Texas Presbyterian Foundation

Rescued by a Spend Rate: Maintaining Support for Your Mission

By John Furlow, TPF’s Executive Vice President

TPF, like most charitable organizations, uses a Uniform Prudent Management of Institutional Funds Act (UPMIFA) compliant pre-determined spend policy based on the average market value of the funds over a set time (usually the prior three-year period). But why is this important to you?

The following outlines some key facts about the spend rate to help provide some clarification:

  • A version of the UPMIFA has been adopted in all fifty states.
  • UPMIFA provides standards and guidelines for the management, investment, as well as for expenditure of charitable funds and for endowment spending by institutions organized and operated exclusively for a charitable purpose.
  • A spend rate provides a predictable and stable stream of income from the real, inflation-adjusted return on assets.

When we see a Bear market like this one, organizations who have a spend policy will continue to receive the same distributions to support their mission for the remainder of that budget year. In most cases, the calculations for 2023 that utilize the spend policy will result in the same dollars or a modest increase for the next year’s budget. Even though the market value of the investments has recently decreased, the three-year average has smoothed out the calculation.

To hear more about the current markets and the use of a spend policy, please join us for our upcoming webinar, THE WORD ON THE STREET, August 2022: A Mid-Year Conversation on Investment Philosophy, Performance, & Perspective on Wednesday, August 10th at 11:00 AM CST. CLICK HERE TO REGISTER TODAY!