won approval for five quasi-endowments at the Board of Trustees meeting in June. At the divisional level, the Board of Trustees approved the FSB Academic Excellence Fund and the FSB Faculty Excellence Fund.

According to Rebekah Keasling, assistant dean for administration at FSB, the new dollars will be used for program improvements, matching fund gifts, faculty support and more.

At the departmental level, quasi-endowments are now in place for the Economics General Fund, Marketing General Fund, and the Marketing Academic Excellence Fund. The purpose of these endowments are to meet the needs of the individual departments, as determined by the dean and department chairs.

“It’s important to understand the importance of having something like a quasi-endowment -- something that generates more money than a typical endowment through interest,” said Keasling.

Photo: Students attend Law Day 2016, hosted by the Pre Law Program, with 67 participating law schools. -- Photo By Scott Kissell, Miami University