The university has two pools for managing expendable funds, the Endowment Income Funds Pool (“EIFP”) and the Expendable Funds Pool (“EFP”).
a. Endowment Income Funds Pool
The EIFP comprises funds holding unspent prior year payout distributed from pure endowment funds (including amounts reinvested in those funds).
- Investment Policy: One hundred percent of the assets in the EIFP are to be invested in cash and liquid short-term investment vehicles managed in the Short-term Investment Pool (“STIP”).
- Return Allocation Policy: Each endowment income fund holding unspent prior years’ payout will receive an allocation equal to the net return on the STIP, less the cost to administer the portfolio.
b. Expendable Funds Pool
The EFP holds the following types of expendable funds:
- Endowment Income Funds – current year payout distributed from pure endowment funds and all payout from Funds Functioning as Endowment (“FFE”) not yet expended
- Restricted Funds – gifts or other restricted expendable funds not yet expended
- Designated Funds – funds designated for a specific school, department, faculty or purpose, not yet expended
- Unrestricted Funds – university, school, department, auxiliary or faculty funds held in reserve or pending expenditure
- Gifts Pending Designation – gift funds received for which the purpose has not yet been designated and which are not invested in the Merged Pool or Intermediate Pool
- Plant Funds – funds designated for facilities, not yet expended.
- Recycling Pool – proceeds from internal debt amortization available to lend to projects
- Insurance and Benefit Program Reserves – reserves held for claims within self-insurance programs
- Student Loan Funds – funds available to lend for student loans
- Agency Funds – funds held by Stanford University on behalf of third parties
- Investment Policy: Depending on the University’s operating and other liquidity requirements, the University’s Chief Financial Officer or his/her designee will determine appropriate balances to be invested in the Intermediate Pool (IP) or cash and liquid investment vehicles managed in the STIP. The remainder of the EFP is to be cross-invested in the MP. The University may also draw on a bank line or other debt vehicle to fund liquidity needs as deemed necessary by the University’s Chief Financial Officer or his/her designee.
- Return Allocation Policy: Funds invested in the EFP are grouped into two categories for purposes of allocating investment returns.
a. Money-Market Accounts
The following types of Expendable Funds will be treated as “Money-Market Accounts” and will receive an allocation equal to the net return on the STIP:
- Restricted Funds, only when stipulated by donor requirement
- Gifts Pending Designation, excluding class gift funds and donor funds of less than $100,000
- Plant Funds, raised from gifts exceeding $1 million
- Recycling Pool
- Insurance and Benefit Program Reserves
- Student Loan Funds
- Agency Funds
b. Zero-Interest Accounts
All other Expendable Funds will be treated as “Zero-Interest Accounts.” Investment returns on these funds will not be allocated to the individual fund, but will be accumulated and distributed to the Provost’s General Fund and to the School of Medicine (“SoM”) and Graduate School of Business (“GSB”) Dean’s Unrestricted Funds, as described below:
- SoM Dean’s Unrestricted Fund will receive an allocation related to zero-interest account balances controlled by the SoM dean’s office, departments and faculty.
- GSB Dean’s Unrestricted Fund will receive an allocation related to zero-interest account balances controlled by the GSB dean’s office, departments and faculty.
- Provost’s General Fund will receive an allocation related to all other zero-interest account balances.
The allocation shall vary between 0% and 5.5% of the zero-interest account average monthly balances during the prior fiscal year:
- The allocation shall be 0% if the prior year’s return of the EFP is less than or equal to 0%
- The allocation shall be 5.5% if the prior year’s return of the EFP is greater than or equal to 5.5%
- The allocation shall be equal to the prior year’s return of the EFP if the actual return is greater than 0% and less than 5.5%
To the extent the allocation on zero-interest account balances is less than 5.5% in any year, the Provost and Deans may, at their individual discretion, elect to offset the shortfall by reducing an equivalent amount of the contribution in that year from general funds and deans’ funds to the Capital Facilities Fund (“CFF”).