Trust Fund Set Up
- Setting up of the Fund
- Appointment of Trust Fund Managers
- Permanent Capital
- Spendable Capital
- Coding Structure of Trust Funds
- Trust Funds belonging to more than one department
- Varying the Ordinances for Trust Funds
When trust funds are established there are a number of considerations that should be taken into discussion with potential benefactors, including:
| The value of the capital | This should be sufficient for the purpose for which it is to be used. The University Development Office can advise on levels of capital required as well as tax-efficient methods of making a gift to the University. |
| The terms of the gift and subsequent wording of the regulations | The more general the terms of the gift, the more subsequent wording of the flexibly it can be used. It is helpful to include regulations provision, where acceptable to the benefactor, for funds to be used for general purposes as well as a specific purpose. For example, a fund might be for a prize, but the regulations might specify that any remaining funds can be used for the furtherance of teaching and research in the subject. |
| Provision for funding essential departmental and central administrative costs | This is essential departmental and administrative costs. |
It is important to consult the University Draftsman, or other officer of the Secretariat, about the form of regulations as they can advise in the early stages of any discussion with benefactors.
Setting up of the Fund
Benefactions and gifts to establish new Trust Funds are always reported to Council and a Notice announcing acceptance by the University is published in the Reporter.
The Notice would usually be accompanied by a grace, or grace and report, to set up regulations for the management of the new trust fund.
The Development Office will make arrangements to receive the benefaction into their separate bank account for the Cambridge University Development Office. They will then organise a journal to be done to transfer the funds to the new trust fund account.
The Cambridge Foundation should receive the benefaction, which will then be transferred to the Finance Division. The Finance Division will set up a new trust fund account on the University Financial System (UFS), and make arrangements to invest the money on behalf of the fund. Monthly financial statements will be produced and distributed to the managers from this point.
Original donation agreements are held by the Development Office, and copies are held centrally by the Finance Division. Trust Fund Managers are advised that it is good practice to set up files within their department, to keep their own copies of all appropriate paperwork/correspondence for future reference.
Appointment of Trust Fund Managers
The constitution of the board of managers or electors of a trust fund is usually laid down by Ordinance. Managers may be appointed by the Council, the General Board, Faculty Board or other bodies. A full list of managers for each trust tund is published in a Special Number of the Reporter at the start of each term.
As with all University Boards, Syndicates and Committees, the upper age limit for trust fund managers on appointment is seventy years.
Trust Fund Managers have an important role to ensure the Trust Fund is managed effectively. Financial responsibilities include ensuring expenditure is:
- within the regulations
- within the level of income
- carefully planned each year
Permanent Capital
Most trust funds will have some permanent capital - the original endowment that cannot be spent by the Managers. A number of funds do not have permanent capital as, under the terms of the bequest, both the original donation and any income generated, may be spent.
The permanent capital of a trust fund is invested in the Cambridge University Endowment Fund (CUEF) and is treated as a long-term investment, i.e. the units held cannot be sold. The CUEF income generated from the permanent capital is credited monthly to the spendable part of a Trust Fund (cost centre ZZYB) under the transaction code NAAA.
Spendable Capital
Most trust funds will have some spendable capital as well as permanent capital. This is also known as accumulated unspent income.
The regulations for most Trust Funds explicitly provide for unspent income to be carried forward and used as income in subsequent years. The regulations for a few Trust Funds, however, specify that unspent income must be reinvested as an annual addition to permanent capital.
The CUEF income generated from spendable capital is also credited monthly also to the spendable part of a Trust Fund (cost centre ZZYB) under the transaction code NAAA.
Trust Fund managers should, where possible, ensure that spendable capital is not left to accumulate, but matched with appropriate expenditure, thereby relieving general departmental reserves. In some cases, it is understood that this is not possible, where reserves are being accumulated for long-term purposes such as contributing towards new buildings.
Coding Structure of Trust Funds
Trust funds are classified as 'specific endowments' as the benefactor has specified that the funds are to be invested and the investment income is to be used for specific purposes. The funds may be required to be invested in perpetuity or for a finite period.
In UFS, each trust fund is identified by a unique source of funds code beginning with the letter "K". This distinguishes them from other types of activities in the Chart of Accounts.
The permanent capital element of a Trust Fund is distinct from the spendable capital, by the use of a different Cost Centre within the same Source of Funds.
For example, if you have a trust fund that is identified as "ABC", your account code would be as follows:
| Department | Cost Centre | Source of Funds | Description |
| Your Dept code | ZZYA | KABC | Trust Fund - Permanent Capital |
| Your Dept code | ZZYB | KABC | Trust Fund - Spendable Capital |
What does this mean to me?
Subject to the terms of the trust deed, you can pay invoices out of the spendable capital cost centre. NEVER charge expenditure to ZZYA!
Trust Funds belonging to more than one department
Some trust funds have managers in more than one department. These funds are therefore mapped to Central Administration and are listed under "General" when the Annual Accounts are published in the University Reporter.
Departments will not have access to these funds, therefore the accounting will be carried out by the Finance Division on behalf of all relevant departments. All invoices and payment requests must:
- Be authorised in writing by the Trust Fund Managers, or by the individual with delegated authority
- Then be sent to the Trust Fund Assistant for processing.
Varying the Ordinances for Trust Funds
The University has limited powers to vary the application of a trust fund.
| Statutes & Ordinances | |
| Statute E, Chapter 1, 8 | Allows the University to make Ordinances to apply income for a purpose other than that prescribed by the terms of the trust, provided that such application is in keeping with the original purpose of the endowment. |
Changes to Ordinance are made by the Council by publication in the Reporter of a:
- Grace and footnote; or
- Grace and report (if the changes require more detailed explanation)
The University Draftsman in the Secretariat can give guidance on changing the Ordinances. Where significant changes are proposed, it is necessary to refer back to the original deed or will to check that what is proposed is within the spirit of the original terms of the trust.
Where original terms of endowment cannot be satisfied
In some cases, unforeseen changes in circumstances mean that the original terms of the endowment cannot be satisfied, e.g. changes in the nature of study of a subject or changes in the make-up of the student population.
| Statutes & Ordinances | |
| Universities of Oxford & Cambridge Act 1923 Section 8 (I) | Where it can be demonstrated that a fund is unspendable as well as unspent, even after the purposes of the trust have been met as far as they possibly can be, the University has power to make a Statute varying the terms of a trust. |
This power is limited by the following requirements:
- The trust must have been in existence for more than sixty years, or alternatively, the consent of the trustees must be obtained;
- If the trust has been in existence for less than sixty years, an alteration can only be made with the founder of the trust if they are still alive.
Making or changing a Statute, however, is a lengthy and often expensive procedure requiring approval of the Queen in Council.