8.33 University Development Fund

Purpose:	To provide procedures for contributing to the University Development Fund when gifts greater than $5,000 are received.
Policy Owner:	Financial Management

Policy

Background
The financing of fundraising is a shared enterprise requiring a significant amount of University and Foundation resources for appropriate alumni and development activities and oversight.  Therefore, the following policy regarding the reallocation of gift income is adopted and applies to all cash or cash-equivalent contributions, pledges, gift commitments, additions to endowments or capital accounts, some grants, sponsorships, and all other gifts in excess of $5,000 committed after June 30, 2005 without exception.  Gifts are defined in the Gift Policy Chapter 8.12 in the Financial Policies and Procedures manual. This University policy is required for the continuation of a successful fundraising operation.

Upfront Contribution for Endowed and Non-endowed Gifts
Beginning July 1, 2005, 6 percent is to be taken upfront out of the principal amount of all non-endowed and endowed gifts, including payments on obligations created prior to July 1, 2005, in order to permit immediate use of the gift.  Alternative arrangements can also be made to contribute 6 percent of the amount of the gift upfront from other sources (e.g., an equivalent contribution could be made from other unrestricted departmental funds on hand).   Four percent of the gift will be immediately distributed to fund development activities, one percent of the gift will be immediately distributed to fund the University President's development activities, and one percent will be distributed as soon as practicable (on a pro-rata basis of fee-eligible funds raised) as unrestricted support for college development activities. 

Donors' concurrence should be sought early in the solicitation process to avoid any and all misunderstandings as to the application of the entire amount of the gift and the 6 percent reduction to support fundraising. Donors should not be encouraged to make a series of gifts of less than $5,000 in order to avoid the fee. If such practice is detected, the series of gifts will be aggregated and assessed the 6 percent fee. The Foundation will review all written solicitations to ensure that appropriate disclosure and acknowledgment are made.

Other General Policies
For non-cash gifts in excess of $5,000 (pledges, securities, property, etc.), the 6 percent upfront contribution will be applied after the pledge is received and the gift is converted to cash. In addition, the full direct costs involved for asset disposal (including appraisal fees, surveys, attorney's fees, etc.) will be charged against the proceeds for all real property transactions.

For any transactions involving transfers of gift funds, accounts, or assets between the University of Arizona and the University of Arizona Foundation or another affiliated foundation, the upfront contribution will be applied only once and be applied by the initial recipient. If the gift is deposited at the incorrect institution, the entire gift is transferred before the upfront contribution is assessed by the benefitting institution.

The 6 percent upfront contribution will be applied in addition to any other applicable University administrative fees. This University Development Fund policy will be renewed annually and continued unless the University President so decides.

Exemptions
No exemptions or exceptions can be permitted except as noted below.

• This policy does not apply to the income on existing endowment or quasi-endowment accounts.
• Program revenues that are subject to the Administrative Service Charge are not subject to the 6 percent upfront contribution.
• As noted in the Gift policy, conference, symposia or event sponsorships typically contain a gift element. The portion of the payment relating to the gift element is subject to the 6 percent upfront contribution.
• Scholarships and fellowships that will be fully expended within 12 months of receipt (i.e., pass-through scholarships) are exempt from the 6 percent upfront contribution.
• Gifts to purchase identified equipment - A gift from a single donor, which (a) is earmarked by the donor for purchase of an identified piece of equipment that will be used by a department or program in its educational mission, (b) covers the entire acquisition cost of the identified equipment and (c) is discounted if purchased through the University rather than by the donor, will be treated as equivalent to a gift of the equipment itself.
• Funds contributed by University Medical Center and University Physicians Health (with supporting documentation identifying a fund B designation) to units of the Arizona Health Sciences Center shall be considered departmental transfers and will be exempt from this University Development Fund policy. Such contributions are considered gift funds and properly count toward the CAE and CASE reporting totals.
• Written and acknowledged pledges made before November 15, 1999, are exempt until fully satisfied.

Examples:  Several examples follow which may aid in understanding the application of the policy.

1. ABC Foundation makes a $50,000 gift to support Professor Susan Smith's research project in the College of Agriculture. The agreement from ABC Foundation requires the funds to be spent within 12 months for the project, but there is no product or service commensurate in value to the foundation, and the foundation pays no indirect costs. After discussing the 6 percent upfront rule, ABC Foundation does not want to pay an equivalent contribution out of the gift. Professor Smith agrees to pay 6 percent ($3,000) out of discretionary funds held at the UA Foundation for her research.
2. Big Computer Company makes a gift of $200,000 in computer equipment to the Eller College for use in undergraduate computer labs. There is no intent to sell or otherwise dispose of the equipment in the near future. This gift is exempt as it is a non-cash gift which will not be converted to cash.
3. Bigger Drug Company (BDC) makes a grant of $500,000 to support the research of Chip Jones in the College of Pharmacy, including full payment of indirect costs. The data derived from the research along with any and all patentable products will be accessible to BDC upon completion of the research. This is a sponsored project that is not subject to the 6 percent upfront contribution.

Affiliated Foundations
All "affiliated foundations" as defined in 6.15 University Relations with Affiliated Organizations of the manual (including the Arizona 4H Youth Foundation, the Law College Association, the University Medical Center Foundation and the University Physicians Healthcare Foundation) will be subject to these requirements and will pay to the University or Foundation the 6 percent upfront allocation, or expend an equal amount of such allocation directly on fundraising-related expenses as approved in writing in advance by the President of the University.

Questions
Questions about the application of these rules should be addressed to the Office of the University President.

maintained by:Karen Filippelli
last reviewed: 03/01/10