An endowment is an investment in the future of the University of Georgia. When you use your charitable gift to establish an endowment, the gift is invested with two goals in mind: to provide spendable income for whatever specific purpose you have designated and to make the principal grow faster than inflation. The original principal (or gift) is never spent, and any investment return over allowed spending and fees is channeled back into the fund to keep it healthy and growing.

Simply put, annual giving helps support continual operations, while endowed giving creates the building blocks for long-term growth. Many donors who create endowments also participate in annual giving. Both types of giving are critical to the University's success, but an endowment is distinct and unique in its impact on UGA.

Your endowment will be set up in a separate account within the UGA Foundation to carry out the purpose specified in the gift agreement. Endowments are invested long-term in an investment pool overseen by the Investment Committee of the Board of Trustees. At least quarterly, endowments receive interest and market value adjustments based on the actual results of the investment pool, net of investment management fees. More information is available in the Policies & Procedures: investment policy section.

What you choose for your endowment to support is entirely up to you. You may designate your gift for any purpose (including unrestricted) that betters the University of Georgia and that is acceptable to the University Administration and the Board of Trustees of the UGA Foundation. Depending on what you intend your endowment to support, certain minimum endowment requirements apply.

Whenever a gift is restricted by the donor to a particular purpose for which there is not an existing endowment, a fund agreement is created. A fund agreement ensures that the gift will always be used exactly as you intend. The agreement sets out your specific criteria for how the University will utilize your gift and, if you desire, includes background on why this gift is important to the University. Your Development contact will assist you with drafting and understanding the fund agreement.

A fund agreement also enables your endowment to be invested and the investment return to be used towards the endowment's purpose. It also sets forth provisions for other requirements such as the support fee.

The support fee is currently charged annually at a maximum rate of 1% of the endowment value. The support fee will be assessed only if there is sufficient investment return to first fund the following:
1. the spending allocation and
2. an inflation factor reinvested to provide for intergenerational growth .

For example, if the spending percentage is 4% and the inflation factor is 3.5%, a support fee would not be assessed until the investment return exceeds 7.5%. Any investment returns in excess of 8.5% (4% spending, 3.5% inflation, and 1% support fee) would be reinvested along with the inflation factor.

Since the University directly supports the vast majority of the operating costs of the UGA Foundation the support fee is primarily used to fund academic programs and activities serving UGA priorities. The Board of Trustees must approve all such expenditures requested by the University Administration. The support fee is also used to fund the remaining operating costs of the UGA Foundation that are not provided by the University.

Your endowment will be invested with the objective of achieving intergenerational equity while providing for a reasonable spending allocation to support the endowment's purpose. Intergenerational equity for endowments is the concept of protecting future purchasing power by growing your endowment at a rate that meets or exceeds inflation.

To achieve intergenerational equity, investment return in excess of the spending allocation will be reinvested, and the support fee will not be assessed until such reinvested amount exceeds an inflation factor. The inflation factor is determined annually by Arch in consideration of present and historic inflation and currently is 3.5%. Ideally, as your endowment grows, so does the support it provides.

The following examples illustrate the importance of this concept over time:

Once your endowment is fully funded and invested for at least one fiscal year, an annual spending allocation will be calculated for your fund. Waiting at least one fiscal year allows your endowment to earn investment returns to support spending and increases the probability of an annual increase in the amount available to spend from your endowment. If there is no investment return in excess of the original amount of the endowed gift, then no spending is allowed.

The annual spending allocation is based on a predetermined rate applied to the average balance of your endowment and is limited to available investment return. The spending rate is determined annually by the Investment Committee in consideration of maximizing both spending and endowment growth and currently is 4.0%. The average balance of your endowment is calculated using the previous monthly balances for up to 36 months. This averaging helps smooth the effects of market fluctuations.

Unused spending allocations can be rolled over to the next year subject to certain limitations. Investment return in excess of the spending allocation is retained within the endowment increasing its size over time and, therefore, increasing the amount of support generated for the donor's specified program. More information is available in the Policies & Procedures: spending policy section.

Knowing the benefit the University receives year after year as a result of your generous support is one of the keepsakes of the legacy you have created through your endowment. The University's Office of Donor Relations stewards endowments by keeping you informed with annual reports highlighting the progress and growth of your endowment.

You can also contact the University unit which your gift supports and they can provide you with a current report on a real-time basis. Or, you can always contact the UGA Foundation Office at (706)542-6677 and ask for the status of your endowment.