The Foundation at a Glance

     The Northern Kentucky University Foundation is an independent, non-profit, tax-exempt public charity incorporated in Kentucky under Section 501(c)(3) of the Internal Revenue Code. A gift to the Foundation is a charitable donation that can be claimed as a tax deduction by the donor. The Foundation exists solely to receive and manage private gifts for the advancement and benefit of Northern Kentucky University. The Northern Kentucky University Foundation does not receive public funds, such as state or federal grants.

     The private support generated by the Northern Kentucky University Foundation provides Northern Kentucky University a margin for excellence. State appropriations, which make up about 45 percent of Northern's 2001-2002 budget, help fund the University's basic operation; other sources of revenue, such as auxiliary enterprises and tuition fees, help meet basic operating costs not covered by state funding. Private support allows the University to reach beyond basic survival--to provide students and faculty with opportunities that otherwise would not be financially possible.

     Building an endowment for the University is important because a substantial endowment can transform a good university into a great one. This is because an endowment provides a consistent, reliable, perpetual source of income for programs and services that inspire and fund above-average achievement by students and faculty. The larger the endowment, the greater the income and, therefore, the more opportunities available for students and faculty.

     As an independent, private organization, the Northern Kentucky University Foundation can maintain donor confidentiality, as appropriate, more effectively than the more-public University. Confidentiality standards safeguard Foundation donors against the possible misuse of personal information by creditors, government agencies, etc. However, the Foundation board recognizes that it serves a public university and that public scrutiny can be a safeguard against the abuse or misuse of funds or information. Although the Foundation is open in reporting to donors and the public how gift monies are managed and spent, It is also responsible in keeping donors' private financial information confidential. The Foundation further serves the University by maintaining private fund accounts from one fiscal year to the next, whereas state funds must typically be spent in the year for which they are appropriated.

     The Northern Kentucky University Foundation is governed by an independent volunteer board of directors. Through its board and committee structure, the Foundation gives alumni and friends a personal involvement in the fund-raising and asset-management program, which they themselves are expected to support.

     Foundation financial statements are audited by independent auditors. Budgets, investment reports and other non - confidential financial data are published in forums such as this so donors and others will know who contributes, how funds are managed, and how they are spent.

     Gifts fall into two categories: Restricted and Unrestricted. Most (more than 90 percent) are restricted to specific purposes, as agreed to by the donors, the Foundation and the University. For example, gifts can be directed to a specific academic department or to a specific scholarship program, such as Northern Kentucky Scholars. Unrestricted gifts are used for University priorities, programs and services not supported by state funds, endowment income or other sources.

     Whether restricted or unrestricted, annual gifts generally are spent in the year in which they are received, while endowment gifts are pooled with other gifts and invested. Part of each year's endowment income is distributed to the purpose for which the endowment was established, and the rest of the income is reinvested. In this way, endowment funds grow and so does annual income. Even a relatively small endowment--$50,000--can support an undergraduate scholarship in perpetuity.

     The Foundation prefers gifts of cash; however, non-cash gifts, such as negotiable securities (stocks), real estate and equipment, are accepted. Non-cash gifts that do not have direct academic usefulness typically are sold (converted to cash).

     Bequests, trusts and other deferred gifts are accepted. Many people find that giving to Northern is not only the right thing to do, it's the smart thing to do in terms of tax-and estate-planning. There are many ways to give to the Foundation while retaining a lifetime income for yourself and/or your beneficiary.

     Under the direction of the Investment Committee of the Northern Kentucky University Foundation Board of Directors, Foundation endowments are invested by professional fund managers for maximum long-term total returns consistent with prudent levels of risk. Under current policies approximately 30 percent is invested for fixed income, and 70 percent goes into more variable (but potentially higher-yielding) stocks and securities.

     Eventually, the University gets all income from Foundation investments, but this does not occur immediately. The Foundation allocates a set percentage of return per year (currently 5 percent) to the specific program supported by a particular endowment fund. To mitigate the impact of short-term market volatility on endowment spending, the spending rate is based on a 16-quarter moving average of the endowment market value as of June 30 of the previous year.

     Whatever the endowment earns in excess of the distributed income is reinvested in the endowment fund, thereby increasing the value of each share. For example, assume the average market value of the endowment during the previous 16 quarters was $2,000,000 and income plus gains throughout the period was 7.0% of that figure, or $140,000. Distribution of income would be based on the average market value per share over a period of 16 quarters. Using the example above, assuming a 16 quarter moving average market value of $2,000,000, we see that $100,000 or 5.0% of the average would be distributed. The remaining amount of $40,000 ($140,000-$100,000) would remain in the endowment fund. This addition increases the total endowment fund market value, which increases the amount upon which the 5.0% calculation for income distribution is based. This, in turn, enhances future income distributions for each individual endowment account which helps compensate for inflation.