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UNIVERSITY OF TENNESSEE SYSTEM POLICY
FISCAL

POLICY NO: FI0315 SUBJECT:  GIFTS  
EFFECTIVE: 07/01/2003 REVISION NO: 4

TOPICS:
Administrative Framework Receipt And Deposit Of Gift Funds
Tax-Exempt Status Of Gifts To The University Related Policies
Accounting Treatment Of Gifts Procedures
Minimum Size And Other Limitations On Restricted Gifts Contacts
Documentation Requirements For Current Restricted Gift Funds

OBJECTIVE:

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To provide policies and procedures on the acceptance and administration of gifts to the university.


POLICY:

Administrative Framework[top]

  1. The university, through the university-wide administration and campus alumni development offices, has well-organized programs for encouraging and soliciting gifts for the support of the university's various functional purposes and activities. The proper functioning of these programs requires that each campus or unit develop internal procedures to assure that all gifts to the university are properly channeled through or reported to the appropriate alumni or development office. These procedures must be approved by the chief financial officer (or designee), the treasurer, and the vice president for development.

Tax-Exempt Status of Gifts to the University[top]

  1. Donors to the university are permitted to take deductions on federal tax returns to the extent permitted by Treasury Department regulations. The basis for this deduction is that the University of Tennessee is an instrumentality of the state of Tennessee [Section 170 (c)(1) of the Internal Revenue Code]. For the transfer of monies to the university to qualify as a gift, the monies must be for the exclusive use of and under the control of the university. For example, a transfer by a donor to fund a scholarship for a designated student or for the purpose of benefiting a designated third party is not a gift to the university, but rather a gift to the student or other third party. Such monies for the benefit of specifically named students or third parties may not be accounted for as gifts to the university, but must be directly credited to the designated student's account or be credited to a fund for disposition in accordance with the transferor's instructions.

Accounting Treatment of Gifts[top]

  1. Gifts (including bequests) are monies or property voluntarily given to the university without expectation of return or compensation on the part of the donor. For accounting and administrative purposes, gifts are classified into two main categories:


    1. Unrestricted Gifts. These are gifts upon which the donor has placed no definite restrictions as to the method or purpose of expenditure, leaving the university to determine the appropriate use of such monies. This term may also be applied to gifts received under a continuing solicitation program for general support of an institutional activity (such as the university's athletics programs where anticipated gifts are budgeted as a regular funding source).

      Generally accepted accounting principles require that unrestricted gifts be accounted for by the university as revenue of Current General Funds. Such monies may be budgeted, appropriated, and expended for any appropriate institutional purpose through the university's normal fiscal procedures.



    2. Restricted Gifts. These are gifts upon which the donor has placed definite restrictions on the purpose for which or the conditions under which such monies may be expended or disbursed.

      Restricted gift monies available for current expenditure in accordance with the purpose designated by the donor will be credited to an appropriate Current Restricted Fund until expended. Other restricted gift amounts not available for current expenditures (such as gifts to establish Student Loan Funds, Endowment Funds, or Annuity or Living Trust Agreements) will be credited directly to a specially designated fund in the appropriate fund group.


Minimum Size and Other Limitations on Restricted Gifts[top]

  1. Current Restricted Gift Funds. To avoid carrying out the administrative responsibilities connected with many small separate funds, each campus and unit may establish, with the concurrence of the University-wide Development Office and the Office of the Treasurer, minimum amounts of gift funds required to justify establishing a separately designated restricted fund.


  2. Gifts for Endowments, Loan Funds, and Living Trust Agreements. The establishment of perpetual Endowment Funds or Student Loan Funds through direct gifts or through the establishment of Living Trust Agreements places definite administrative obligations on the institution. The university has adopted the following minimum requirements for establishing such funds:


    1. Endowments and Loan Funds should not be established in amounts of less than $25,000. Living Trust Agreements should not be established in amounts of less than $50,000.


    2. Installment Endowments must be funded within a period of ten years from the date of the initial gift.


    3. An Installment Endowment Agreement must contain a provision that if, for any reason, the donor does not totally fund the minimum endowment of $25,000 within the period (not to exceed ten years) stated in the agreement, the university has the authority to use the principal for the purpose stated in the Memorandum of Agreement.


    4. Ordinarily, the Memorandum of Agreement covering the establishment of an Endowment Fund will provide that the endowment income be expended for the designated purposes as earned; however, on installment endowments the university will permit an option for the donor to provide that the income earned on endowment investments be added to the endowment principal until such time as the principal reaches $25,000 (not to exceed ten years). Once the principal reaches $25,000, the income must be expended for the purposes for which the fund was established. If the donor's commitment is to fund an endowment in excess of $25,000, income earned may be added to principal until such time as the principal reaches the targeted amount (which must be stated in the agreement), such period of re-investment not to exceed ten years (time limit must also be stated in agreement).


    5. The establishment of each new Endowment Fund or Student Loan Fund must be based on a Memorandum of Agreement. The establishment of a Living Trust Agreement must be based on a formal Unitrust or Annuity Trust Agreement executed by both the university and the donor. Such a Memorandum of Agreement covering the establishment of Endowment and Loan funds should be drafted by the campus or unit development officer or the donor's attorney, following the general format of sample agreements furnished by the University-wide Development Office. Any modifications of the standard Memorandum of Agreement should be reviewed by the Office of the General Counsel and the Office of the Treasurer in advance of the donor's signature. Upon execution by the donor, the agreement should be forwarded to the Office of the General Counsel through the contract review process for execution by the university and transmittal through appropriate channels to the treasurer for the permanent document files. Appropriate accounts cannot be established nor may the gift funds be invested until the treasurer receives the required executed agreement.

      Due to the extremely technical nature of Unitrusts and Annuity Trusts, such instruments should be drafted only by the University-wide Development Office's Planned Giving area or a designated planned giving officer at a campus or unit. The terms of all trust agreements must be approved by the treasurer before the agreements are executed.


    6. Each Memorandum of Agreement covering the establishment of an Endowment or Student Loan Fund must be accompanied by a statement of provisions for administering the fund, with the exception of UT Knoxville Men's and Women's Athletics scholarship endowments where NCAA and SEC policies and procedures govern use of the funds. This statement of provisions should be drafted when the Memorandum of Agreement is drafted and should accompany the memorandum through the review and execution process. After execution, the development office should furnish a copy of the statement to the financial aid officer of the appropriate campus whenever funds are designated for student aid so that the monies may be applied in accordance with the donor's specifications.


    7. After execution by the university and the donor, any subsequent changes to the Memorandum of Agreement or the administrative provisions can be made only by executing an amendment to the original agreement. The amendment must be reviewed and executed through the same channels as the original Memorandum of Agreement.


    8. Exceptions to the above conditions and limitations must have the written approval of the chief financial officer (or designee) and the vice president for development.

Documentation Requirements for Current Restricted Gift Funds[top]

  1. To ensure appropriate accounting treatment and administration of Current Restricted Gift Funds in accordance with the wishes of or agreement with the donor, the campus or UWA alumni or development office must furnish the Office of the Treasurer the official agreement (where one is appropriate) or written details that designate the purpose or restrictions on the use of such monies. Appropriate fund numbers cannot be assigned before this information is received, and such information is required for the permanent document files on each fund. Such documents, information, and requests for fund numbers should be channeled through the campus or unit business office to the controller's office. (Alternate procedures have been approved by the university that permit the permanent document files on Current Restricted Gift Funds for the Health Science Center to be retained at that location.)

Receipt and Deposit of Gift Funds[top]

  1. Unrestricted Current Gift Funds. Gifts received through any of the organized gift programs and unrestricted as to use should be transmitted to the appropriate campus or UWA alumni or development office. This office will promptly receipt and deposit such monies through normal channels with credit indicated to the appropriate Unrestricted Gift Revenue fund.
  1. Restricted Current Gift Funds. Gifts received with donor restrictions as to purpose or use should be transmitted to the campus or UWA alumni or development office for appropriate receipting and depositing. If appropriate fund numbers have not been established at the time gift monies are received, the check, along with supporting documents, should be forwarded to the campus or UWA alumni or development office for receipting and depositing into a gift suspense or holding fund to be transferred when the appropriate fund numbers are assigned. The fund number should be requested through the campus or unit business office to the Controller's Office.
  1. Endowment and Loan Fund Gifts. Gifts for the establishment of such funds should be receipted and deposited by the alumni or development office into a gift suspense or holding fund to be transferred when the appropriate fund number is assigned. The number will be assigned by the Treasurer's Office when that office receives the fully executed Memorandum of Agreement through regular channels from the Office of the General Counsel.
  1. Trust Fund Gifts. Gifts for the establishment of trust funds should be transmitted immediately by the campus or unit development office directly to the Office of the Treasurer so that the fund number can be established and the monies deposited. The Treasurer's Office will issue a receipt for such monies.
  1. Gifts of Securities. Any gift made to the university in the form of negotiable stocks, bonds, or other securities should be accepted in form and by procedures authorized by the treasurer for each transaction. Such securities should be delivered or transmitted directly to the Office of the Treasurer immediately upon receipt. The Treasurer's Office will issue a receipt for such securities. If the gift securities are electronically transferred from the donor's brokerage account to a university brokerage fund, the Treasurer's Office should be notified as soon as possible to determine appropriate gift disposition.
  1. Gifts of Real Property. The acquisition of gift property is discussed in FISCAL POLICY FI0620. Usually, the treasurer will execute Form 8283 for gifts of real property. If Form 8283 is executed by any other University personnel, it is the responsibility of the signer to immediately forward a copy of the Form 8283 to the trust officer in the Office of the Treasurer. Also, refer to FISCAL POLICY FI0615 on the disposition of gift personal property.

RELATED POLICIES
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PROCEDURES
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Knoxville:  http://web.utk.edu/~dfinance/fiscal-policy.shtml
Health Science Center:  http://www.uthsc.edu/policies/w932_document_list.php?app=FSC
Space Institute:   
Chattanooga:   
Martin:  http://www.utm.edu/departments/finadmin/procedures.php
FOR MORE INFORMATION
:
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  Butch Peccolo  (865) 974-2302  cpeccolo@utk.edu