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Trust Funds and T Activities Procedure

Category Finance
Type Procedure
Approved by Chief Financial Officer
Date Procedure Took Effect 16 April 2002
Last Approved Revision 28 May 2014
Sponsor Chief Financial Officer
Responsible Officer Treasury Accountant
Review Date 28 May 2019

Purpose

These procedures set out the procedures for the distribution of Trust Funds held by the University of Otago Foundation Trust.

Policy Content

Introduction

The University of Otago Foundation Trust is a registered Charitable Trust under the Charities Act (CC20440). It receives and administers donations, bequests and sponsorship monies for University and academic priorities. Trust deeds ensure that the wishes of donors and sponsors are fulfilled.

The University is the beneficiary of over 350 individual trust funds held by the University of Otago Foundation Trust. Each fund has a founding document eg trust deed or will which governs the purpose for which the funds can be used, the manner in which this is decided and whether the capital balance needs to be retained. The distribution of income to support research and teaching activities from these funds is controlled by the Trustees of the Foundation Trust. Information on what trust funds are available to each Cost Centre and the purposes for which it must be used is available in the annual budget process or from the Treasury Accountant, Financial Services Division.

Trust Fund Investments

All monies received by the University of Otago Foundation Trust are combined for investment purposes, enabling investment risk to be managed through a diversified portfolio. The investment objectives are to ensure that, where appropriate, the capital is preserved and increased by an amount at least equal to the rate of inflation, and that an income return of 4.5% is achieved.

Investment income is allocated monthly to individual trust funds based on the average monthly balance of each fund.


Distributions from Trust Funds

Distributions to the University can only be made from prior year earnings. The balance available in each fund is shown in the Trust ledger (TL ledger) under dissection 9961 (unspent income from prior years). The University however encourages Cost Centres to only distribute 4.5% of the opening balance of each trust fund as investment income can fluctuate between years. During the budget process, an estimate of the funds available for distribution is provided to Cost Centres in their budget packs.

Distributions from trust funds can only be made in accordance with the original purposes of each fund. Sufficient expenditure must have taken place in the University to match the distribution. Distributions must be approved by the Head of the Department, or the Dean of the School or Faculty, before being made.

All expenditure on trust funded activities must be accounted for in an appropriate departmental activity within the University. Expenditure may not be coded directly to a Trust account.

A journal is used to transfer distributions from trust funds to the University to fund that expenditure. This journal is completed by Cost Centre administration staff for the GST exclusive costs and can be done in the following ways:

  • A lump sum at the end of the month covering all payments made during the month,
  • A regular monthly lump sum,
  • Individual journals covering individual payments, or
  • An annual journal covering all payments made during the year.

This procedure ensures that Departmental accounts reflect income provided to the University by the Trust, and all research, teaching and admin expenditure is measured in the University's reporting of outputs.

The General Ledger journal will always be:

  • DR Trust Fund     TL &&&& 3795 (Trust Distributions to the University)
  • CR University       GL 10 $$ $$$1921 00 (Distribution from Trusts)

The Project Ledger (Q Accounts) journal will always be:

  • DR Trust Fund    TL &&&& 3795 (Trust Distributions to the University)
  • CR University     PL $$$$$$ $$ $ $$ 1331 00 (Distribution from Trusts)

The Project Ledger (Q Accounts) journal will always be:

  • DR Trust Fund    TL &&&& 3795 (Trust Distributions to the University)
  • CR University     PL $$$$$$ $$ $ $$ 1921 00 (Distribution from Trusts)

The Project Ledger (S Accounts) journal will always be:

DR Trust Fund TL &&&& 3795 (Trust Distributions to the University)
CR University PL $$$$$$ $$ $ $$ 1921 00 (Distribution from Trusts)

Any other journal entries in the Trust Ledger will be the responsibility of Treasury staff in the Financial Services Division.

At the end of each year Financial Services send out a form to be signed by the Head of the Department or the Dean of the School or Faculty to confirm that the funds distributed have been spent in accordance with the purposes of the Trust.

T Activities ("little t's")

These are tagged gifts and bequests, which are not Trusts, and are generally known as "little t's". The capital balances reside within departmental accounts as T activities and are not required to be maintained permanently. Essentially they are like carry forwards but for three notable differences:

  • They are interest bearing,
  • Each fund may be fully expended provided the purpose/s given by the donor are met, and
  • The balance sits in dissection 9962.

Authorised expenditure is simply coded to the appropriate dissection within the T activity. The balance brought forward is updated before the end of March each year.

For any additional information please contact the Assistant Accountant, Treasury, Financial Services.

Contact for Further Information

For further information, contact the Treasury Accountant, extn 8185 or email helen.harris@otago.ac.nz