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Glenn Hegar  ·  Texas Comptroller of Public Accounts

Reporting Requirements for Annual Financial Reports of State Agencies and Universities

Notes & Samples

NOTE 22 – Donor Restricted Endowments

In a table format, report the amount of cumulative net appreciation on investments of donor-restricted endowments available for authorization for expenditure. Net appreciation is the cumulative appreciation, net of all previous distributions. It is not the one year fair value increase/decrease on donor-restricted endowment investments.

Report only the net appreciation available for authorization for expenditure. Internal policies regarding how appreciation will be distributed on a yearly basis are not relevant to classification as expendable restricted net position. Nonexpendable classification is only appropriate when the net position (including related cumulative appreciation) is required to be retained in perpetuity (for example, endowment corpus).

Underwater endowments occur when the market value of the endowment is less than its historic dollar value. The historic dollar value is the value of the original endowment adjusted for amounts required to be added to it either by the donor or law. When investment markets are down, endowments tend to go underwater. If an endowment is underwater, it has no net appreciation available for expenditure. Do not report a negative net appreciation in Note 22. If an endowment is underwater, make a notation in the body of the note and explain the current year changes to this underwater status.

Display amounts as true endowments and term endowments and disclose how these amounts are reported in net position. Display current year fair value adjustments parenthetically in a footnote to the table.

Use the following format to explain variances from prior year-end for expendable and nonexpendable balances:

Changes from Prior Year Balances
Endowment Funds Increase/(Decrease) Reason for Change
Expendable Balances
True Endowments $ 1,500,000 Fair value increase in portfolio
Term Endowments (27,650) Fair value decrease in energy stocks
Non-Expendable Balances
True Endowments 2,000,000 Donor gifts and bequests
Term Endowments (50,000) Term restrictions expired

Also include your policy for authorizing and spending endowed earnings (such as a spending-rate or total return policy).

Note: Endowments are classified as nonexpendable or expendable under restricted net position. Appreciation of true and term endowments that can be spent is classified as expendable. This does not apply to or change the status of the endowment, only the appreciation associated with that endowment when the appreciation can be expended.

Glenn Hegar
Texas Comptroller of Public Accounts
Questions? Contact statewide.accounting@cpa.texas.gov
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