All gifts coming into the endowment are unitized proportionally over a three-month period (i.e. each new gift will “purchase” endowment units equal to one-third of the historic dollar value each month for three months), beginning in the month following the receipt of the gift. This methodology is applied consistently across all gifts intended for the endowment, regardless of value (i.e., non minimum threshold). This process mitigates the fact that unit values assigned to new gifts may not reflect up-to-date valuations of certain, less liquid asset classes.
New gifts do not receive an endowment distribution in the fiscal year when they are first received. In the following fiscal year, the income distribution is based on the fund’s prior fiscal year average principal units (APUs). APUs factored into the distribution are calculated from June 30th through May 31st of the previous fiscal year.
The distribution will be funded in part through earnings (i.e., cash interest and dividends) and to a much larger degree through available market value. All funds with APUs are eligible to receive a distribution. A fund is eligible to receive a higher-than earnings distribution to the extent its market value, inclusive of the distribution exceeds 80% of historic dollar value (fund’s corpus balance). There may be exceptions to this rule due to donor restraints.
Other components related to this distribution include assessments used to support central and local costs. These would only happen if the fund terms allow for these overhead assessments. Funds recapping 100% of treasurer’s distribution income will not be bear any centrally-processed assessments.
If there are questions concerning the above or any other gift/ investment questions, please contact Lisa Talacci at lisa_talacci@harvard.edu or at 6-3041.