Kuali Endowment Module (KEM)May 21, 2007

Kim Yeoh, Assistant ControllerCornell University

Norm Peacock, Assistant Director ITS Indiana University Foundation

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KEM Presentation Agenda

• SME Members• General Overview• Project Scope/Out-of-Scope• General Requirements• Progress to date and Next Steps• Comparison of SME Institutions• High-level Review of KEM Modular Design

Note: Reference and additional materials available in the back of presentation handout.

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KEM SME Members

Norm Peacock, Lead SME, Indiana University Foundation

– Cornell University - Gail Thayer, Kim Yeoh, Ming Bengtsson

– Indiana University - Bill Buskirk, Joan Hagen

– Michigan State University - Nancy Carter

– NACUBO - David Lyons

– San Joaquin Delta College - Shelley Pierce

– University of Arizona - Mike Treiber, Cecilia Esguerra, Marlene Moldenhauer

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Endowments Comparison Among Participating Institutions

Institution Mkt. Value as of 6/30/06

# Accounts

# Campus IntegratedSystem?

Cornell University

$4.4 Billion 6,528 2 No, though GL manages shares

Indiana University

$174 Million

375 8 No

Indiana University Foundation

$1.4 Billion 5,200 8 Yes, but needs enhancements

Michigan State University

$1 Billion 1,850 1 No

San Joaquin Delta College

$1.7 Million

5 1 No

University of Arizona

$200 Million

670 2 NoKEM - 4

Kuali Endowment Module

Based on the IU Foundation Endowment and Trust Accounting System (ETA)

KEM is a stand-alone system (could be implemented without Kuali Financial System)

KEM outside the original scope of Kuali Financial System (KFS)

KEM seeking development partnersKEM - 5

Kuali Endowment Module

The Scope of the KEM includes– Investment tracking and basic reporting– Investment participation management and

standard reporting– Budgeted payout and income projections– Access to donor instructions– Searchable data elements– Beneficiary disbursement process and tax

reportingKEM - 6

Kuali Endowment Module

What’s Out-of-Scope?– Gift Records System

• fund raising activity - campaign goals and results

• donor contacts

• pledges- both conditional and unconditional

• gift payments

– Pool Valuation• market value of pool assets

• underlying asset distributionKEM - 7

KEM Conceptual Diagram

Draft Gift / KEM / KGL Interfaces

All Gifts

Gift System

Opt

ion

2

KEMInvestment PoolsDonor InstructionsInvestmentsFunds

Kuali GL

Investment Custodian

Op

tion

1A

ll Gifts

Inve

sted

Gifts

FFE andOther invested reserves

Non-Invested orSpendable Gifts

Investment Gift and Income Transactions

New MoneyMarket Value Changes

andIncome Distribution

KEMNon-KEM

Non

-KE

MK

EM

Option 1

Option 2

LEGEND

KE

M

Non

-KE

Mi

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KEM General Requirements

• Accommodate security transactions at the individual security level or at the summary level

• Support both FASB and GASB reporting

• Capture and maintain donor restrictions and instructions for income/unspent funds

• Facilitate the management of “unitized” investment pool(s)

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General Requirements

• Track “separately invested” securities, or non-pooled investments

• Maintain stewardship information for reporting to donors

• Feed financial transactions to an institution’s General Ledger

• Ability to manage electronic documents with an external workflow engine

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Progress to Date

• Developed the conceptual model for KEM• Developed the physical data model for

KEMID (aka KEM Account)• Developed a resource estimate based on

current IUF-ETA functionality and approved enhancements

• Defined KEM standard or basic reports

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Next Steps (In Process)

• Recruit development partners• Map IUF-ETA screens to KEM

eDocs

• Create functional specifications for each eDoc

• Complete KEM physical data model KEM - 12

IU Foundation Systems Overview

Donor DatabaseGift Processing(Both IU and IUF gifts)

Transaction ProcessingAccount Maintenance

Automated Cash Investment Automated Income Distribution

Asset ManagementInvestment Management Reports

Transaction and Balance Statements

Daily Transfer of IUF gift totals

by account

Daily Summary of Transaction

Totals (By Fund and Object Code)

Gift System

Endowment & Trust Accounting System

General LedgerBudget AccountingAccounts PayableEnterprise Funds

Fixed AssetsIUF Management Reports

General Ledger

Custodian Bank Asset

Data

Pool Pricing and Underlying Asset / Income Allocation

Database

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UofA Systems Overview

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KEM Modular Design

KEMIDSECURITIES,

HOLDINGS AND CASH

TRANSACTIONS

RECURRING TRANSACTIONS

INDIVIDUAL

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KEMID (Endowments and Trusts)

• All relevant KEMID administration data– Open and close records– Ticklers– KEMID type– Associations with Fund and Unit

• Instructions– Transaction Restrictions

• KEMID Status, Agreement Documentation Status, Restrictions and authorizations

– Investment Instructions• Automated Investing, Daily and Periodic

– Fees

KEMIDSECURITIES,

HOLDINGS AND CASH

TRANSACTIONS

RECURRING TRANSACTIONS

INDIVIDUAL

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Securities, Holdings and Cash

• Balances by KEMID– Current and historical

– Cash

– Securities• Units, Carry Value, Market

Value, Accrued Income

• Securities Managed by the Organization– Current Values

• Units, Carry Value, Unit Value, Market Value

• Security type

• Interest rates and dividend per share, payment schedule

• Pooled Investment Fund Data – Current and historical unit values and distribution amounts

KEMIDSECURITIES,

HOLDINGS AND CASH

TRANSACTIONS

RECURRING TRANSACTIONS

INDIVIDUAL

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Investment Participation Management

• Pool Control KEMID (Master Trust Account)

– Holder of all Pool Investment Assets• An endowment uses cash to purchase units of the pool,

increasing the principal cash asset of the control KEMID.• When an endowment sells units of the pool, the principal cash

asset is reduced.• Excess principal cash is transferred to a manager for

investment in appropriate assets.

– Receives all investment income from the investments• Dividend and interest posted as income cash in the control

KEMID• Distributions to the endowments reduce income cash in the

control KEMID

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Investment Tracking and Reporting

• Tracking Managed Securities – Holdings by Security

• Current Position• Share Price• Income information

– Holdings by Endowment• Current and Historical• All Holders List• Holding Detail

• Securities Transactions– Purchases and Sales– Corporate Actions– Accrued Income Calculations– Income Distributions

KEMIDSECURITIES,

HOLDINGS AND CASH

TRANSACTIONS

RECURRING TRANSACTIONS

INDIVIDUAL

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Transactions

• Unique transaction types– Cash, Asset and Liability

• Purchases, Sales, Deposits, Disbursements• Increase, Decrease or Transfer

– Special types• Original Gift Value Adjustment• Holding Unit Adjustment• Corporate Reorganization• Trust Asset Transfer

• Multiple entry methods– Recurring transactions– Imported Transactions

• Gift Transactions, Spreadsheets– Daily Processes

KEMIDSECURITIES,

HOLDINGS AND CASH

TRANSACTIONS

RECURRING TRANSACTIONS

INDIVIDUAL

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Recurring Transactions

• Investment Models– Cash Sweeps (Money Market Investments)

– Pooled Funds

• Scheduled Transactions– Transfers

– Disbursements

• Automated Processes– Interfaces

– Batch• Daily

• Monthly

• Annual

KEMIDSECURITIES,

HOLDINGS AND CASH

TRANSACTIONS

RECURRING TRANSACTIONS

INDIVIDUAL

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Individuals

• Payees, KEMID Signers, Users

• Name and Address records– Home, Business, Campus, Seasonal

• 1099 reporting– Independent Contractor, NRA

• Bank Depository – ACH or Wire Transfer

• Associated KEMIDsKEM - 22

Possible Automated Processes

• Possible Interfaces to KEM– Importing Gift Transactions– Security Pricing– Exporting General Ledger Entries– Updating Database used for Web Inquiries

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Thank you!

Questions?

For progress updates

http://www.kuali.org/KEM - 24

Additional References

KEM Presentation

Supporting Materials

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KEM Scope

• Investment tracking and basic reporting– number of shares, book, par and market values, CUSIP

number, investment category (stocks, bonds, real estate, etc.), and capital commitments.

– purchases and sales of investments; income earned, collected, accrued; management and custodial fees and commissions; and other investment related data.

– provide data to compare investment policy allocation targets to actual allocations and incorporate pending transactions (i.e. rebalancing).

– track investment commitments for limited partnerships and contributions made against these commitments.

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KEM Scope

• Investment participation management and standard reporting including unitized transactions– Investment pool data (number of units, market value per unit) for

all funds that participate in an institution's investment pool(s). – Quantify units purchased and sold, and calculate the gain or loss

on withdrawal. – Record investment income, realized gains, unrealized gains, and

fees to the various funds, either in the specific fund or in high level accumulation accounts.

– Track the net asset balance of a true endowment fund between its components of historical book value and accumulated earnings.

– Allocate either a budgeted payout to the income accounts affiliated with a principal account (based on pooled units), or actual income earned on separately invested endowment funds.

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KEM Scope

• Budgeted payout and income projection– Project the budgeted payout (based on pooled

units and an approved spending policy) – Project the anticipated income based on

declared dividends, bond holdings, etc. – Update current year income projections– Create spending policy reports by fund,

KEMID, college, dept, etc.Go Back

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KEM Scope

• Access to donor instructions– Capture and distribute the donor instructions

for a gift or endowment fund– Link imaged document files to KEM accounts

and transactions

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KEM Scope

• Beneficiary disbursement process and tax reporting – Disburse payments to beneficiaries (including

“split interest agreements”) – Provide data for annual tax reporting

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KEM Interface Diagram

Kuali Endowment Module (KEM) Conceptual Diagram (3/15/2006)

Inst

itutio

n F

inan

cial

In

form

atio

n S

yste

m

Transaction Module

KE

MO

usid

e K

uali

FIS

Out

side

KE

M Gift Processing Transaction

Interface

Transaction Import

Miscellaneous transactions

(spreadsheets)

Automated Investments

Income Distributions

Fee Transactions

Pool Management

Automated Disbursements and Transfers

Manual Transactions

E-DOCS(WORKFLOW)

Custodial Bank

Pool Valuation

KEM Transactions

KEM AccountData

Instructions

Donor Compliance

Ownership

GL Relationship

KEM Individual Data

Payees, Trust Beneficiaries,Account Authority,Users

Multiple Addresses and Relevant data for contact or payment

KEM Recurring Transaction Information

Automated Investments

Automated Income Distribution

Transfers and Disbursements

KEM Security and Holdings Data

Balance Data

Security TotalsKEM Account totals

CashInvestments

DailyHistorical

General Ledger Module

Scrubber PosterGeneral Ledger

Interface

GL Pending Entries

Payment Disbursement

Processing

Purchase Orders/

Accounts Payable

Accounts Receivable

Updates

Check PrintingACH file

Generation

External Pricing Service

E-Docs

Tax Reporting Service

Donor Relations Database

Kuali Chart of Accounts

Kuali Budgets

Relates to

Validates

Validates

Validates

Reporting Environment/

Data Warehouse

Actuarial Values

External SystemsBursar, Payroll,

Independent Billings etc.

Decision Support System

Imaged Documents

Student Information

System

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Baseline System of KEM

• Endowment Trust Accounting (ETA) System used by Indiana University Foundation is the baseline system of KEM.

• ETA will be “kuali-fied” – look-and-feel will be Kuali but core design and functionality will be based on ETA.

• A few ETA screens available on the next few pages…

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Endowment and Trust Accounting

• Account Management

• Investment Management

• Automated Functions

• Relational Database

• Multiple Reporting Options– ODBC – User-Designed Daily and On Demand Reports– Web Access

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ETA Accounts(Endowments and Trusts)

• All relevant account administration data– Open and close records– Ticklers– Account type– Associations with Fund and Unit

• Instructions– Transaction Restrictions

• Account Status, Agreement Documentation Status, Restrictions and authorizations

– Investment Instructions• Automated Investing, Daily and Periodic

– FeesKEM - 34

Account Detail Screen

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Securities, Holdings and Cash

• Balances by Account– Current and historical– Cash– Securities

• Units, Carry Value, MarketValue, Accrued Income

• Securities Managed by the Organization– Current Values

• Units, Carry Value, Unit Value, Market Value• Security type• Interest rates and dividend per share, payment schedule

• Pooled Investment Fund Data – Current and historical unit values and distribution

amounts KEM - 36

Balances by Account

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Securities by Account

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Accrued Income Calculations

• Income Accrual Methods– Automated Cash Management – This is the accrual mechanism for “money market”

type KEMIDs. It will calculate daily based on the holdings of each date and add the amount to the total interest due to the KEMID holder.

– Dividend –The total dividend amount to be paid to the holder of a security based on the ex-dividend record date, units held, dividend amount and payment date. These accrual amounts will be calculated periodically, based on the ex-dividend date.

– Treasury Notes and Bonds – Daily accruals are calculated based on the number of days in the six months prior to the semiannual payment date.

– Discount Bonds – Accruals are calculated daily but will never be paid to the KEMID holder until the security reaches maturity or is sold.

– Mortgage Pass-Through 30 –This is not a true daily accrual. The total income due is recomputed daily. It assumes that payments are made one month in arrears (30 days) on the 15th of the month.

– Mortgage Pass-Through 60 – Like the previous method except that it assumes that payments are made 2 months in arrears (60 days) on the 15th of the month.

– Time Deposits – Simple interest calculations, not compounded. Payment frequencies will vary depending upon the instrument

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Securities Managed

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Pooled Investment Funds

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Transactions• Unique transaction types

– Cash, Asset and Liability• Purchases, Sales, Deposits, Disbursements• Increase, Decrease or Transfer

– Special types• Original Gift Value Adjustment• Holding Unit Adjustment• Corporate Reorganization• Trust Asset Transfer

• Multiple entry methods– Recurring transactions– Imported Transactions

• Gift Transactions, Spreadsheets– Daily Processes KEM - 42

Transactions

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Transactions

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Transactions

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Recurring Transactions

• Investment Models– Cash Sweeps (Money Market Investments)– Pooled Funds

• Scheduled Transactions– Transfers– Disbursements

• Automated Processes– Interfaces– Batch

• Daily• Monthly• Annual KEM - 46

Investment Models

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Investment Models

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Scheduled Transfer

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Scheduled Disbursement

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ETA Automated Processes

• Interfaces– Importing Gift Transactions– Security Pricing– Exporting General Ledger Entries– Updating Database used for Web Inquiries

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Daily Nightly Batch Processes

• Daily– Transaction Import– Large Batch Posting– Accrual Transactions – Accrual Calculations– Recurring Transactions– Pooled Fund Distributions– Automated Cash Investments– Cash Sweeps– Pooled Fund Control Accounts Summary Transactions– Change Reporting– Date Frequency Roll Process

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Periodic Nightly Batch Processes

• Monthly– Cash Balance Archive– Holding Balance Archive– Seasonal Address Update– Fee Assessment Transaction Process

• Year-End– Update Original Gift Values

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Individuals

• Payees, Account Signers, Users• Name and Address records

– Home, Business, Campus, Seasonal

• 1099 reporting– Independent Contractor,

NRA

• Bank Depository – ACH or Wire Transfer

• Associated AccountsKEM - 54

Individuals

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What is KEMID?

• KEMID – represents monies held and invested for the benefit of a specific area and to be used for a specific purpose. One KEMID may be related to one or many GL accounts.

• The unique name was developed so as not to confuse it with the GL account concept.

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KEM Resource Estimates

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KEM Standard Reports

The following seven reports will be delivered with the KEM module:– Endowment Asset Statement– Endowment Transaction Statement– Endowment Transaction Summary– Non-Endowed Asset Statement– Non-Endowment Transaction Statement– Non-Endowment Transaction Summary– Trial Balance

Notes:– Trial Balance – will include columns for available expendable cash and

estimated income for the balance of the fiscal year.– All reports should have the capability to be run for organizational entities

or sequences including: department, division, school and campus, etc. The trial balance report should also have the capability to be run by endowment or account type.

– Additional internal and other reports needed by a KEM institution will be run at the school using a reporting tool of each school’s choice.

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End of Additional Resources

Thank you for your continued support!

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