Fund Administration and Use
4.0 Additions to Funds
4.1 Contributions, Deposits and Other Payments Received
The purpose of The Kansas University Endowment Association is to encourage and administer contributions and bequests for the University of Kansas, its students, faculty and staff. KU Endowment is responsible for providing appropriate documentation to substantiate our donors’ tax-deductible contributions, usually in the form of a tax receipt, in accordance with IRS requirements.
Contributions that are payable to the University of Kansas or one of its subdivisions cannot be accepted by KU Endowment without proper authorization. In accordance with Kansas statutes, the University has developed a procedure to transfer to KU Endowment the ownership and fiduciary responsibility for managing such gifts that are initially directed to the University.
Gifts payable to KU or a KU subdivision that are greater than $5,000 must be sent to the University General Counsel and the Chief Financial Officer for the appropriate approvals before acceptance into a KU Endowment fund account. (The University may always elect to, instead, direct the gift to an agency account (see section 4.2 for more details). Gifts to the University of $5,000 or less can be accepted into a KU Endowment account without further University approvals.
The University’s Chief Fiscal Officer and General Counsel have authorized that modest contributions to the University of a recurring nature-such as when annual telefund gifts are inadvertently directed to the University, rather than KU Endowment-may be endorsed by the dean or department chair for deposit to the appropriate unit’s KU Endowment fund account. The University requires that these endorsements include a signature of the person responsible for transferring these gifts to KU Endowment. After endorsement to KU Endowment, these items are considered to be contributions to KU Endowment, and a tax receipt will be provided to the donor by KU Endowment.
A quid pro quo contribution is one in which a donor receives a benefit (goods and/or services) in response to making the contribution. An example is when a University unit organizes a concert, dinner, or other activity as a fundraising event to raise scholarship resources. Typically, an admission fee is charged in excess of the actual value of the benefits received by the attendees. In these cases, the amount of the donor’s payment that exceeds the fair market value of the quid pro quo benefit (meal/entertainment, etc.) provided to the donor can be considered a tax-deductible contribution.
Please note that the fair market value of the benefits may not be equal to the cash costs of the event. For example, when goods or services are obtained at no or low cost to support the event, such as when a caterer donates food and wait-staff to support the event, the fair market value of those benefits (what they normally would have cost) must be included in the non-deductible portion of the admission fee, even though no cash was actually disbursed to obtain the food and wait staff services. The fair market value should represent what the donor would pay for similar or comparable goods and/or services elsewhere. A reasonable method must be used to make a good faith estimate of the fair market value of the goods and/or services received by the donor.
The IRS is concerned that non-profit entities are undervaluing the benefits received by attendees at fundraising events, which then overstates the tax deductible contribution amount. Consequently, the IRS has additional reporting requirements related to fundraising events. You must complete a Fundraising event notification form and a Fundraising event wrap-up form to help KU Endowment document and communicate the required information to the IRS.
In order to ensure good donor relations, this disclosure of the tax-deductible/non-deductible components of the admission fee should be provided to the prospective donor as a part of the gift solicitation materials. Additionally, the University unit should then clearly specify the deductible portion and the non-deductible portion on the Gift/Deposit Transmittal Form, so KU Endowment’s receipt to the donor can properly comply with the tax reporting requirements. Please see the rest of this section 4.1 for more on the Gift/Deposit Transmittal Form. IRS Publications 1771 and 526 provide additional details on acknowleging quid pro quo contributions.
Quid pro quo contributions may be deposited into a KU Endowment account. KU Endowment staff must be involved to properly determine the tax-deductible (contribution) portion of the event admission fee. Situations where the participants receive a benefit by attending the event that is equal or greater than the admission fee have no tax deductible component and these payments generally should not be deposited at KU Endowment. See Payments to be Deposited in State Accounts, above, for more on how to deposit funds received from the sale of these benefits. Additionally, KU Endowment accounts should not be utilized for events which are not sanctioned by the University.
Funds raised for the purchase of personal gifts should not be deposited at KU Endowment, even if the provider is not intending the payment to qualify as a charitable contribution. It would be pointless to use KU Endowment in this way, since disbursements for personal items, such as for baby/wedding gifts, etc., clearly have no direct University-related purpose and will not be paid (see sections 5.1 and 5.4). In contrast, funds raised to honor or memorialize individuals by establishing a KU Endowment fund related to the University’s mission, such as for a scholarship fund, are considered charitable contributions and are entirely appropriate for KU Endowment to receive and administer.
An honorarium or other payment for services that are perfomed by a University employee will be considered a charitable contribution if the employee endorses the payment check over to KU Endowment. The check must be payble to the employee in these cases. A contribution receipt will be provided to the employee donor. The honoraria remains taxable income to the University employee who redirects the payment to KU Endowment. It is inappropriate for a University employee to request that payments for services provided by the employee to be paid directly to KU Endowment. Checks received by businesses are assumed to be charitable contributions of the business, unless there is some indication that the check may be a payment for services performed by a University employee. In order to protect KU Endowment’s tax-exempt status, KU Endowment staff will follow-up with the business entity if the check appears to be a payment for service, to ensure that any potential earned income is being appropriately reported to the IRS.
Earmarking attaches more specific restrictions to a gift than apply to the fund in which it is being deposited. The purpose of the contribution is reported as a comment line to the academic departments on weekly contribution/donor reports and on other regularly scheduled accounting reports. The academic unit is then responsible for ensuring the contribution is used in accordance with the donor’s wishes. Earmarking should only be utilized on a limited basis for small contributions which will be expended in the short term.
All funds to be deposited at KU Endowment must be accompanied by a KU Endowment Gift/Deposit Transmittal form. Please use separate forms to transmit tax-deductible contributions versus non tax-deductible deposits. For non-deductible deposits, the item(s) must be described in detail before the funds may be accepted or deposited to a KU Endowment account. Deposits of refund or expense reimbursements must explain when the KU Endowment fund which is receiving the deposit had previously incurred the expense.
Obviously, quid pro quo contributions may be reported on one form, by properly denoting the tax-deductible versus non-deductible elements of the payment on the form. In order to comply with IRS requirements regarding managing fundraising events, please identify the event to which the contribution relates, as appropriate. (Also see section 5.1 for more on fundraising event reporting.) Please contact KU Endowment’s account services or appropriate development staff to ensure that we understand your intent when completing the form for quid pro quo contributions. Additionally, see the discussion on Quid Pro Quo Contributions earlier in this section for the process of how to determine the tax-deductible versus non-deductible portion ofthe quid pro quo contribution/payment.
It is important for KU Endowment to appropriately recognize our donors. Your help in completing the Gift/Deposit Transmittal form as accurately as possible is an important first step in recording the value of their gift in KU Endowment’s donor records system. See a flow chart of the KU Endowment deposit process.
4.2 Fund Account Establishment Requirements
The purpose of new fund accounts must be to benefit the University of Kansas, its students, faculty and staff. Any donor solicitations, regardless of whether a new KU Endowment account is established, must be coordinated with appropriate KU Endowment development staff, as set forth in the Institutional Advancement at the University of Kansas: Policies and Practices document promulgated by the Provost.
The minimum amount required to establish a separate fund account is $25,000 for endowed funds and $5,000 for expendable funds. Recommended levels to establish a new fund account for a particular purpose, such as scholarships, lectureships, professorships, etc. are determined by KU Endowment in consultation with University administration.
A separately administered expendable fund may be established with $5,000 or more when it is expected to be in existence for more than one year. In the event that a new fund is to be established from other department-unrestricted funds, for example, to separately account for a significant new project, a completed Request to Open Fund Account form should be provided to KU Endowment to ensure that the account is established as the department intends.
New funds which commit the University to establish a new program will not be accepted at KU Endowment without the approval of the Provost or Executive Vice Chancellor. Any other receipts which may appear to raise questions about the propriety of KU Endowment’s acceptance will be reviewed with KU Endowment and University staff, as appropriate, before acceptance.
An agency fund account will be established for the benefit of the University upon the written request of the Chancellor and the University General Counsel. Assets received into such agency funds are not considered to be contributions to or assets owned by KU Endowment. An agency fund account may also be established for the benefit of a separate entity that is related to the University, when sanctioned by the University. KU Endowment’s role in these cases is one of investment management and general compliance review only, and the University or the University-related entity, as the principal entity in these situations, is responsible for providing tax receipts and other appropriate communication to donors. When establishing an agency fund for a related entity, KU Endowment must receive a copy of the related entity’s 501(c)(3) determination letter, or its equivalent. There should always be a written agreement for KU Endowment to administer agency funds on behalf of either the University or the related entity. The agreement to administer agency funds on behalf of the University must be signed by the Chancellor and the University General Counsel, and accepted by KU Endowment. The agreement to administer agency funds for University-related entities must be authorized by an appropriate officer of the entity, and formally sanctioned by the University and accepted by KU Endowment.
Scholarship contributions for an individual who is specifically identified by the donor will usually not be accepted by KU Endowment. These payments usually should be directed to the University’s Office of Student Financial Aid on the Lawrence campus and the Student Financial Accounting Office on the Medical Center campus.
All new fund accounts must have written documentation (letter of gift, will or other estate/trust documents, memoranda from appropriate University staff, etc.) which clearly specifies the donor’s/depositor’s intent for the use of the funds and KU Endowment’s intent to accept management of the funds. The originating documentation will also identify the University representative responsible for recommending expenditures to KU Endowment for approval and payment.