All trust funds are legally created and have their own deed that details the rules and regulations for the specific fund. The primary consideration when budgeting for a trust fund is that expenditure is limited by funds available, that is income earned in the year plus spendable reserves brought forward from previous years.
The income available to a trust fund in the year is the sum of the monthly dividends from capital invested in the Cambridge University Endowment Fund (CUEF) plus interest earned from monies on deposit. Each year, as part of the annual Planning Round, an estimate of dividend payable per unit by the CUEF is prepared by the Finance Division. Your Finance Business Partner, Institution head of finance or the Treasury & Investments Team in the Finance Division can provide you with this information if you are trying to calculate the expected income for a year.
It is important when calculating what income is available to fund planned expenditure on a trust fund, to distinguish between Permanent Capital and Spendable Capital. Permanent Capital, recorded on cost centre ZZYA, cannot be spent. Spendable Capital, recorded on cost centre ZZYB, can be spent and can thus be used to supplement income earned in a year if this is insufficient to cover the cost of planned activity.
If the rules of the trust fund permit it, salaries charged to a trust fund will incur an overhead.
Therefore the process for preparing a trust fund budget is as follows:
- Is planned expenditure permitted by trust fund?
- Calculate the cost of planned expenditure
- Allow for overheads on pay if applicable
- Estimate annual income from fund
- Compare income available to planned expenditure to ensure funds available are sufficient.
Refer to FPM, Chapter 13, for more information on Trust Funds.
The Monitoring and controlling expenditure against income section provides guidance on how to monitor and control expenditure where there is no formal budget in UFS.