Kuali Endowment Module (KEM) May 14, 2008 Kim Yeoh Cornell University Norman Peacock Indiana...

Kuali Endowment Module (KEM)May 14, 2008

Kim YeohCornell University

Norman PeacockIndiana University Foundation

KEM -1

KEM Presentation Agenda

• Why Endowments?• Project Summary• KEM Overview• KEM Features• Opportunity!

Note: Reference and additional materials available in the back of presentation handout.

KEM - 2

Why Endowments?

Significant Institutional Resource• 2007 NACUBO Endowment Study

– 785 respondents– Over $411 Billion total value

• From $571,000 to $34,634,906,000 in assets

“…an increase of more than $71 billion from NACUBO’s 2006 study. As a result, according to NACUBO estimates, this one-year increase in endowment assets being managed by colleges and universities will generate approximately $3.25 billion in additional revenue during the current fiscal year to pay for institutional programs and initiatives.”

NACUBO, January 24, 2008

KEM - 3

Increased Public Awareness and Scrutiny• Excerpt from letter to 136 college and university

presidents from US Senate Committee on Finance, January 25, 2008:

“We would appreciate additional information about tuition costs and your institution’s endowment. University endowments receive very generous tax breaks under the Internal Revenue Code. We want to better understand how these tax benefits for higher education endowments are improving education and making undergraduate studies more affordable for low and middle income families today.”

KEM - 4

Why Endowments?

Increased Legislation• Uniform Prudent Management of Institutional

Funds Act of 2006 (UPMIFA)– Updates principles established by UMIFA (1972)– requires investment “in good faith and with the care an ordinarily

prudent person in a like position would exercise under similar circumstances.”

– states that the institution “may appropriate for expenditure or accumulate so much of an endowment fund as the institution determines to be prudent for the uses, benefits, purposes and duration for which the endowment fund is established.”

– Enacted by 20 states, pending in 12 othersNational Conference of Commissioners on Uniform State Laws

KEM - 5

Why Endowments?

Increased Regulations• Proposed FASB FSP 117-a

Endowments of Not-for-Profit Organizations: Net Asset Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosures

– Guidance on the net asset classification of donor-restricted endowment funds

– Additional financial statement disclosures:• governing board’s interpretation of the law that underlies the net asset classification of

donor-restricted endowment funds

• description of endowment spending policies

• description of endowment investment policies

• reconciliation by financial statement net asset class that shows cumulative investment returns (“roll-forward”)

• composition of an organization’s endowment by financial statement net asset classification (donor vs board designated endowment funds) KEM - 6

Why Endowments?

Project Summary

History of KEM project• Kuali Financial System (KFS) based on Indiana

University’s existing FIS system– Endowment management not part of FIS so not

considered part of the core scope• Interested Kuali partners reviewed existing

applications– Selected IU Foundation’s Endowment and Trust

Accounting System (ETA) to be the base• Determined KEM should be a stand-alone system

(could be implemented without KFS)KEM - 7

KEM Subject Matter Experts

• Indiana University Foundation– Norman Peacock, Lead SME

• Cornell University– Gail Thayer, Kim Yeoh, Ming Bengtsson

• Indiana University– Bill Buskirk, Joan Hagen, Amoret Heise

• NACUBO– David Lyons

• San Joaquin Delta College– Shelley Pierce

• University of Arizona– Mike Treiber, Cecilia Esguerra, Marlene Moldenhauer KEM - 8

Project Summary

Project Summary

Current Status of KEM project

• Completing the development of functional specifications

• Programming scheduled to begin in July 2008

KEM - 9

KEM Overview

Donor DatabaseGift Processing

Transaction ProcessingAccount Maintenance

Automated Cash Investment Automated Income Distribution

Asset ManagementInvestment Management Reporting

Donor StatementsTransaction and Balance Statements

Daily Transfer of gift totals by account

Daily Summary of Transaction

Totals

Gift System

Endowment System

General LedgerBudget AccountingAccounts PayableEnterprise Funds

Fixed AssetsFinancial Management Reports

General Ledger

Custodian Bank Asset

Data

Pool Pricing and Underlying Asset / Income Allocation

Database

KEM - 10

KEM Overview

• KUALI Features– Kuali standard architecture– Web-based technology utilizing electronic

documents– Integrated workflow for transaction generation

and approval– Flexible, robust data structures; facilitates

data warehousing for decision support– Institutionally defined custom attributes

KEM - 11

• Productivity Features– Consolidates endowment management

functions in a single application– Defined interfaces to external systems– Enhanced access to donor documents– Includes ticklers to serve as task reminders– Automated and recurring transactions– Group and report endowments based on

user-defined criteria KEM - 12

KEM Overview

• System Features– Stand-alone application– Inquiry with drill-down capabilities– Supports UMIFA requirement to track

underwater endowments– Supports donor due diligence and

stewardship– Supports trust accounting

KEM - 13

KEM Overview

KEMIDSECURITIES,

HOLDINGS AND CASH

TRANSACTIONS

RECURRING TRANSACTIONS

INDIVIDUAL

KEM - 14

Modular Data Design

KEM Overview

• Common Kuali document components– Document header information

• Doc number, Status, Initiator, Created

– Tabs• Document Overview• Notes and Attachments• Ad Hoc Recipient• Route Log

KEM - 15

KEM Overview

KEM Features

KEM - 16

Sample KEMID Maintenance Document Screen

KEMID Features

• KEMID Maintenance– Stores long title– Identifies organization responsible for

administering endowment/trust– Tracks date KEMID was established– Captures purpose– Allows for restriction of certain transactions– Tracks status of KEMID

KEM - 17

KEM Features

KEMID Features (cont’d)

• Agreement Description– Identifies type of agreement – Tracks status of agreement and changes to

the agreement– Place to list other documents on file– Can include other comments and unique

donor instructions

KEM - 18

KEM Features


• Benefitting Organization(s)– Identifies the organization(s) that will benefit

from the endowment/trust– If multiple benefitting organizations, allows

tracking by percentage or dollar amount

KEM - 19

KEM Features


• Account Responsibility– Identifies individual(s) responsible for

monitoring KEMID– Assigned with date parameters– Can be incorporated into the document

workflow by the organization

KEM - 20

KEM Features


• Use Restriction– Categorizes donor imposed restrictions– Allows for additional, more detailed

instructions

KEM - 21

KEM Features


• Source of Funds– Identifies original source and date of funds– Tracks original gift value

KEM - 22

KEM Features


• Investment Instructions– Assign “models” for investing income cash

and investing principal cash– Automate movement of funds in and out of

investment vehicles

KEM - 23

KEM Features


• Fee Instructions– Identifies what type of fees should be charged– Allows allocation to income or principal– Provides date parameters– Indicates whether fees should be accrued– Allows for waiver of fees

KEM - 24

KEM Features


• Payout Instructions– Provides instructions for endowment payout– Allows payout to be split by percentage or by

dollar amount– Can link payout to multiple KEMIDs or general

ledger accounts

KEM - 25

KEM Features


• Reporting Codes– Links KEMID to the Council for Aid to

Education (CAE) standard reporting codes– Organization may create additional reporting

criteria according to need

KEM - 26

KEM Features


• Ticklers– Enables date driven ticklers– Can establish frequency and end date– Identifies who should receive tickler

KEM - 27

KEM Features

Securities, Holdings and Cash (SHC)

• Securities– Tracks separately invested securities and investment

pools– Current Values

• Units, Carry Value, Unit Value, Market Value

– Interest rates and dividend per share, payment schedule

– Track by CUSIP, registration code, class code, subclass code, reporting group

– Standard income accrual methods

KEM Features

KEM - 28

SHC Features (cont’d)

• Holdings– Balances by security

• Current Position• Share Price• Income information• All Holders List by security

– Balances by KEMID• Current and Historical• Tax Lots• Holding Detail

KEM Features

KEM - 29


• Investment Pools– Can establish dummy security representing

investment pool• Endowments use cash to purchase units of the investment

pool security

– Control KEMID holds all investment pool activity

– Set and schedule distributions per unit– Tracks current and historical unit values and

distribution amounts

KEM Features

KEM - 30


• Investment Models– Can establish multiple models with

instructions for how and when to invest income cash and principal cash

– Examples of models might include:• Uninvested cash may purchase shares of a money

market pool nightly as a cash sweep• Cash and money market pool funds may be used

to purchase shares of a long term pool monthly

KEM Features

KEM - 31

Transaction Processing Features

• Securities Transactions– Purchases and Sales– Corporate Actions– Accrued Income Calculations– Income Distributions

KEM Features

KEM - 32

Transaction Processing Features (cont’d)

• Unique transaction types– Cash, Asset and Liability

• Purchases, Sales, Deposits, Disbursements• Increase, Decrease or Transfer

– Special types• Original Gift Value Adjustment• Holding Unit Adjustment• Trust Asset Transfer

KEM Features

KEM - 33


• Multiple entry methods– Recurring transactions– Imported Transactions

• Gift Transactions, Spreadsheets

– Daily Processes

KEM Features

KEM - 34


• Recurring transactions– Investment Models

• Cash Sweeps• Pooled Funds

– Scheduled Transactions• Income Distribution• Transfers• Disbursements

KEM Features

KEM - 35


• Automated Processes– Interfaces– Scheduled processing

• Nightly• Monthly and Year-end

KEM Features

KEM - 36

Reporting Features

• Standard Reports– Statement of Activity– Balance Statement

• Institutionally defined ad hoc reporting

KEM Features

Special Trust Accounting Features• Tracking by tax lots• Flexible gain/loss calculations (FIFO, LIFO or

Average Balance)• Beneficiary disbursements and tax reporting

KEM Features

KEM - 38

Other Features• Name and Address records

– Home, Business, Campus, Seasonal

• 1099 reporting– Independent Contractor, NRA

• Bank Depository – ACH or Wire Transfer

KEM Features

KEM - 39

Opportunity!

Interested in KEM?!• Will still consider new development partners• Major benefits:

– Participate in decisions regarding functionality– Develop local resource who is fluent in JAVA and

the ins and out of Kuali programming• Implementation• Customization• On-going local support

KEM - 40

Thank you!

Questions?

For progress updates

http://www.kuali.org/KEM - 41

http://www.kuali.org/



Additional References

KEM Presentation

Supporting Materials

KEM - 42

Kuali Endowment Module

The Scope of the KEM includes– Investment tracking and basic reporting– Investment participation management and sta

ndard reporting– Budgeted payout and income projections– Access to donor instructions– Searchable data elements– Beneficiary disbursement process and tax rep

ortingKEM - 43

KEM Scope

• Investment tracking and basic reporting– number of shares, book, par and market values,

CUSIP number, investment category (stocks, bonds, real estate, etc.), and capital commitments.

– purchases and sales of investments; income earned, collected, accrued; management and custodial fees and commissions; and other investment related data.

– provide data to compare investment policy allocation targets to actual allocations and incorporate pending transactions (i.e. rebalancing).

– track investment commitments for limited partnerships and contributions made against these commitments.

Go BackKEM - 44

KEM Scope• Investment participation management and standard

reporting including unitized transactions– Investment pool data (number of units, market value per unit) for

all funds that participate in an institution's investment pool(s). – Quantify units purchased and sold, and calculate the gain or loss

on withdrawal. – Record investment income, realized gains, unrealized gains, and

fees to the various funds, either in the specific fund or in high level accumulation accounts.

– Track the net asset balance of a true endowment fund between its components of historical book value and accumulated earnings.

– Allocate either a budgeted payout to the income accounts affiliated with a principal account (based on pooled units), or actual income earned on separately invested endowment funds.

Go BackKEM - 45

KEM Scope

• Budgeted payout and income projection– Project the budgeted payout (based on pooled units

and an approved spending policy) – Project the anticipated income based on declared

dividends, bond holdings, etc. – Update current year income projections– Create spending policy reports by fund, KEMID,

college, dept, etc.

Go Back KEM - 46

KEM Scope

• Access to donor instructions– Capture and distribute the donor instructions

for a gift or endowment fund– Link imaged document files to KEM accounts

and transactions

Go BackKEM - 47

KEM Scope

• Beneficiary disbursement process and tax reporting – Disburse payments to beneficiaries (including

“split interest agreements”) – Provide data for annual tax reporting

Go BackKEM - 48

KEM Interface DiagramKuali Endowment Module (KEM) Conceptual Diagram (3/15/2006)

Inst

itutio

n F

inan

cial

In

form

atio

n S

yste

m

Transaction Module

KE

MO

usid

e K

uali

FIS

Out

side

KE

M Gift Processing Transaction

Interface

Transaction Import

Miscellaneous transactions

(spreadsheets)

Automated Investments

Income Distributions

Fee Transactions

Pool Management

Automated Disbursements and Transfers

Manual Transactions

E-DOCS(WORKFLOW)

Custodial Bank

Pool Valuation

KEM Transactions

KEM AccountData

Instructions

Donor Compliance

Ownership

GL Relationship

KEM Individual Data

Payees, Trust Beneficiaries,Account Authority,Users

Multiple Addresses and Relevant data for contact or payment

KEM Recurring Transaction Information

Automated Investments

Automated Income Distribution

Transfers and Disbursements

KEM Security and Holdings Data

Balance Data

Security TotalsKEM Account totals

CashInvestments

DailyHistorical

General Ledger Module

Scrubber PosterGeneral Ledger

Interface

GL Pending Entries

Payment Disbursement

Processing

Purchase Orders/

Accounts Payable

Accounts Receivable

Updates

Check PrintingACH file

Generation

External Pricing Service

E-Docs

Tax Reporting Service

Donor Relations Database

Kuali Chart of Accounts

Kuali Budgets

Relates to

Validates

Validates

Validates

Reporting Environment/

Data Warehouse

Actuarial Values

External SystemsBursar, Payroll,

Independent Billings etc.

Decision Support System

Imaged Documents

Student Information

System

KEM - 49

Baseline System of KEM

• Endowment Trust Accounting (ETA) System used by Indiana University Foundation is the baseline system of KEM.

• ETA will be “kuali-fied” – look-and-feel will be Kuali but core design and functionality will be based on ETA.

• On the next few pages are displayed some of the KEM docs in progress and selected ETA screens yet to be re-designed.

KEM - 50

What is a KEMID?

• KEMID – represents monies held and invested for the benefit of a specific area and to be used for a specific purpose. One KEMID may be related to one or many GL accounts.

• The unique name was developed so as not to confuse it with the GL account concept.

Go back KEM - 51

KEMID Maintenance Tab

Go BackKEM - 52

KEMID Agreement Description Tab

Go Back KEM - 53

KEMID Benefitting Organizations Tab

KEM - 54Go Back

KEMID Account Responsibility Tab

KEM - 55Go Back

KEMID Use Restriction Tab

KEM - 56Go Back

KEMID Source of Funds Tab

KEM - 57Go Back

KEMID Investment Instructions Tab

KEM - 58Go Back

Automated Investment Flow

KEM - 59Go Back

KEMID Fee Instructions Tab

KEM - 60Go Back

KEMID Payout Instructions Tab

Go Back KEM - 61

KEMID Reporting Codes Tab

KEM - 62Go Back

KEMID Ticklers Tab

Go Back KEM - 63

Security Maintenancein ETA

KEM - 64Go Back

Accrued Income Calculations

• Income Accrual Methods– Automated Cash Management – This is the accrual mechanism for “money

market” type KEMIDs. It will calculate daily based on the holdings of each date and add the amount to the total interest due to the KEMID holder.

– Dividend –The total dividend amount to be paid to the holder of a security based on the ex-dividend record date, units held, dividend amount and payment date. These accrual amounts will be calculated periodically, based on the ex-dividend date.

– Treasury Notes and Bonds – Daily accruals are calculated based on the number of days in the six months prior to the semiannual payment date.

– Discount Bonds – Accruals are calculated daily but will never be paid to the KEMID holder until the security reaches maturity or is sold.

– Mortgage Pass-Through 30 –This is not a true daily accrual. The total income due is recomputed daily. It assumes that payments are made one month in arrears (30 days) on the 15th of the month.

– Mortgage Pass-Through 60 – Like the previous method except that it assumes that payments are made 2 months in arrears (60 days) on the 15th of the month.

– Time Deposits – Simple interest calculations, not compounded. Payment frequencies will vary depending upon the instrument

KEM - 65Go Back

KEMID Current Balance Lookup

KEM - 66Next

KEMID Balance Inquiry TreeKEMID Current Balance Inquiry Showing Drill Down Path to Holding Lot Detail

KEMID and Codes Detail Results(one record)

Tax Lot Detail(One record)

Security Detail(One Record)

Holdings by Group(One row for each Security #)

Principal HoldingsAt Market

Inquiry Results(multiple rows in a grid)

Inquiry Criteria

KEMID

Benefitting Organization

KEMID Purpose

(None Required)(Search available on all)

KEMID

KEMID Short Title

Benefitting OrganizationAnd Percent

KEMID Purpose Code

KEMID Status Code

Income Market Value

Principal Market Value

Total Market Value

Estimated Income

KEMID Detail

Income HoldingsAt Market

Cash and Equivalents

Stocks

Bonds

Pooled Funds

Alternative Investments

Other Assets

Liabilities

Market Value

Market Value

Market Value

Market Value

Market Value

Market Value

Market Value

Cash and Equivalents

Stocks

Bonds

Pooled Funds

Alternative Investments

Other Assets

Liabilities

Market Value

Market Value

Market Value

Market Value

Market Value

Market Value

Market Value

Holdings(for the selected group)

Tax Lots by Holding(One row for each lot held)

Security Detail(See Security

Inquiry)

Tax Lots

Tax Lot Holding Detail

KEMID

Security Number

Security Description

Units owned

Carry Value

Market Value

Estimated Income

KEMID

Security Number


Units owned

Lot Number

Carry Value

Market Value

Date Acquired

Estimated Income

KEMID

Lot Number

Carry Value

Estimated Income

Date Acquired

Units owned


Security Number

Market Value

Current Accrual

Prior Accrual

Registration Code

Registration Description

I/P Indicator

Last Transaction Date

Registration Code


I/P IndicatorI/P Indicator

Registration Code


Benef. Org. Detail

Purpose Detail

Status Detail

Balance Detail Results(one row for each security type held)

KEM - 67Go Back

Investment Pools in ETA

KEM - 68Go Back

KEM - 69Go Back

Investment Models in ETA

ETA Asset Sale Transaction

KEM - 70Go Back

KEM Cash TransferTransaction

KEM - 71Go Back

KEM - 72

ETA Recurring Transfer

Go Back

Automated Processes

• Interfaces– Importing Gift Transactions– Security Pricing– Exporting General Ledger Entries– Updating Database used for Web Inquiries

KEM - 73Go Back

Nightly Batch Processes

• Daily– Transaction Import– Large Batch Posting– Accrual Transactions – Accrual Calculations– Recurring Transactions– Pooled Fund Distributions– Automated Cash Investments– Cash Sweeps– Pooled Fund Control Accounts Summary Transactions– Change Reporting– Date Frequency Roll Process

KEM - 74Go Back

Nightly Batch Processes

• Monthly– Cash Balance Archive– Holding Balance Archive– Seasonal Address Update– Fee Assessment Transaction Process

• Year-End– Update Original Gift Values

KEM - 75Go Back

KEM Standard Reports

The following seven reports will be delivered with the KEM module:– Endowment Asset Statement– Endowment Transaction Statement– Endowment Transaction Summary– Non-Endowed Asset Statement– Non-Endowment Transaction Statement– Non-Endowment Transaction Summary– Trial Balance

Notes:– Trial Balance – will include columns for available expendable cash and

estimated income for the balance of the fiscal year.– All reports should have the capability to be run for organizational entities

or sequences including: department, division, school and campus, etc. The trial balance report should also have the capability to be run by endowment or account type.

– Additional internal and other reports needed by a KEM institution will be run at the school using a reporting tool of each school’s choice.

Go back KEM - 76

ETA Individual Record

KEM - 77Go Back

KEM Resource Estimates

Go backKEM - 78

End of Additional Resources

Thank you for your continued support!

KEM - 79

Kuali Endowment Module (KEM) May 14, 2008 Kim Yeoh Cornell University Norman Peacock Indiana...

Documents

Transcript of Kuali Endowment Module (KEM) May 14, 2008 Kim Yeoh Cornell University Norman Peacock Indiana...