Part V of Schedule D captures information about endowments and quasi-endowments, and the figures you report here should include funds that your organization holds, as well as funds held by organizations formed and maintained only to further one or more of your exempt purposes, and organizations that hold endowment funds for your benefit. 3 types of funds are included in Schedule D’s definition of endowments and quasi-endowments:
- Temporarily Restricted Endowments: These come from donor-restricted contributions and provide income during a specific time frame or until a specific event occurs. This also includes unappropriated income from permanent endowments that isn’t subject to permanent restrictions, and any other net assets that are temporarily restricted and held in a donor-restricted endowment.
- Permanent Endowments: They are funds that were permanently restricted by donors and are held in perpetuity in order to provide income. You’re required to invest the principal and keep it intact, and you can only use the income it generates.
- Board-Designated Endowments, aka Quasi-Endowments: These funds were not restricted by donors, but were set aside by your board of directors for restricted use(s). The restrictions you put on the money may be temporary or permanent.
On line 1a, list the total balances of all endowment and quasi-endowment funds for the current year, and the 4 previous years. On line 1b, list the contributions made towards these funds and transfers into them. Include contributions from donors as well as new quasi-endowment funds set up by your board of directors. On line 1c, list the total of investment earnings, gains and losses (both realized and unrealized). If you report earnings net of transaction costs (e.g. investment management fees), put the net amount on line 1c. If you report earnings on a gross basis, put the transaction costs on line 1f.
On line 1d, enter the amount you released from the funds for grants and scholarships and on line 1e, put the amounts distributed for facilities and programs. If you withdrew amounts from a quasi-endowment, or otherwise reduced the amount you had invested in quasi-endowments for the sake of reducing the amount invested, put that on line 1e. On line 1f, put the amount of administrative expenses incurred, whether the expenses were internal to your organization or from a third party. Finally, put the year-end balances on line 1g, which will tie out to the beginning balances, adding lines 1b and 1c, and subtracting lines 1d through 1f.
On line 2, enter the percentage of the endowment funds which are in each of the 3 categories listed above, which should add up to 100%.
On line 3a(i) and (ii), check off whether any of your endowment funds are held by unrelated organizations and/or related organizations, respectively. If any of the funds are held by related organizations, these organizations should be reported on Schedule R; check off whether they’re all listed there on line 3b. (Schedule R Parts I-IV, Part V, Part VI)
Per line 4, describe in Part XIII what you intend to use your endowment funds for.
Schedule D can be found here, and more detailed instructions for filling it out are provided here. I am covering other parts of Schedule D in additional blog posts. (Part I | Part II | Part III | Parts VI – X | Parts XI – XII)