In setting up an endowment, the investment of an initial gift or principal produces earnings which then fund the initiatives established by the donor. This USC Education Foundation administers the general, scholarship, and chair endowments of all University campuses. This is a tax exempt eleemosynary organization under Internal Revenue Service code section 501 (C) (3) that is charged with appropriately investing and disbursing funds. USC’s investment earnings have been consistently above the average of our peers in the Southeastern Conference.
USCB’s endowments are separately accounted for, with quarterly statements prepared, just as a personal bank account would be, and they are credited to USC Beaufort. USC Beaufort has the benefit of the professional expertise and management experience of the USC Development Office and the Foundation. As a result USC Beaufort is immediately able to handle complex gifts of any nature, including stocks, property and planned gifts.
Once the decision to fund an endowment is made, a written gift agreement is developed between USC Beaufort and the donor. The document contains the name, address, etc. of the donor, the name of the endowment, the purpose of the endowment, terms of payment if it is to be a pledge and any other criteria that may apply. Once a gift is accepted, the conditions of the gift are followed in perpetuity.
Frequently Asked Questions about endowments:
Q. How much does my endowment earn?
A. Endowment funds are pooled into a portfolio managed for the University’s foundations by nine investment management firms. Earnings from the pool are allocated pro rata among all endowment accounts each quarter.
Q. Why are endowments important?
A. Endowments are permanent capital and exist in perpetuity. The larger the endowment, the larger the income stream from earnings. If a student continues to meet the requirements, a scholarship is usually a four-year commitment. A professor might hold an endowed chair or professorship for many years. The continuity provided by an endowment meets these financial needs.
Q. How much does it take to create a USC Beaufort Endowment?
A. $25,000 is the minimum endowment level.
Q. What is “principal”?
A. Principal is the total gifts made to an endowment. Only earnings on the principal are spent in an endowed fund. When there are earnings in excess of the amount allocated for spending, they are accumulated as a reserve for market fluctuations.
Q. What are “earnings and losses”?
A. Interest, dividends, realized and unrealized gains and losses are all used in calculating earnings and losses.
Q. How is “spendable income” calculated?
A. Set by Foundation Board policy, currently a payout of 5 percent is made each year even though the pooled portfolio may earn more. Excess earnings are credited to the individual funds and are held as “unallocated earnings.” These provide a reserve against losses in the securities market and allow the Foundation to continue to make the 5 percent pay out when the pooled portfolio does not meet investment goals in a particular year.
Q. How often are the individual endowment funds credited with earnings?
A. Earnings or losses are allocated to individual funds each quarter.
Q. How does the market affect an endowment account?
A. The amount of earnings added to the fund fluctuates with the markets. Although the portfolio is well diversified, some investments might occasionally lose value. The spread of the investment allocation among nine managers helps to compensate for losses by a particular style of investment and takes advantage of earnings that can be realized when an investment style is in favor with the market.
Q. How does the size of USC Beaufort’s endowment compare to its peer institutions?
A. Our total endowment is below the median of institutions in the Southeastern Conference. However, our investment earnings have been above the average of our peers.
Q. Can I designate my endowment for a specific purpose?
A. Absolutely, as long as it is consistent with University policy and state and federal laws. Once a gift is accepted, the conditions of the gift are followed in perpetuity.
Q. Why are unrestricted gifts important to USC Beaufort?
A. As the University’s needs change, unrestricted funds allow the flexibility necessary to meet those needs. Unrestricted funds are controlled by the Audit and Budget Committee of the Foundation Board of Directors and the Board of Trustees.
Q. How do I create an endowment?
A. It is simple. Contact us at 843.208.8080, and we will draft a brief Gift Agreement that will govern your gift according to your wishes.
Q. Can I add to my endowment?
A. Additional gifts may be made at any time.
Q. Can I use mutual funds, stock, bonds, or real estate to create my endowment?
A. Certainly. We realize that gifts of appreciated property can have significant tax benefits to donors. We work with a number of brokers so securities may be transferred simply and easily. Real estate also is a welcome gift, but certain basic requirements must be met related to environmental issues and a marketable title.
Q. How many students receive endowed scholarships?
A. About a dozen students receive proceeds from endowed scholarships each year. Many more students would benefit from scholarships than current resources allow. Some endowment funds make scholarship awards to multiple students. Students who receive scholarships from endowed funds are provided contact information regarding the donor and are encouraged to express their gratitude for the support.