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Fact Book > Finance and Endowments
> Philanthropic SourcesPhilanthropic Sources of Budgetary SupportWashington and Lee University enjoys significant budgetary support derived from three gift sources. The first of these sources is the Annual Fund, which is a recurring pool of gifts given annually in direct support of the operations of the University. The magnitude of these gifts now exceeds $5.2 million annually (on June 30, 2006). The other two gift sources provide a flow of income generated from the investment of the principal amounts involved. The source of greatest magnitude is Endowment. As of June 30, 2006, the market value of the endowment controlled by the University was $587.0 million. During that fiscal year $27.1 million was spent from endowment return in support of salaries, financial aid, and other forms of operation. Another major gift source is that income received from trusts established entirely or in part for the benefit of the University, but under the control and management of some other party. We refer to these as Trusts Held By Others. Our interests in such trusts as of June 30, 2006 amounted to $254.6 million from which $6.95 million was received in direct support of operations. Policies are in place which strive to protect the purchasing power of Endowment Funds over time. The assets of these Funds are combined into a single Investment Pool and professional investment managers are allocated varying portions of that Pool to optimize the total return. Within the Pool, each individual fund is accounted for separately by the use of a unitized system. This system works essentially like a mutual fund in that the value of a unit moves with the market performance of the pool. A unit purchased in 1982, for example, will reflect a growth in value in 2006 as a result of participating in the managed pool of assets. An addition in 2006 would purchase units at the current rate, thereby depending upon future management to grow in value. Thus, if $100,000 were received in 1982 it would have purchased 119.336 units in the pool and would now be worth $463,425. The value today is net of spending which would have occurred each fiscal year based upon a formula approved by the Board of Trustees. The Board-approved formula for Endowment spending is a four-step process. The first step is essentially incremental in nature. A projection is agreed upon for inflation for the next year. To that amount, we add one percent for modest annual growth. We then increase the most recent allocation from Endowment by this percentage. The resulting amount becomes a potential allocation for the next year. We then move on to the second step of the formula; this is our averaging step. We average the market values as of December 31 of the most recent three years. Then, we take six percent of that average. This result is compared with the incremental result of step one and the lesser amount of the two is retained as the probable allocation for the next year. The third step is an upper limit test. It is intended to prevent imprudent spending in periods of declining market values. In this step we calculate ten percent of the most recent market value (usually a March 31 value) and compare it with the historic dollar value. Normally, the most recent value by far exceeds the historic value, but in the event that it should drop below the historic value, spending would be limited only to yield. Otherwise, the amount retained in step three becomes the allocation, subject to one final test. The fourth step (our final test) is to compare the allocation amount with a calculation of five percent of the June 30 market value. If the allocation amount exceeds the five percent figure, it must be reduced to that figure. If not, it becomes the allocation. In fiscal year 2006, the market value of the Investment Pool increased by a net of $55.0 million. Investment income, net realized gains and appreciation of assets added $67.5million. In addition, the combination of new gifts accounted for an addition of and various transfers netted another $14.6 million. All of these increments were offset, however, by distributions which totaled $27.1 million. |
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Office of Institutional Research |
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