Creating an Endowment or Scholarship
How Endowments Work
Endowment funds for the benefit of WVU are held by the WVU Foundation, a 501(c)(3) organization whose purpose is to receive and manage private contributions for the benefit of the University.
Endowments can be designated by the donor to impact a specific program or area within the University (including West Virginia 4-H, the Mountaineer Athletic Club and Potomac State College), or remain unrestricted to meet the most critical needs of the University. Donors can name a new endowment, and many choose to honor a loved one, recognize a favorite professor or create the endowment in their own name. Gift minimums apply to certain projects.
Donors may use either outright gift or deferred gift vehicles to establish named endowed funds. Outright gifts of cash or stock can be made completing the endowment immediately, or through a pledge over a period of up to five years. Deferred or planned gifts such as bequests, income producing gifts, life insurance and retirement assets can also be used to establish an endowment in the future when the gift is received.
The WVU Foundation staff works with each donor, on an individual basis, to tailor both the type of asset used and in preparing the guidelines for the administration of each endowed fund.
The purpose of an endowment is to provide ongoing support for the current and future activities of WVU and its affiliates. It is, therefore, a perpetual, self-sustaining source of permanent funding for the benefit of WVU. Each year, a portion of the endowment's earnings are paid out, while the principal (or corpus) is retained for future growth. As a result, it is imperative that the endowment grow its investment assets at a real (inflation-adjusted) rate that is sufficient to support an annual spending stream and preserve the purchasing power of the endowment in perpetuity.
The two key ingredients that are required for the endowment to grow its assets are: 1) new gifts and 2) investment performance. In order to achieve the latter, it is necessary to aggressively manage the endowment's investment portfolio so that, over the long-term, it can generate net absolute returns in excess of the required spending payout, thereby creating intergenerational equity.
From an investment perspective, the endowment's funds are pooled, or commingled, together in a manner similar to a mutual fund. The pooled investment fund is managed by professional investment managers and overseen by the Foundation's Investment Group. The WVU Foundation utilizes unitized investment accounting, which permits individual endowment funds to retain their identity, while sharing proportionately in the earnings of the commingled investment fund. As a result of this pooling of funds, the endowment's investment portfolio is broadly diversified across many asset classes and among many investment managers, thereby reducing volatility while maximizing performance. Diversification is the key driver behind the successful long-term growth of the endowment through market cycles.
Endowment Spend Policy
One of the West Virginia University Foundation’s most important responsibilities is the management and investment of endowments which are created by donors with the intent of providing permanent support for the University. As such, these funds are invested by the WVU Foundation so that a gift today will fund a donor’s objective on an ongoing basis. In establishing the Endowment Spend Policy, the Foundation seeks to provide a consistent level of funds each year for the University’s use in meeting the endowment’s purpose (endowment spend) while assuring that over time the value of the endowment will maintain its purchasing power.
Endowment spend is distributed annually from each qualifying endowment’s invested funds to its spendable cash account and is available for use by the University to fulfill the endowment’s stated purpose.
Endowment Spend Calculation
The WVU Foundation uses a banded inflation method to determine the amount of endowment spend. This method is expected to provide Endowment Spend that keeps pace with inflation while maintaining the value of the original gift over time. Endowment Spend is calculated as of calendar year end (December 31) and is determined as follows:
- Each endowment’s prior year calculated spend is adjusted by the current inflation rate to provide for the impact of inflation. This amount is the initial calculated spend amount for the coming year.
- This calculated spend amount will be compared to the market value of the endowment at calendar year end (December 31). Spend must be no less than 3.5% and no more than 4.5% of the market value. If the spend amount exceeds 4.5% of the market value, it will be reduced to 4.5%. If it is less than 3.5% of the market value, it will be increased to 3.5%. This amount would be the revised calculated spend.
- Endowment Spend will be paid according to the following schedule:
a. An endowment with market value in excess of original gift value will provide full calculated spend.
b. An endowment with market value below original gift value by 5% or less will provide spend at 75% of the upper band or 3.375% of December 31 market value.
c. An endowment with market value below original gift value more than 5% and no more than 20% will provide spend at 50% of the upper band or 2.25% of December 31 market value.
d. An endowment with market value below original gift value of more than 20% will provide no spend.
- Endowments created during the calendar year are eligible to receive Endowment Spend for that respective year. Endowment Spend for new endowments will be 4% of the December 31 market value and will be paid according to the above schedule.
- The WVU Foundation Board of Directors reviews and approves Endowment Spend each February. These amounts are held in an encumbered cash account and are made available for expenditure on July 1, the beginning of the new fiscal year.
Establishing a named endowed scholarship is an ideal opportunity to permanently link a donor's name, or the name of someone the donor wishes to honor, with the traditions and future of WVU. Just as the name attached to an endowed scholarship will be held in perpetuity at the University, so also will a service be rendered to future students, and through them, to West Virginia and the nation.
WVU Foundation Endowment Minimums
- Department/Division – Consultation Required
- Deanship – Consultation Required
- Chair – $1,500,000*
- Distinguished Chair – $3,000,000*
- Professorship – $500,000*
- Distinguished Professorship – $1,000,000*
- Named Scholarship Program – $1,000,000
- Presidential Scholarship – $100,000
- Graduate Fellowship – $50,000
- General Scholarship – $25,000
- Faculty Enrichment Fund – $50,000
- Student Enrichment Fund – $25,000
- General Endowment – $25,000
- Library (Endowment) Acquisitions Fund – $10,000
* Supplements institutional base salary and related expenses
Note: Individual college's and school's endowment minimums may differ due to special financial consideration. Donors should consult the individual college's or school's website for a listing of its endowment minimums.