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Endowment Policy

I. Purpose of the Fund

 

The purpose of the Washington Native Plant Society’s (WNPS) Endowment Fund (Fund) is to provide financial support to WNPS research, education, and conservation grants and projects. The Fund was established by resolution of the WNPS Board of Directors (Board) on July 20, 2001 and shall endure for as long as WNPS formally exists as a charitable organization.

 

II. Endowment Structure

 

The Fund is considered a “true endowment fund” comprised solely of donor contributions and gifts (that is, contributions or gifts permanently restricted by the stated or presumed intent of the donors; hereinafter referred to in the aggregate as “original contributions”). The Fund shall be managed to retain the value of the original contributions for the life of the Fund, as described in Section V. The value of original contributions is considered permanently restricted.

 

Investment distributions accrued during any fiscal year shall be reinvested until such time as spending appropriations are identified and withdrawn to support the Purpose of the Fund. Ordinary income (that is, dividends and interest) and capital appreciation (both realized and unrealized) of both current and prior years earned are considered temporarily restricted revenues. Temporarily restricted funds appropriated in support of the Purpose of the Fund are subject to the spending limits described in Section V.

 

III. Roles and Responsibilities

 

The Board retains sole accountability for the Fund and delegates administration of the Fund to the WNPS Executive Committee and WNPS Treasurer. Investment selection and portfolio management may be administered internally by the Treasurer and WNPS Financial Advisory Committee (Committee) consistent with the Fund investment policy in Section IV. Internal management of Fund portfolios may be appropriate for assets that are passively managed and self-adjusting.

If the Board elects a more active management of Fund portfolios, use of external agents may be more prudent. Uniform Prudent Management of Institutional Funds Act (UPMIFA) [Revised Code of Washington (RCW) Chapter 24.55] authorizes use of external agents to conduct the management and investment functions for institutions. In discharging this authority, the Board delegates the Executive Committee to act in the place and stead of the Board and may receive reports from, pay compensation to, and enter into and terminate agreements with such external agents.

The Treasurer, with approval of the Executive Committee and in consultation with the Committee, shall report to the Board annually on the status of original contributions, portfolio performance, investment and spending summaries, and recommendations for changes to this Policy. Recommendations for specific grants and projects for funding within the authorized spending appropriation shall be the responsibility of the Research, Education, and/or Conservation committees with concurrence of the Board.

The Treasurer and each member of the Executive Committee and Committee must complete an annual affirmation of compliance with the WNPS Conflict of Interest Policy.

IV. Investment Guidelines

 

The Fund shall be managed in accordance with UPMIFA. The primary investment goal of the Fund is to produce a return-on-investment that will permit funding support for the Purpose of the Fund to an extent that is consistent with prudent and fiscally responsible management of investments, preservation of the value of original contributions, and to provide potential for long-term asset growth. Secondary investment goals attempt to minimize risk by considering asset selection/diversification and to minimize administrative and management costs.

Permissible Investments

Fund assets managed in-house shall be invested in mutual funds and fixed income securities (including certificates of deposit and money market instruments). If external agents are selected to manage the Fund, then publicly-traded common and preferred stocks, convertible bonds and preferred stocks, bank common funds, mutual funds, and fixed income securities (including corporate bonds, certificates of deposit, and money market instruments) whether interest-bearing or discount instruments may be used and shall be subject to any restrictions hereinafter specified. No other securities are permissible investments without specific approval of the Board.

Investments and Transactions Not Permitted

Equity Investments: common stock in non-public corporations; letter or restricted stock; derivative instruments; initial public offerings; and buying or selling on margin are not permissible investments.

Fixed-Income Investments: tax-exempt bonds; junk bonds; bonds, notes, or other indebtedness for which there is no public market (private placements); and direct placement of mortgages on real property are not permissible investments.

Options and Futures: transactions in futures contracts or in options contracts of any kind are not permissible investments.

These restrictions are not intended to apply to equity or fixed income mutual funds that may occasionally and/or inadvertently include nominal or incidental investments that would otherwise be restricted by this Policy but that are otherwise not the focus of those equity or fixed income mutual funds.

 

Asset Mix

The primary investment goal of this Policy implies a balanced approach involving equity investments, fixed-income investments, and short-term investments. The purpose of equity investments (both domestic and international) is to provide capital appreciation and growth of income with the recognition that this asset class carries a burden of greater market volatility and increased risk of loss. The purpose of fixed income investments (both domestic and international) is to provide current income and diversification, and to dampen the volatility of equities. The purpose of cash or cash-equivalent investments is to provide liquidity for spending.

Thus, the Fund’s investment strategy is expected to use portfolios of equity securities (common stocks, preferred stocks, and convertible securities), fixed-income securities (debt instruments), and short-term investments—or mutual funds comprised of these security types—according to the following Fund allocation guidelines. These Fund allocation guidelines may be modified periodically by the Committee.

INVESTMENT TYPE

LONG-TERM TARGET

ALLOWABLE RANGE

Equity

57.5%

30% to 70%

Fixed Income

37.5%

30% to 70%

Cash or Cash Equivalents

5%

0% to 20%

 

Asset Diversification and Quality, and Monitoring

Asset diversification and risk exposure shall be maintained by selecting balanced and index mutual funds. The Committee shall monitor and review the performance of specific assets at least annually and evaluate any asset whose performance falls below applicable performance guidelines to determine whether any particular investment asset should be retained. The Committee shall also monitor the Fund’s overall investment allocation to ensure the Policy’s allocation guidelines are being met; if not, the Committee should attempt to rebalance the allocation.

V. Spending Guidelines

 

Spending Limits

 

No spending appropriations shall be made from the Fund that would reduce the market value of the Fund below $100,000. To preserve the value of original contributions, no appropriations shall be made in any year that would reduce the Fund’s current market value (as valued on December 31st of the previous year) below the amount of that year’s cumulative value of original contributions.  Annual appropriations shall be limited to 5% of the value of the Fund as of December 31 of the prior year. The Board may decide to make no appropriations from the Fund in some years.

Appropriations for the coming year shall be recommended by the Committee to the Board during annual fall Board meetings. Those recommendations shall be based on considerations involving size, growth, inflation, performance (past and projected) of the Fund, and the needs of WNPS. The cash required for appropriation may be drawn from both ordinary income and capital appreciation. Any income earned and capital appreciation not required to meet spending appropriation in any given year shall continue to be accounted for separately as temporarily restricted revenue and invested until spent.

The Board may authorize up to 2% of the Fund’s temporarily restricted revenue to defray costs of fund-raising and administration/management of the Fund. 

VI. Dissolution

In the unlikely event of the formal dissolution of WNPS as an organization, the Fund shall transfer to an organizational endowment whose goals are consistent with those of WNPS. That decision would be made by the Board at the time of formal dissolution.

VII. History

 

This Policy replaces the Endowment Policy adopted by the Board on July 20, 2001 (as amended October 23, 2004) and is consistent with UPMIFA, RCW Chapter 24.55.

 

VIII. Amendment and Revision

 

This Policy shall be reviewed and approved by the Committee annually. The Board reserves to itself the exclusive right to amend and revise this Policy at any time.

 

APPROVED BY WNPS BOARD OF DIRECTORS ON: October 20, 2012.

Printable PDF

Original Endowment Policy approved by the Executive Board: July 20, 2001, revised 10/23/04, substantial revisions approved and adopted on October 20, 2012.




Updated: March 7, 2015
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