February 8, 2011
Agenda
 Definitions:
Gift
Grant and contract
Private support
 Types and tenders of gifts – rules and processing
 Special events - special rules
 The Gift Fee and STIP
 Gift recording in the systems
 Where does the gift go once recorded?
 Regents versus Foundation – which entity and the outcomes?
 Private grants – where do we get the information?
 Reporting private support – to whom and when?
 References
 Endowment – how does it work?
Definitions
Definitions
GIFT
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A conveyance or transfer of an asset
(including cash or negotiable instruments)
given with charitable intent and without
consideration – (legal definition).
Processed by Gift Processing
Definitions, cont
WHAT MAKES A GIFT TAX DEDUCTIBLE?
 Given to a bonafide charity recognized by the United States Internal
Revenue Service for its charitable purpose. Charitable gifts are not
made to individuals and cannot be restricted to benefit individuals for
personal benefit.
 Funds are awarded irrevocably.
 May be restricted for a specified purpose such as an approved capital
project or facility improvement within new or existing buildings, for
general research purposes and for various endowment purposes, as well
as for current expenditures to benefit specific campus groups such as
for scholarships, fellowships, library or equipment purchases.
 Not a “quid pro quo” transacation (even exchange of funds for results or
services) by the University or its employees for the gift, other than to
use the funds for the purpose intended by the donor. (There can be a
quid pro quo component, and that part will not be tax deductible)
Definitions
GRANT
 Written agreement between two or more
parties which obligates the recipient to provide
something or perform a service of more than
incidental significance to the grantor.
 Grants have “terms and conditions”, or
consideration.
 Often intention is still charitable, and the
requirements are more of a detailed reporting
nature within a time frame.
 Processed by OCGA.
Definitions
CONTRACT
 Written agreement between two or more
parties which obligates one party to provide
significant services, research with deliverables
or ownership rights in exchange for money,
goods or other services from the other party.
 Contracts are even exchanges and are not
charitable.
 They are never included in private support
totals
 Processed by OCGA.
What is Private Support?
 PRIVATE SUPPORT (CASE Management
Reporting Standards)
All gifts and private grants provided by private
entities in support of educational, research and
outreach missions
 Does not include contracts
 Includes support from private sources –
defined as being from non-governmental
entities, for profit or not-for-profit.
 A role of Advancement Services is to report
all Private Support given to UCSD (more
later)
Processing Gifts to UCSD
Overarching Guidelines
What are the policies governing gifts?
 UCOP Development Policy and Administration
Manual
 UCOP Policies and Delegations of Authority
 UCSD Policy and Procedure Manual
 UCSD Foundation Policies and Guidelines
 CASE (Council for Advancement and Support of
Education) Management Reporting Standards
 IRS Regulations
 Other legal/ethical considerations
(many of these have references at the end)
Responsibilities of Department Personnel
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Preliminary Classification of an Award from a Private
Source per PPM 150-35
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http://adminrecords.ucsd.edu/PPM/docs/150-35.HTML
UCSD PPM 150-35: All awards received directly by a campus department will be preliminarily classified by that
department as a gift, fellowship, contract, grant or service agreement. All awards initially classified as gifts or
fellowships shall be forwarded to the Gift Administration Office. However, all awards which are not considered
clearly definable gifts or fellowships by the Gift Administration Office will be immediately forwarded to the
OCGA for additional review and classification. It is the policy of the Gift Administration Office to routinely send
all proposed gifts for research from private, for-profit sponsors to OCGA for review. OCGA has the authority for
final determination of an award classification
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Ensure gift made to correct entity
Gift Documentation (more in a minute!)
Sent to Gift Processing in a timely fashion
Stewardship: Acknowledged by Department or
Development personnel
Responsibilities of Gift
Processing
To adhere to UCOP “delegations of authority” at each campus
for our specified role.
 UCSD Gift Processing is officially designated as the
UCSD office to accept or obtain acceptance, record,
receipt, report, and maintain records for all gifts to the
campus – Regents or Foundation.
 To report PRIVATE SUPPORT given to the campus to
UCOP, CAE and the campus (It has to get IN the system
to be reported!) Generally CASE Standards guide us.
 http://www.ucop.edu/instadv/documents/2009.pdf
 To ensure GIFTS meet IRS Regulations and UC and
UCSD policy and are truly a gift. A transaction may not
be called a gift to cover another underlying type of
transaction (ie, one that may be prohibited, or require
the assessment of overhead).
Delegation of Authority
for Gift Acceptance
 Over $5 Million: UC President
 Up to $5 Million: Chancellor
 Up to $1 Million: VC- External and Business
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Affairs
Up to $500,000: AVC: Development
Up to $250,000: Director, Advancement Services
Up to $100,000: Dep. Director, Advancement
Services
Up to $25,000: Manager, Gift Processing
All Foundation gifts in excess of $5 million must be
accepted by the UC President as well.
Development/Dept staff should not sign to accept a gift or
gift agreement.
Types of Gift Funds
FUND TYPES
Current Funds:
 Current funds are funds that are to be entirely expended for the purpose
designated by the donor. Are held by either the Regents or Foundation.
 Once expended, the fund is closed
 Current funds are not credited with the STIP earnings…earnings are swept
Endowed Funds:
 Endowments are gift made to be held and invested in perpetuity:
 The principal is never spent to ensure growth and long term funding
Endowments require special gift language.
 Endowments are held by either the Regents or Foundation.
 Endowment Spending Policies allow for spending some of the annual return.
This “spending” is then made available to the Departments.
Purposes/Uses
 Campus Improvement
 Department Support
 Instructional Support
 Research
 Student Support
 Other Purposes
 Unrestricted
Processing a Gift
What do we need to process a gift to EITHER the UC Regents
or the UC San Diego Foundation?
 A proper gift or pledge letter from the donor or
solicitation letter sent to the donor (required for all
gifts over $10,000; otherwise encouraged)
 Pledge versus contingent pledge (pledge potential)
 Check (unless it is only a pledge)
 Credit Card information
 Stock gifts
 Other Gifts in Kind (a little later and special processes
may apply)
 Deferred gifts and bequests
Processing a Gift (cont.)
 A proper Regents or Foundation gift fund number the gift
may be placed in, or a request for a new gift fund if needed
 Fund Accounting rules = all gifts for a similar purpose
are allocated to the same fund. New funds are only
created when a unique purpose cannot be attributed to
an existing fund.
 Need a new fund info sheet for a Foundation gift
http://www-er.ucsd.edu/foundationDir/FDN-ACT/fundfrms/fundinfosheet1.pdf
 Always use Gift Acceptance form for a Regents fund
http://www-er.ucsd.edu/giftprocessing/pdf_excel/GiftAcceptanceForm.pdf
 Economic Interest Statement from the faculty member if
applicable. (discussed later)
Special Events – Special Rules
Event Tickets
Often have a Quid pro quo component– defined as
“value received” (get what you pay for)
 In a gift or event transaction, the charity is
responsible, per IRS guidelines, to SPECIFICALLY
disclose at the time of solicitation, the fair market
value of any benefits a donor receives in exchange
for a gift.
 Special events are notorious for this: meals,
entertainment, drink, valet, music, etc. The COST
of providing these items to the charity is not
necessarily a measure of FMV, especially if the
costs were underwritten. The charity still must
disclose the FMV of the benefits, which is NOT a
tax deductible gift.
Raffles
 RAFFLES are regulated by the State of California
 Charitable raffles are now permitted, via a
registration process. Only the UC San Diego
Foundation can hold a raffle. The dept. holding
the raffle must file a financial report after the
raffle. For more information and forms go to:
http://ag.ca.gov/charities/raffles.php
 There is a 90/10 rule where 90% of the proceeds
must go to charity and only 10% of the proceeds
spent on expenses (50/50 raffles are illegal).
Raffles,cont.
 The ticket sales are still not a charitable donation, as they
represent the purchase of a chance to win, or 100% quid
pro quo.
 Raffles can be complex and have tax implications for the
winners of the prizes. If the prize is over $5,000, there is
tax withholding rules and you may need to get the taxes
from the winner before they take possession of their prize.
 Generally, they not widely used or recommended.
 Call Gift Processing if you are considering holding a raffle
at your next fundraiser.
Auctions
Auctions involve a good amount of organization and
paper trail. They have two components:
1. Incoming gifts in kind from donors (the items to
be auctioned off):
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Some items are recorded and receipted as gifts, such as
tangible personal property.
Other items, such as free services, free uses of facilities
or homes etc, are lost income and are not receipted or
recorded.
Auctions, cont.
2. Items Auctioned Off:
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Must be listed with a fair market value at the auction
with disclosures related to deductible and nondeductible.
Anything paid under or at FMV is quid pro quo,
meaning, no gift and no tax deductibility.
Anything paid in excess of FMV is receipted as a gift
and tax deductible.
Event Sponsorships
 SPONSORSHIP
Sponsorships come in two forms:
 where commercially valuable benefits (generally
meaning commercially viable advertising of the sponsor
and their products, or by virtue of UCSD training of
sponsor company personnel) are returned to a sponsor
by the donee entity, the sponsorship is considered
business income to the donee entity and advertising or
marketing expense to the sponsor (that is, not a gift).
 Such income may be subject to Unrelated Business
Income Tax (UBIT) by the donee.
Event Sponsorships
 SPONSORSHIP (cont’d)
 Where only incidental benefits are returned to a sponsor
by the donee entity, such as use of the sponsor’s name or
logo for donor acknowledgment, and when less than 2%
the sponsorship paid is returned in value of goods or
services to the sponsor, then the sponsorship is a
“qualified sponsorship” to the donee entity, is not
subject to UBIT, and is a defined as a GIFT under
University policy and IRS regulations.
Underwriting
EVENT UNDERWRITING
 Generally a gift provided to assist UCSD in putting on an event.
 Underwriting is solicited often at UCSD and is treated as a
charitable gift, as long as the benefits returned to the sponsor fall
under the 2% rule.
 Some benefits, in the form of event tickets, etc, may be provided
in return to the underwriter, as quid pro quo, and will be
receipted accordingly.
Gift Fees and STIP crediting
 Assessment Fee – PPM 410-3
 94% of every $ given goes towards the purpose for
which it was intended; 6% is directed to
administrative costs related to fundraising
 Applies to Regents and Foundation gifts, only
exceptions are gifts in kind that are not sold and
certain fellowship gifts
 Does not apply to grants
 STIP Crediting PPM-410-10
 STIP defined
 STIP is not credited to funds. It is swept.
What Charitable Entities at UCSD
Can A Gift Be Made To?
Two Legal Charities
 Gifts that are solicited on behalf of UCSD belong to either
of the following two legal entities:
 The Regents of the University of California
(95-6006144)
 UC San Diego Foundation (95-2872494)
 The UC Board of Regents are a governing Board of the
system. The Regents do have charitable status. Each
campuses gift office may accept and process gifts on behalf
of The Regents.
 The individual campus foundations were established to
provide a local Board and entity which could more
effectively support the raising and management of funds
for the unique needs of each campus. Each campus has a
foundation, governed uniformly by a single policy.
Regents vs. Foundation
 What’s the difference between the entities?
 How are gifts processed to each?
 When does a gift go to the Regents vs. the
Foundation?
 Once money is in the Foundation, how do you get it
out? (Transferring funds for expenditure)
GUIDELINES ON DIRECTING A DONOR’S GIFT TO THE REGENTS OR THE UC SAN DIEGO
FOUNDATION
There are various administrative and donor relations advantages to be considered in directing a donor’s gift. In particular, the UC
San Diego Foundation is geared to handle high volume funds (many gifts solicited for the same purpose.), ongoing funds (those
that will continue to receive gifts in the future) and endowed gifts. The Regents is primarily geared to handle individual one time
gifts, particularly those for current expenditure.
OF NOTE: Except for in-kind gifts to be held and retained by UCSD, any gift may be made to EITHER entity!
OF NOTE: All gifts are counted for private support and credit to Development should be done regardless of the entity!
 The Regents
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One-time current use gifts (directed to a
specific researcher and/or project)
Gifts-in-kind to be held and retained by
department and not sold – includes gifts
of intellectual property rights
Real Estate to be held and used by UCSD
Previously established Regents Funds
Fellowships with a named Fellow and an
application process: money really belongs
to the Fellow
Any gift where a case cannot be made that
the donor made an error and did not
intend it to go to the Foundation
Bequests that do not specifically state
“UC San Diego Foundation” or a
Foundation fund
All items classified as Grants, Contracts,
or Business Agreements
 UC San Diego
Foundation
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Most gifts solicited by Development
Gifts made to funds that will be ongoing
with a balance maintained over period of
years
Annual funds and other higher volume
gifts
Fundraising events managed by
Development (gifts with quid pro quo)
Gifts-in-kind to be sold
Most planned/deferred gifts (Lead Trusts,
Life Estates, Gift Annuities & Charitable
Remainder Trusts)
Real estate for sale
Previously established Foundation Funds
Most endowed gifts
Most gifts for capital projects
Parameters Common
to Regents and Foundation
 Quid pro quo (discussed earlier)
 Gifts that must be approved and accepted by the
President of the UC
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Endowed chairs
Real property to be retained by UC
Gifts over $5 million
Parameters Common
to Regents and Foundation(cont.)
Gifts-in-Kind (tangible items) - must have
“related use” to UCSD; exceptions for appreciated
property of securities and real estate.
 Valued at their fair market value
 Equipment gifts:
 Need a department owner.
 Are documented using a gift letter or deed of gift form
 If new, must be valued at our “educational discount”
cost to purchase.
 For used for equipment – we need to ensure it is safe,
and we often ask for help to determine the value.
Parameters Common
to Regents and Foundation(cont.)
 Free or reduced services are considered “Lost
Income” and are not charitable gifts. Only out-ofpocket costs related to providing these gifts may
be deducted by the donor.
 Intellectual property gifts are particularly
cumbersome – and rare now. Contact us.
 Real estate gifts require a great deal of due
diligence and are handled as a planned gift.
Parameters Common
to Regents and Foundation(cont.)
 If the FMV of a GIK is $5,000 or more, donor will
need an appraisal and must submit an IRS Form
8283 with tax return.
 Gifts-in-kind are receipted with a description of
the gift only -- “value as declared by donor” is
listed as the amount.
 Donors are responsible for determining the
deducted amount on their tax returns.
Parameters Common
to Regents and Foundation(cont.)
 Matching gifts
 Donor completes, signs & send with gift
 GP Staff finalizes and submits for payment
 Dept. Staff NOT authorized to sign
 Anonymous gift
 Request must be in writing
 Two types: a flag, or, we really don’t know!
 Gifts of Marketable Securities
 Valuation date is the date they are received into our
brokerage account (via DTC wire) or the properly
endorsed certificates are delivered to UCSD
Parameters Common
to Regents and Foundation(cont.)
Marketable Securities (cont.)
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Valuation amount is the average of the high and low
price as published by the exchange on the date of the
gift
Donors are advised of how UCSD calculated the
value of their securities gift; however, it is the donor’s
obligation to determine valuation deducted for tax
purposes
VERY IMPORTANT: Donors should not endorse the back
of stock certificates. Separate stock power forms should be
used. Consult with our Planned Giving Office or Gift
Administration for proper handling.
Parameters Common
to Regents and Foundation(cont.)
Conflict of Interest Filing (PPM 200-13)
Having a direct or indirect financial interest in the sponsor of research,
which is funded in whole or in part.
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When is the filing required
Negative vs. Positive EI
Exclusions
 Gift Receipts
 Sent out by Gift Processing as soon as possible,
generally within a few days unless there are funds to
be set up, issues with documentation or COI, or
questions as to whether it is a gift or not
 Non-monetary gift receipts describe the item given
only – not a valuation
Gift Recording Process
 Review the gift documentation to ensure it is a gift and
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determine acceptance criteria
Batch checks for deposit
Batch gifts for keying (includes checks, credit cards,
pledges, in kind etc. )
Key pledge/payments/ outright gifts into Millennium
Database
Receipt and thank donor
File our back-up information
E-mail notifications – next day, to Development and to
PI or BO
What happens to a Foundation gift
once processed?
 Foundation Accounting gets all the data and accounts
for the transactions in the Foundation’s Fund
Accounting system
 Department owners access the information on the fund
from their login on the Foundation web portal
Spending a Foundation Gift
 The Foundation fund works like a savings account
 Departments request use of Foundation funds by lump
sum transfers to the University
 The transferred funds are placed in a University Fund
by Foundation accounting personnel.
 Departmental personnel then expend the funds in the
same manner as other University funds
 The transfer fund works like a check book
What happens to a Regents Gift once
processed?
 Review the gift documentation to ensure it is a gift and
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determine acceptance criteria
Batch checks for deposit (creates a financial entry in IFIS)
Batch gifts for keying (includes checks, credit cards, pledges, in
kind etc. )
Key pledge/payment/outright gift into Millennium Database
Receipt and thank donor
Budgetarily allocate the gift in the University Fund Accounting
system
File our back-up information
E-mail notification to PI or BO
Note: Only after a gift is allocated will the gift show on the
Department ledger for spending.
Spending a Regents Gift
 Gifts may be spent from the ledger in accordance
with normal ways to expend all University funds.
For example….
 Check request
 Travel
 Purchase order
 Payroll costs
 These funds work like a check book
Private Grants
 Private grants are received monthly by a report
from OCGA.
 We code and record them in the database so that
the private support can be properly reported.
 The office of acceptance is “Grant” and is listed
under “category on the Mill screen.
Private Support Reporting
 We report internally weekly.
 We report to UCOP quarterly and annually using
both the CAE criteria and the “Regents” criteria.
 We report to CAE/VSE annually and to UCOP
annually for campaign totals.
POLICIES
Other Policy References
 UC Development Policy and Administration
http://www.ucop.edu/ucophome/policies/devpol/
 UCSD Gift Processing Manual http://wwwer.ucsd.edu/giftprocessing/
 Classification of Awards from Private
Sources PPM 150-35
 UCSD Gift Fee Policy – PPM 410-3
 UCSD Naming Policy – PPM 410-4
 UCOP Resources http://www.ucop.edu/instadv/fundraising.html
Forms
 Foundation Fund Information Sheet, Signature
Authorization
http://www-er.ucsd.edu/foundationDir/FDNACT/fundfrms/Forms.asp
 Gift Acceptance Form
http://www-er.ucsd.edu/giftprocessing/
Endowment
 A gift given whereby the original gift is not to be
expended
 It is to be invested, generally with the objective to grow
the principal over time by investment returns.
 Generally invested in diversified portfolios of stocks,
fixed income and alternative investments that produce
both cash returns of interest and dividends and return
in the form of unrealized appreciation (or
depreciation, as the case may be!)
Endowment
 If the gift cannot be spend, what good then, is the gift?
 The idea is that a portion of the annual investment
returns will be used for expenditure. This is called the
“endowment spending policy”. It is set by the policy of
the governing board.
 The unexpended amount of return is retained in the
principal, helping to protect it from inflation and thus
protect the future “spending streams”
Endowment
 Put another way: Grow the principal, grow the
spending. Purchasing power hopefully stays the same,
or improves, over time.
 The fund lasts forever, done right. Permanent money
is the best kind to have!
 But yes, a large endowment is needed to produce any
reasonably sized spending stream.
 We manage endowments under the guidelines of the
Uniform Prudent Management of Institutional Funds
Act “UPMIFA”
 Impact of the recent drastic market on value
Questions?