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What is an endowment, and why are they so important?

An endowment is an investment in the future of the University of South Carolina Beaufort. It is a permanent gift that provides one of the most secure sources of future revenue for this university to have leading edge research and vital support for students, faculty and programs. Endowments are the most lasting way a donor can give. They forever benefit the mission of the university and ensure excellence in perpetuity. Endowment funds are managed to provide a permanent source of income to support the educational mission of a college or university. The endowment, a set of pooled assets, is generally composed of many individual funds and is invested in a purposeful and accountable manner to generate income that will honor the donors’ intended purposes for their gift.

How is the spending allocation determined?

Once your endowment is fully funded and invested for at least one fiscal year, an annual spending allocation will be calculated for your fund. Waiting at least one fiscal year allows your endowment to earn investment returns to support spending and increases the probability of an annual increase in the amount available to spend from your endowment. If, during the first year of eligibility, the endowed gift does not exceed the original amount, then no initial spending allocation is allowed.

The annual spending allocation is based on a predetermined rate applied to the average balance of your endowment and is limited to available investment return. The current spending rate is 4.5 percent. The average balance of your endowment is calculated using the previous balances for up to 36 months. This averaging helps smooth the effects of market fluctuations. Unused spending allocations are carried forward to be used in subsequent years. Investment return in excess of the spending allocation is retained within the endowment, increasing its size over time and, therefore, increasing the amount of support generated for the donor’s specified program.

Endowments at USCB

USCB’s endowments are held within the USC Education Foundation but are separately accounted for, with quarterly statements prepared, just as a personal bank account would be, and they are credited to USC Beaufort. 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. 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.