Managing Trust Funds. Matthew Fleet, Finance Division Robert Bough, Legal Services Office. Tuesday 12 April 2016

Transcription

1 Managing Trust Funds Matthew Fleet, Finance Division Robert Bough, Legal Services Office Tuesday 12 April 2016

2 What we are going to cover What are Trusts / How are they created? Duties of Trustees Interpreting Trust Regulations Financial and Investment Processes Understanding Trust Financial Statements Consolidating Small Funds

3 WHAT ARE TRUSTS? HOW ARE THEY CREATED?

4 What is a Trust? A legal construct created when a settlor places property under the control and legal ownership of a trustee, who must manage them for the benefit of a beneficiary or for a specified purpose For a trust to exist there must be: certainty of intention (i.e. to create a trust) certainty of subject matter (i.e. property in the trust) certainty of objects (i.e. beneficiaries or purpose)

5 Example: Child Trust Fund transfers property to for the benefit of SETTLOR e.g. grandparent TRUSTEE(S) e.g. parents BENEFICIARY e.g. child

6 University Trusts Arise largely from donations from benefactors for specific purposes DONOR UNIVERSITY SPECIFIC PURPOSE (Settlor) (Trustee) (Beneficiary) Also arise (less commonly) when University declares trusts over its own property

7 Trust property Physical things, e.g. land, buildings, art, antiques Money and investments Permanent endowment where endowment capital must be preserved Expendable endowment where endowment capital may be preserved or spent Income which must be spent within a reasonable period of time

8 University endowment funds by purpose Museums and Collections 1% General Departmental 3% Societies 1% Libraries 4% Prizes 1% Other 3% TOTAL FIGURES: Value of capital: 1,150 million Student Support 17% Academic Posts 42% Annual income: 36 million Unrestricted 28% Number of endowments: 1,050 Approx. figures at 31 July 2015

9 DUTIES OF TRUSTEES

10 Duties of trustees Duty to familiarise oneself with the terms of the trust and to comply with those terms Duty of care Duty to apply income Duty to avoid conflicts Duty to comply with relevant legislation

11 Duty to comply with terms of trust What purposes can the trust fund be used for? Is the capital in the form of permanent or expendable endowment? Who is the appointed board of management? Have funds been properly administered in the past?

12 Duty of care Use personal skills and experience to ensure that the trust fund is well-run Consider getting professional advice where appropriate Ensure funds are invested appropriately and not placed at undue risk

13 Duty to apply income Trust fund income must be spent within a reasonable period of time University policy dictates that it is spent as soon as practicably possible... and before other sources of income, e.g. general departmental funds

14 Other duties Duty to avoid conflicts act with integrity and avoid any personal conflicts of interest or the misuse of charitable trust funds Duty to comply with relevant legislation e.g. with regard to equality legislation, or data protection

15 TRUST REGULATIONS AND OUDT

16 How and where are trusts recorded? Objects are those intended by the donor at the time the gift was made Usually set out in a will, gift agreement, or correspondence with the donor For significant restricted endowments, objects and Univ. s powers recorded through a Trust Regulation (viewable online, see

17 Example Trust Regulation Expendable / permanent Main object(s) Board of Management Power to accumulate Power of amendment

18 Statute XVI, section 20 Any surplus income of any trust in any year may, in the absence of provision to the contrary under specific provisions relating to individual trusts, and at the discretion of the board of management ( ) : (1) be used in that year for the benefit of the division, faculty, sub-faculty, or department within whose area of responsibility the administration of the trust falls; or (2) be placed on reserve for expenditure in the subsequent year as if it were income of that subsequent year.

19 Oxford University Development Trust OUDT established in 1989 to enable University to receive gifts for benefit of itself and Colleges Trust Deed amended in 2010 to create a number of broad purpose funds within OUDT Prompted by change in donations policy donors encouraged to give to OUDT on broad, flexible terms 100,000 minimum required for new, bespoke trust

20 OUDT broad purpose funds Vice-Chancellor s (General) Fund Oxford Teaching Fund Oxford Undergraduate Scholarship Fund Oxford Graduate Scholarship Fund Widening Access and Participation Fund Fund for each Academic Division Sports Fund Bodleian Fund Ashmolean Fund Fund for each College

21 FINANCIAL AND INVESTMENT PROCESSES

22 Financial processes for trust funds Founding donation received, usually through Gift Registry, and recorded on DARS Trust regulation drafted, as necessary, and approved by General Purposes Committee Trust fund account set up in Oracle Financials; funds transferred via accounting journal Cost Centre Account Activity Source of Funds Organisation unique identifier

23 Investment of funds Funds are invested with Oxford University Endowment Management Limited (OUEM) OUEM is authorised and regulated by the Financial Conduct Authority OUEM manages two main funds under investment and distribution policies set by Investment Committee: (i) Oxford Endowment Fund (ii) Oxford Capital Fund

24 OEF versus OCF Oxford Endowment Fund Oxford Capital Fund Investment Objective 5.0% return over CPI 1.5% return over CPI Volatility Objective Distribution Policy No more than MSCI World (approx. 16%) Annual distribution, 4.25% of average NAV over last 20 qtrs) No more than 50% of MSCI World (approx. 8%) No distribution, all income is reinvested Investment Horizon Long-term, at least 5 years Medium term, 2-5 years Subscriptions Quarterly - 1 Jan, Apr, Jul, Oct (1 month notice required) Quarterly - 1 Jan, Apr, Jul, Oct (1 month notice required) Lock-in Period 5 years 35% locked in for 1 year Redemptions Annually 1 Jan (6 months notice required) Quarterly 1 Jan, Apr, Jul, Oct (3 months notice required)

25 Financial processes (cont.) Funds placed with OEF and/or OCF (or retained in Deposit Pool for spending) Register of authorised signatories completed Income claimed from fund by charging approved expenditure to relevant Oracle SoF code Trust fund financial statements issued quarterly to main contact

26 UNDERSTANDING TRUST FINANCIAL STATEMENTS

27 Financial statements I&E Account Capital Account Investment Income 40,000 Endowment 750,000 Expenditure 35,000 Surplus / Deficit 5,000 Endowment 1,000,000 Opening balance 0 represented by: Closing balance 5,000 (Book value) (Market value) 40,000 Endowment Fund per share

28 Case studies See handouts Questions to think about: What was the value of the original donation? How much is the fund worth now? How much investment income was earned last year? What was the fund spent on last year? Does the fund have any income reserves? Any other things to note?

29 CONSOLIDATING SMALL FUNDS

30 Consolidating trust funds Cost of administering small funds can outweigh their benefit to the University Under the Charities Act 2011, trustees may transfer assets from one trust to another providing: the objects of the recipient fund are similar and at least as wide as the fund being transferred; and the fund being transferred has annual income under 10,000

31 Consolidating trust funds (cont.) Policy of consolidating small trust funds endorsed by Council and overseen by Trusts Management Board Benefits to departments include: simpler administration / accounting greater flexibility in spending income lower management fees Named awards can continue to be made from larger pool of consolidated funds

32 Example consolidations Funds to be consolidated Transferred by trustee resolution Recipient Trust Fund Various faculty prize funds Various departmental funds Various faculty prize and scholarship funds Various medical science prize and scholarship funds Faculty of English Language & Literature Prize Fund Dept. of Plant Sciences General Purposes Fund Faculty of Law Prize and Scholarship Fund Medical School Prize & Scholarship Fund

33 Further information Matthew Fleet, Trusts Administrator, Finance Division, tel. (2)70236 Robert Bough, Senior Solicitor, Legal Services, tel. (2)70163 Tanya Cosier, Asst. Investments & Trusts Accountant, Finance Division, tel. (6)16065 Trusts website:

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35 QUESTIONS?