Restricted Funds Management Policy

To ensure compliance with donor intent, to allow for timely stewardship of donor-restricted gifts, and to promote practices that result in the greatest flexibility in long-term financial planning and utilization of all available resources.

EFFECTIVE DATE

July 2007

APPROVED OR LAST REVISED DATE

May 2020

RESPONSIBLE OFFICES

Endowment Administration
Financial Reporting Office
Gift Recording Office

POLICY HIGHLIGHTS, CATEGORIES, & TUTORIAL

Restricted Funds

PDF VERSION

Restricted Funds Management Policy

POLICIES

Dartmouth College is legally obligated to honor donor directives regarding the use of their gifts. All donor-restricted gifts (current-use gifts, facility gifts and distributions from restricted endowments) must be used for purposes consistent with donor intentions. It is equally important to spend gifts in a timely manner consistent with these charitable purposes. Holding restricted gifts in reserve unspent doesn’t meet donor intentions and furthers the risk of not being able to provide stewardship for donors or reports on spending for compliance reasons.

For purposes of complying with donor intent and providing good stewardship, and in consideration of other available resources, it is strongly encouraged that restricted gifts and endowment distributions be used consistently as the first source of funding to support programs and activities meeting the restriction. Unrestricted resources may be applied to such programs after gifts and distributions restricted to those purposes have been fully exhausted.

Donors occasionally make contributions to provide the President or Deans with expendable gifts or endowments to support special projects determined at their discretion. Although these resources often provide a great deal of flexibility, funds may be held in reserve until projects are decided on and come to completion. Holding discretionary current-use gifts or endowment income in reserve for reasonable periods of time so that special projects and purposes can be accomplished in fulfillment of the donor’s intent is considered acceptable.

Donor expressed “preferences” are not legal obligations in the same way as a restriction, but it is Dartmouth’s policy and longstanding practice to honor preferences whenever possible and for as long as preferences continue to fit the needs of the benefiting area and the educational mission of Dartmouth College.

ACCOUNTABILITIES

The Gift Recording Office is responsible for:

  • Ensuring that all donor gifts/commitments are documented with a Statement of Understanding or other appropriate gift instrument/documentation in accordance with Dartmouth College policy.
  • Reviewing current-use gift documentation for donor intent and, working in collaboration with the Financial Reporting Office and Office of Institutional Accounting, assigning restriction level codes for use by Fiscal Officers and others who oversee the use of gifts.
  • Providing documentation for gifts creating new allocations in Endowment, Current-Use or Facilities, to Fiscal Officers, the Financial Reporting Office or the Endowment Administration Office, depending on the purpose.
  • Verifying that gift additions to existing allocations are clearly designated and documented.
  • Maintaining documentation for Facilities and current-use gift allocations.
  • Providing guidance to Fiscal Officers, Departments and Program Administrators if there are problems spending current-use gifts because of restricted terms. Finding options for using current-use gifts such as: helping to identify possible uses within the existing terms; working within Advancement to contact living donors to request broader terms; or seeking judicial relief.

 

The Endowment Administration Office is responsible for:

  • Ensuring that all new endowment funds are documented with a Statement of Understanding or other appropriate gift instrument.
  • Interpreting and recording donor intent (restrictions and preferences) and assigning restriction level codes and other applicable classifications in Dartmouth’s Endowment Fund System for use by Fiscal Officers and others who oversee the use of endowment distributions.
  • Maintaining a permanent record of all endowment gift agreements and preparing a narrative summary of the fund terms.
  • Providing guidance to Fiscal Officers, Departments and Program Administrators if there are problems spending endowment distributions because of restricted terms. Finding options for using distributions such as: helping to identify possible uses within the existing terms; working with Advancement to contact living donors to request broader terms; or seeking judicial relief.
  • Seeking guidance regarding donor intent and/or the legal obligations of Dartmouth College from the Office of General Counsel if needed.

 

The Office of Institutional Accounting is responsible for:

  • Communicating the terms of all new endowment funds to fiscal officers at the time the endowment is established.

 

Fiscal Officers are responsible for:

  • Providing Departments and Program Directors or other staff responsible for spending endowment income or restricted gifts with the specific fund/gift terms.
  • Managing current use gift and endowment spending in their area of oversight to ensure that expenditures charged against restricted gifts and endowment distribution reserves are consistent with donor intent, the educational mission of Dartmouth College, and its tax-exempt purpose.
  • Contacting the Office of Endowment Administration for clarification on endowment distributions and Gift Recording for current-use gifts if there is a lack of donor documentation or any difficulty interpreting the donor's intention.
  • Ensuring that restricted gifts and endowment income is utilized in a timely manner for purposes meeting the restriction. It is strongly encouraged that restricted gifts and endowment distributions be used consistently as the first source of funding before using unrestricted funds for purposes meeting the restriction.
  • Contacting the Office of Endowment Administration for guidance if annual income cannot be fully utilized on an on-going basis for the restricted purpose.
  • Contacting Gift Recording if there are current-use gifts that cannot be spent in the near term due to narrow restrictions.

 

Department and Program Administrators are responsible for:

  • Spending endowment income or restricted current-use gifts in accordance with the specific fund/gift terms.
  • Maintaining documentation for restricted current-use gifts until they are fully expended.
  • Spending restricted funds in a timely manner for purposes meeting the restrictions. It is strongly encouraged that restricted gifts and endowment distributions be used consistently as the first source of funding to support programs and activities meeting the restriction.
  • Contacting their Fiscal Officer for guidance if 1) they have questions about interpreting donor instructions, 2) there is a lack of donor documentation (particularly with old gifts) or 3) there are problems spending the funds because of restricted terms.

 

The Financial Reporting Office and Office of Institutional Accounting are responsible for:

  • Ensuring that facility gifts are used to fund capital projects in compliance with donor intent based on a donor-signed Statement of Understanding. This includes funding project costs as they are incurred and transferring gifts remaining after construction is complete to establish an operations and maintenance endowment, provided the terms of the Statement of Understanding allow for such.

CONTROLS

  • The Office of Endowment Administration conducts periodic reviews to help ensure that endowment funds are classified correctly and that restrictions are recorded accurately and completely.
  • The Financial Reporting Office may conduct periodic testing to help ensure that income distributions and gifts are being used in accordance with donor restrictions and that income is spent in a timely manner.
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