Establishing an effective spending policy for a foundation or endowment means balancing current and future needs. Listen to this podcast for best practices for creating a sustainable spending policy that serves your institutional mission.
MAIN MENU
Personal Banking MENU
Credit Cards MENU
Loans MENU
Mortgages MENU
Small Business MENU
Investing & Retirement MENU
Wealth Management MENU
Corporate & Commercial MENU
Resource Center MENU
Checking Accounts MENU
Savings Accounts MENU
Premier Banking Program MENU
Digital Banking MENU
Digital Payments MENU
SunTrust Deals MENU
More Services MENU
Cash Rewards Credit Card MENU
Travel Rewards Credit Card MENU
Prime Rewards Credit Card MENU
Secured Credit Card MENU
Features and Rewards MENU
Business Credit Cards MENU
Home Improvement MENU
Home Equity Line of Credit MENU
Auto Loans MENU
Other Loans MENU
Student Loans MENU
Debt Consolidation MENU
Recreational Loans MENU
Buying a Home MENU
Refinancing MENU
Customer Service MENU
Builders MENU
Current Rates MENU
Existing Clients MENU
Correspondent Lending MENU
Real Estate Professionals MENU
Banking MENU
Business Credit Cards MENU
Loans MENU
Merchant Services MENU
Payroll MENU
Cash Management MENU
Your Future MENU
Best Practices MENU
Financial Planning & Advice MENU
How to Invest MENU
Retirement Planning MENU
Investment Solutions MENU
Find a Financial Advisor MENU
Your Priorities MENU
Our Approach MENU
Solutions and Tools MENU
Specialty Groups MENU
Find an Advisor MENU
SunTrust Advantage MENU
Products & Services MENU
Industry Expertise MENU
Personal Finances Resource Center MENU
Homeownership Resource Center MENU
Investing & Retirement Resource Center MENU
Wealth Management Resource Center MENU
Small Business Resource Center MENU
Commercial & Corporate Resource Center MENU
Foundations & Endowments Resource Center MENU
Essential Checking MENU
Advantage Checking MENU
Balanced Banking MENU
Features and Benefits MENU
Essential Checking for Students MENU
Essential Savings MENU
Select Savings MENU
Advantage Money Market Savings MENU
Personal Certificates of Deposit (CDs) MENU
Your Premier Program Team MENU
Benefits & Rewards MENU
Online Banking MENU
Mobile Banking MENU
ATM MENU
How to Pay with Masterpass MENU
How to Use Apple Pay MENU
How to Use Samsung Pay MENU
How to Use Fitbit Pay MENU
How to Use Garmin Pay MENU
Visa Checkout MENU
Frequently Asked Questions MENU
Terms & Conditions MENU
Check Cashing Services MENU
Wire Transfer Services MENU
24-Hour Automated Telephone Banking MENU
FICO® Score Program MENU
EMV Chip Card Technology MENU
Home Equity Line of Credit MENU
Unsecured Home Improvement Loans MENU
Personal Lines of Credit MENU
Home Equity Rates MENU
Explore Your Equity Line End of Draw Options MENU
Retrieve Saved Application MENU
Check Application Status MENU
Frequently Asked Questions MENU
Equity Loan/Line Hardship MENU
New Auto Loan MENU
Used Auto Loans MENU
Auto Refinancing MENU
Classic Car Loan MENU
Auto Lease Buyout MENU
Unsecured LightStream Loan MENU
Home Equity Line of Credit MENU
Personal Lines of Credit MENU
CD Secured Loan MENU
Physician Loans and Lines of Credit MENU
Business Loans MENU
Compare Student Loans MENU
How to Plan and Pay for College MENU
Help & Tools MENU
Scholarship Sweepstakes MENU
Contact Us & Access Your Account MENU
Financial Aid Officers MENU
Equity Line of Credit MENU
LightStream Debt Consolidation Loan MENU
Personal Lines of Credit MENU
Personal Credit Cards MENU
Marine and Boat MENU
RV / Motorhome MENU
Motorcycle MENU
Types of Mortgage Loans MENU
First Time Home Buyer MENU
REO Properties MENU
Homebuyer Privileges MENU
Cash Out Refinance MENU
SunTrust Benefits Access MENU
Advantage Checking Benefits MENU
FAQs MENU
Payment Options MENU
FAQs MENU
Forms MENU
Mortgage Assistance Program MENU
One Vision MENU
One Team MENU
CRA Loans MENU
Many Solutions MENU
Seller Guide MENU
Compare Business Checking MENU
Business CDs MENU
Business Money Market Account MENU
Online Cash Manager MENU
SunTrust SunView Treasury Manager MENU
Online Bill Pay MENU
Direct Connect MENU
Online Courier MENU
Business Rewards Credit Card MENU
Business Non Profit Credit Card MENU
Business Credit Card Servicing MENU
Business Term Loans MENU
SBA Loans MENU
Equipment Financing MENU
Commercial Mortgage MENU
Lines of Credit MENU
SBA Working Capital Loan MENU
Widespread Payment Acceptance MENU
Loyalty Programs Small Business MENU
Transaction Security MENU
Direct Deposit Services MENU
ACH Services MENU
Online 401k MENU
Wire Transfer MENU
Deposit Checks Online MENU
ACH Banking MENU
Online Bill Presentment & Payment MENU
Cash Vault Services MENU
Lockbox Services MENU
Business Sweep MENU
Fraud Protection MENU
Letters of Credit and Trade Services MENU
Your Retirement MENU
Personal Wealth Management MENU
Starting Your Small Business MENU
Controlling Cash Flow MENU
Increasing Profitability MENU
Growing Your Business MENU
Protecting Your Assets MENU
Planning for Business Transition MENU
Guides and Resources MENU
Videos and Webinars MENU
Financial Planning Process MENU
SunTrust SummitView® MENU
Choose an Advisory Service Level MENU
Our Investment Philosophy MENU
Quick Guide to Investing MENU
Quick Guide to Retirement MENU
Types of Investments MENU
Stocks MENU
Bonds MENU
Mutual Funds MENU
Global Investing MENU
Annuities MENU
ETFs MENU
Types of IRAs MENU
Taxable Brokerage Accounts MENU
Family MENU
Retirement MENU
Wealth Transfer & Inheritance MENU
Work & Career MENU
Health & Wellness MENU
Women and Investing MENU
Considerations for LGBT MENU
Philanthropy MENU
Our Clients MENU
Goals-Based Planning MENU
About Us MENU
Investment Solutions MENU
Banking Solutions MENU
Retirement Solutions MENU
Insurance Solutions MENU
Trust and Estate Solutions MENU
SunTrust PortfolioView MENU
Sports and Entertainment MENU
Medical MENU
Legal MENU
International Wealth MENU
Leadership MENU
How We Work MENU
National Footprint MENU
Credit and Financing MENU
Treasury Management MENU
Business Transition MENU
Capital Markets MENU
Commercial Real Estate Banking MENU
International Solutions MENU
Investment Banking Services MENU
Employee Benefit Solutions MENU
Escrow & Reinsurance MENU
Risk Management MENU
Investment Banking Coverage MENU
Aging Services MENU
Associations and Charities (NFP) MENU
Auto Dealers MENU
Commercial Real Estate MENU
Education MENU
Food and Agribusiness MENU
Foundations and Endowments MENU
Governments and Municipalities MENU
Healthcare MENU
Logistics & Supply Chain MENU
Multi-Unit Retail MENU
Plan & Budget MENU
Debt & Credit MENU
Family & Friends MENU
Work Life MENU
Health & Wellness MENU
Travel MENU
Holiday Vibes MENU
First Time Home Buyer MENU
Buying and Selling MENU
Renovating and Maintaining MENU
Correspondent Lending MENU
Realtor Builder Insights MENU
Retirement MENU
Protect Your Family MENU
Charitable Giving MENU
Market Insights MENU
Financial Planning MENU
Estate Planning MENU
Health and Wellness MENU
Life Priorities MENU
Specialty Groups MENU
Start Your Business MENU
Control Cash Flow MENU
Increase Profitability MENU
Grow Your Business MENU
Protect Your Assets MENU
Transition Your Business MENU
Cash Flow MENU
Financing and Capital Markets MENU
Fraud Protection MENU
Business Operations MENU
Business Transition MENU
Industry and Local Trends MENU
Investments MENU
Private Foundations MENU
Associations MENU
Planned Giving MENU
Endowments MENU
[Host] When you serve on an endowment board, there’s a lot of emphasis on raising funds, investing wisely and good governance. But there’s often less attention paid to the endowment’s spending policy. Quanda Allen, First Vice President of the Foundations and Endowments Specialty Practice for SunTrust Bank, explains why it’s essential to develop a disciplined spending policy—and how it’s done.
[Quanda Allen] First and foremost, a disciplined spending policy really balances current and future needs when determining the purpose, structure and governance of endowment assets. It also impacts current budgets, future initiatives, capital projects, investment strategies and administrative expenses. A disciplined spending policy also limits volatility, and it truly eases organizational strain and ultimately allows the organization to build long-term sustainability of endowment assets, which is crucial.
[Host] Here’s how having that disciplined spending policy helped one SunTrust client, an Atlanta-based church.
[Allen] What they decided to do was to really bifurcate their spending policy and apply a 5 percent spending policy over a 36-month average to all endowment gifts prior to 2010. And then for all new gifts from that point forward, they applied a 3 percent spending policy over a 36-month average. And by design, what this allows them to do is to really bring their spending policy down to more of a 4 percent effective spending rate, which considers the importance of the long-term sustainability of the endowment without impacting their operational budget too significantly in the short term.
[Host] When it comes to creating a spending policy, Allen says there are two essential types of considerations—qualitative and quantitative.
[Allen] Qualitative considerations really get to the heart of what is the purpose of the endowment? Are there specific donor restrictions? Do we have obligations that this particular endowment must meet?
Beyond qualitative considerations, there are sound quantitative analysis to support spending policy; specifically, you want to make sure that you understand the overall fiscal health of the organization and the role that the funds would play in the overall operational budget.
The second quantitative analysis that you want to undertake is really begin looking specifically at the obligations of spending. So, are there grants that this particular spending policy needs to meet? Is it funding a program? Are there long-term capital expenses?
As you think about quantitative considerations, you also want to make sure that your investment strategy is aligned with the risk tolerance of the organization and the investment time horizon. You want to insure that the spending policy that you have in place is aligned with the overall return expectations for the investment strategy.
And you also want to make sure that you're considering cost, and those are investment related costs because ultimately they do impact the overall funds that are available to be spent. And finally, inflation is an important consideration. Oftentimes, organizations will use a spending policy that includes inflation as a part of the overall calculation. So your inflation or deflation expectations are very important as it relates to this sort of process.
[Host] One of the key elements of a spending policy is to define exactly how the endowment will use the funds. But your spending policy shouldn’t stop there. Allen elaborates on other components to include.
[Allen] First and foremost, you want to address the preservation of purchasing power expressed in a target return or a measure greater than inflation. So at the end of the day, you're actually using a specific spending policy target, and that can be expressed as a single number or a range. You also want to insure that you include in the spending policy language that prevents erratic spending.
And finally, you want to make sure that your spending policy addresses the role of inflation and investment related expenses.
[Host] If your organization already has a spending policy, Allen says advisory services like those offered by SunTrust, can help to refine it.
[Allen] What we can do is sort of compare the spending objectives against expected return assumptions. And that's a very important exercise because it helps an organization understand the extent to which they're gonna be successful in meeting their obligations. The second thing that we can do is really to examine the strategic asset allocation that's outlined in the investment policy statement to really determine if that allocation is appropriate and/or realistic. And finally, if a spending method has already been selected, we can make recommendations for the spending policy to really insure that the asset allocation reflects future liabilities of the organization.
[Host] For more information, read the SunTrust white paper “Endowment Spending: Designing a Policy that Works,” or contact the SunTrust Foundations & Endowments Team at 866-223-1499, or visit us online at suntrust.com/foundations. If you enjoyed this podcast, please consider subscribing to the Foundations and Endowments Podcast Channel via iTunes, or download our podcast app in the Google Play Store, by searching SunTrust.
Establishing an effective spending policy for a foundation or endowment means balancing current and future needs. Listen to this podcast for best practices for creating a sustainable spending policy that serves your institutional mission.
For more information about SunTrust Foundations and Endowments specialty practice, call 866.223.1499 or contact your Client Manager. Learn more about the SunTrust Foundations and Endowments specialty practice.
This content does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
About Us
Support
Find Us
Investment and Insurance Products:
Are Not FDIC or any other Government Agency Insured Are Not Bank Guaranteed May Lose Value
© 2019 SunTrust Banks, Inc.
Equal Housing Lender. SunTrust Bank - NMLS #93471. Member FDIC.
SunTrust, SunTrust PortfolioView, SunTrust Robinson Humphrey, SunTrust Premier Program, AMC Pinnacle, AMC Premier, Access 3, Signature Advantage Brokerage, Custom Choice Loan and SunTrust SummitView are trademarks of SunTrust Banks, Inc. All rights reserved. All other trademarks are the property of their respective owners.
Services provided by the following affiliates of SunTrust Banks, Inc.: Banking products and services are provided by SunTrust Bank, Member FDIC. Trust and investment management services are provided by SunTrust Bank, SunTrust Delaware Trust Company. Securities, brokerage accounts and insurance (including annuities) are offered by SunTrust Investment Services, Inc., a SEC registered broker-dealer, member FINRA, SIPC, and a licensed insurance agency. Investment advisory services are offered by SunTrust Advisory Services, Inc., a SEC registered adviser. GFO Advisory Services, LLC is a SEC registered investment adviser that provides investment advisory services to a group of private investment funds and other non-investment advisory services to affiliates. Mortgage products and services are offered through SunTrust Mortgage, a tradename for SunTrust Bank, and loans are made by SunTrust Bank.
"SunTrust Advisors" may be officers and/or associated persons of the following affiliates of SunTrust Banks, Inc.: SunTrust Bank, our commercial bank, which provides banking, trust and asset management services; SunTrust Investment Services, Inc., a registered broker-dealer, which is a member of FINRA and SIPC, and a licensed insurance agency, and which provides securities, annuities and life insurance products; SunTrust Advisory Services, Inc., a SEC registered investment adviser which provides Investment Advisory services.
SunTrust Private Wealth Management, International Wealth Management, Business Owner Specialty Group, Sports and Entertainment Group, and Legal and Medical Specialty Groups and GenSpring are marketing names used by SunTrust Bank, SunTrust Delaware Trust Company, SunTrust Investment Services, Inc., and SunTrust Advisory Services, Inc.
SunTrust Robinson Humphrey is the trade name for the corporate and investment banking services of SunTrust Banks, Inc. and its subsidiaries, including SunTrust Robinson Humphrey, Inc., member FINRA and SIPC.
If you are a client affected by the Government Shutdown and need help, click hereLink opens a PDF in a new window.