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Section 4: General Accounting

Accounting treatment of gifts

Effective Date:

08/03/2011

Approved By:

Lenora Chapman, Associate Vice President, Financial Affairs

Last Revised On:

05/01/14

For Assistance Contact:

Assistant Vice President, Financial Affairs and Controller

PURPOSE/SCOPE

To provide guidance for the accounting treatment of revenue and expenditures related to gifts including non-cash gifts and endowments from external parties and donors to UTSA.

This guideline does not address funds related to sponsored projects or gifts given by UTSA. For sponsored projects , see UTSA Financial Management Operational Guideline (FMOG) Grants and Contracts Accounting Practices.


AUTHORITY

The authority to accept gifts is vested in the University of Texas (UT) System Board of Regents (BOR) and delegated by the BOR as set out in the UT System Regents' Rules and Regulations Rule 60101.

The following policies provide information on the acceptance and administration of gifts:


UNIVERSITY GUIDELINES

Table of Contents

A. Private Sector Support

Private sector support is critical to UTSA. Contributions from individuals, foundations, corporations and other entities support the fulfillment of UTSA's mission and the provision of high-quality educational opportunities.

Faculty, staff and administrators are partners in fundraising for UTSA and are encouraged to attract private support to the university. UTSA procedures are intended to provide a systematic and controlled approach to securing private funding from individuals, corporations, foundations and other organizations to maximize philanthropic support for UTSA and ensure that these resources support UTSA priorities.

B. Processing Gifts

A gift is a voluntary transfer of items of value, usually in the form of cash, checks, securities, real property (real estate) or personal property (all other gifts, such as works of art and equipment). Gifts do not require commitment of resources or services by the recipients other than possibly agreeing to use the gift as the donor designates.

Gifts do not require specific deliverables or exhibit other characteristics of sponsored projects. For more information on sponsored projects, see Financial Management Operational Guideline (FMOG) - Grants and Contracts Accounting Practices .

All gifts to UTSA including gifts to administrative units, colleges, divisions, departments, programs, faculty, and any operation under the auspices of UTSA must be processed through the OAS . The OAS works directly with UT System to process gifts on behalf of UTSA. Gifts will not be accepted, acknowledged or deposited without acceptance approval being granted by the OAS.

Processing gifts requires the submission of a complete gift processing package, which includes:

  1. A completed Gift Processing Form for cash/cash equivalents (cash, checks, money orders, credit card transactions, and stocks), or an In-Kind Gift Acceptance Form for personal property (all other gifts except real property). For these forms, and for potential gifts of real property, contact the OAS.

  2. The check, cash, or other asset being transferred to UTSA; and

  3. An original signed copy of the gift letter or gift agreement from the donor. The gift letter/agreement must identify the asset being transferred, the purpose for which it is to be used, and the UTSA administrative or academic unit that is to benefit from the gift.

Gifts of marketable securities must be processed by the UT System Office of Development and Gift Planning Services (ODGPS). Gifts to establish endowments, and gifts of closely-held securities and limited partnerships as well as bequests and gifts resulting from an interest in a trust must be approved by the ODGPS prior to acceptance in accordance with Regents' Rules and Regulations (see Rule 60101).

Gifts of real estate must be approved and accepted by the UT System Executive Director of Real Estate. All such gifts must be submitted to the OAS for coordination and final approval processing through the ODGPS.

Gifts of Outdoor Works of Art are coordinated by the OAS in conjunction with the ODGPS . Considerations include appropriateness with regard to UTSA's Campus Master Plan and expenses related to installation and/or continuing maintenance.

If a donor receives any gifts or services from UTSA or its personnel as a result of a gift, the OAS will consider the fair market value of the gift or service when determining acceptance of the funds and the contribution portion of the gift.

EXAMPLE: An individual pays $50 for a ticket to a UTSA fundraising dinner. The value of the meal served at the dinner is $20. The gift portion of the ticket price is therefore $30 ($50 ticket price less the $20 value of the meal).

Gifts will be categorized according to UTS142.2, GASB Statement No. 33, and the most recent edition of the Management Reporting Standards for Educational Institutions published by the Council for Advancement and Support of Education.

For more detailed information on UT System gift acceptance procedures see the UT System  Acceptance of Gifts Conforming to Policy Matrix.

For further guidance on soliciting, receiving, processing and valuation of gifts, contact the OAS .

1. Accounting for Gifts

Gifts to UTSA are accounted for in Restricted/Gift funds . For more information on Restricted/Gift funds , see FMOG - Chart of Accounts. Gift funds are used to record receipts and expenditures related to gifts received from donors. The majority of gift funds are restricted for use by a particular college or department and/or restricted for a specific purpose or program according to donor criteria.

Gifts to UTSA for endowment are recorded in the appropriate endowment clearing account, while gifts for current operations are recorded in the appropriate expendable account using Account IDs assigned by the OAS .

Gifts to UTSA are never recorded in Agency Funds because Agency accounts do not belong to UTSA. For more information on Agency Funds see FMOGs - Agency Accounts and Chart of Accounts.

The Account IDs used for gift donations are as follows:

  • 45100 – Gifts for Operations
  •  48551 - Gifts for Endowment

An endowment account may have a related expendable account to which distributions from the endowment are transferred.

Restricted/Gift funds must never be used to deposit miscellaneous revenues unrelated to donations and gifts to UTSA.

C. Processing Endowments

Endowments may be established with gifts that have been completed for tax purposes (the donor has relinquished all claim and control over the gift funds or property) or with a combination of such gifts, pledges and other funds.

Endowments may fund scholarship programs and other educational activities as well as certain endowed academic positions (see Regents' Rules and Regulations Rule 60202). The minimum funding level varies according to the type of endowment, but will never be less than $10,000 in accordance with UTS138. Contact the OAS for minimum levels for various types of endowments (e.g., scholarships, professorships, chairs).
All endowments must be reviewed and approved by the OAS and ODGPS.

Endowment Agreements are drafted and finalized by the OAS in coordination with the donor, the development officer and the ODGPS. A written endowment agreement signed by the donor(s) is required for each new permanent endowment established. For details of required endowment agreement provisions see UTS138.

Pledges from donors that follow these procedures may be accepted to fund endowments of any level recognized by the Regents' Rules and Regulations:

  •     At least 20 percent of the donor's total required minimum funding amount must be received prior to the acceptance of an endowment.
  •     The pledge for payment of the remaining funds shall not extend beyond five years after the date of the execution of the endowment agreement.
  •     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 at the required minimum level.
  •     Funding levels will not be determined by the amount of net sale proceeds received from a non-cash gift or by the current market value of the investment held in an endowment.

EXAMPLE: If a donor gives a gift of stock valued at $10,000 to create a new endowment and 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.

  •     If the donor is unable to fulfill the pledge by the end of the five-year period, the endowment will either be dissolved or redesignated upon the formal request of the OAS to the BOR.

Assets donated to fund an endowment may be delivered to the ODGPS for custody and investment by the University of Texas Investment Management Company (UTIMCO) pending acceptance. The OAS must be contacted to coordinate this transfer on behalf of UTSA.

Once an endowment is created, the terms, purpose or existence of that endowment may be changed only if authorized by the terms of the endowment agreement, Regents' Rules and Regulations, and applicable laws. The OAS prepares and coordinates documentation for endowment amendments in coordination with the donor, the development officer and the ODGPS.

1. Accounting for Endowments

Endowments are accounted for in the Endowment funds and are invested by UTIMCO. Endowment earnings are generally distributed to the related expendable account on a quarterly basis.

There are three types of endowments:

    a. True Endowments: The principal of true endowments is not expendable, and must be invested in perpetuity (the income from such endowments may be distributed to an expendable account.)
    b. Funds Functioning as Endowments (Quasi-Endowments): Institutional funds that BOR/UTSA has elected to treat as true endowments although not required to do so. In other words, a decision is made to invest a portion of currently available funds as an endowment for the long-term rather than spending the funds for current purposes. 
    Quasi-endowments can be unrestricted or restricted, depending on the nature of the funds used to create the quasi-endowment.  The income from restricted quasi-endowments may be distributed to the related restricted expendable account, but income from unrestricted quasi-endowments must be distributed to unrestricted current-purpose accounts.  Unlike true endowments, quasi-endowments may be dissolved and the principal returned to UTSA with BOR approval.
    c. Term Endowments: Term endowments are treated as true endowments until a specified date or the occurrence of a certain event, after which the principal is expendable.  

The majority of endowed gifts are restricted for use by a particular college or department and/or a specific purpose or program according to donor criteria.

Fund transfers from endowed accounts are not allowed except when transferring to the Endowment funds to reinvest earnings or to establish new endowments.

For questions regarding endowments, email the Director of Endowment Compliance and Gift Services in the OAS .

D. Gift Pledges

Gift pledges are voluntary nonexchange transactions that result from legislative or contractual agreements, other than exchanges, entered into willingly by two or more parties.

Not all gift pledges receivable will be collected. To match revenue and expenses of a given period and properly value pledges receivable, the OAS , with the assistance of Accounting Services, will develop policies for estimating the allowance for uncollectible pledges and writing off uncollectible pledges in accordance with generally accepted accounting principles. For more information see UT System policy UTS142.2.

UTSA processes unconditional and conditional gift pledges.


1. Unconditional Gift Pledges

An unconditional gift pledge is a gift promise that is binding on the donor when the promise is made and depends only upon the passage of time or collection efforts for its performance.

Material (face value of $10,000 or greater) unconditional gift pledges must be included in the financial statements.

UTSA records the pledge's net present value when it accepts the pledge and the pledge is verifiable, measurable and probable to collect:

 

Debit

Credit

Gift Pledge Receivable

$xxx

 

Gift Revenue

 

$xxx

When the pledge is collected, Gift Pledge Receivable is credited for the original present value and “additional” gift revenue is credited for the interest accrual difference between the present value and the amount received from the donor:

  Debit Credit

Cash

$xxx

 

Gift Pledge Receivable

 

$xxx

"Additional" Gift Revenue

 

$xxx

Multi-year gift pledges must be reported at the discounted present value, calculated by both of the following:

  • Using an interest rate for the applicable federal mid-term rate in effect for valuing certain debt instruments established annually in September of the fiscal year in which valuations or receipts of resources occur.
    NOTE: Interest rates must be re-established annually for subsequent new nonexchange transactions using the September or nearest maturity applicable debt instrument (i.e., US Treasury Bills and Notes quoted yields as listed in the Wall Street Journal); and

  • Basing the calculations on the most recent mortality experience available.

Pledges that are expected to be collected in less than one year are not discounted, and such pledges of non-cash assets may be recorded at net realizable value because that amount results in a reasonable estimate of value.

2. Conditional Gift Pledges

Conditional gift pledges are dependent upon the passage of time or the occurrence of a future uncertain event. Such pledges are monitored by the OAS , but are not recorded until all conditions have been met. At that time, the pledge is recorded as described above, provided that the pledge is measurable and probable to collect.



DEFINITIONS

Term Description

Sponsored Project

An externally funded activity evidenced by a written agreement between UTSA and an awarding agency. Sponsored projects normally involve a reciprocal transfer of something of value, such as the generation of a product, service or other consideration by UTSA in return for the support from the sponsor. For more information, see FMOG - Grants and Contracts Accounting Practices.

Present Value

The value of a future series of cash inflows discounted at a specific interest rate (i.e., the amount that needs to be invested on a certain date to produce a specified future amount).

Net Realizable Value

An estimate of the current selling price of a non-cash asset net of expenses related to the sale.

University of Texas Investment Management Company (UTIMCO)

Created in March 1996 as an external investment corporation formed by a public university system to oversee investments for The University of Texas and Texas A&M Systems.

 

REFERENCES/LINKS

  •  Regents’ Rules and Regulations
  • UT System Policies
  • UTSA Handbook of Operating Procedures