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Policy Section 1
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Policy - Section 1 - General

Policy 1.01
Subject: Legal Counsel Review
Date: January 1, 1991

Purpose
Since the Murray State University Foundation, Inc. (Foundation) is a non profit corporation organized under the laws of the Commonwealth of Kentucky, every effort should be made to ensure that the Foundation complies with both state and federal laws.

Therefore, transactions involving the following areas are to be reviewed for legal implication by legal counsel before the Foundation enters into any binding agreement.

  1. Wills - deferred giving.
  2. Transactions involving real property.
  3. Trusts other than those complying with standard gift provisions previously approved by counsel.
  4. Contractual matters involving the MSU Foundation.
  5. Any other matter with legal implications.

It should be noted that counsel will not review these transactions or give opinion as to their benefit or detriment from a business viewpoint. Such reviews and opinions and any subsequent decisions or transactions are the responsibility of the Foundation Board of Trustees. Counsel's opinion should be interpreted only as to legal suffiency.

Procedures

  1. All legal documents will be submitted to the Foundation's legal counsel for review before execution.
  2. Legal counsel will initial the document after reviewing and return it to the Foundation President.
  3. Legal counsel may consider it desirable at times to provide the Foundation with a brief memo to be included in the files. If such is provided, the brief will be placed in the appropriate file.


Revised October 23, 2014

Policy 1.02
Subject: Account Establishment
Date: January 1, 1991

Purpose
The Murray State University Foundation, Inc. (Foundation) receives funds in the form of donations that are restricted by the donors for particular uses. The Foundation has a fiduciary responsibility to ensure that these funds are expended as intended by the donors. The Foundation maintains numerous restricted accounts in order to comply with donor specifications. The following policy for establishment of Foundation accounts will ensure that donor restrictions for a particular account are documented and that the persons with signature authority for expenditures from the account are aware of these restrictions.

Policy

  1. To request establishment of a new account, the Account Director should complete Section 1 of an Account Establishment Form (102Exhibit1). 
  2. The form should be signed by all individuals authorized to expend from the account. Please see Foundation Expenditure of Funds Policy for information regarding required signatures.
  3. The signed form should be forwarded to the Foundation for completion of Section II and Section III.
  4. Foundation accounting will assign an account number to the fund and will distribute the completed Account Establishment Form as indicated on the form.
Revised October 23, 2014

Policy 1.03
Subject: General Guidelines for Discretionary Accounts
Date: January 1, 1991

Purpose
Donors provide contributions to different segments within Murray State University (University) to be used by that area with no restrictions except that the monies be used for the unit's greatest needs. Because of the fiduciary responsibility of the Murray State University Foundation, Inc. (Foundation) and the segment in the University that receives the contribution, a policy on how monies may be expended should be developed. It is essential that proper accountability and reporting be available to contributors of these funds.

Policy

  1. All contributions designated for a particular department, program, or other unit within the University shall be deposited in the Murray State University Foundation and properly accounted for. Each director of a Foundation account shall have access to monthly financial statements accounting for contributions made, expenditures and fund balances.
  2. Expenditures made from these funds must be approved by the person responsible for the fund and his or her immediate supervisor.
  3. Expenditures from these funds shall reflect the intentions of the donor. If the contributions are made with no restrictions and may be used by the unit for its greatest needs, the following policy will be followed:

    A unit within the University will determine its needs and expend the funds as it deems appropriate realizing its accountability to the donors for such expenditures. Expenditures could include scholarships, equipment, supplies, travel, conferences, seminars, dues, and subscriptions, compensation, departmental functions, student activities, etc. In all cases, expenditures will be made that relate to the improvement, enhancement, or continuation of programs within the University. No funds will be expended for expenses that do not directly benefit the University.

Revised October 23, 2014

Policy 1.04
Subject: Funds Eligible for Investment
Date: October 2, 1998

Purpose
The Murray State University Foundation, Inc. (Foundation) receives, invests, and expends funds for the enhancement and improvement of Murray State University (University).

Under the terms of gift instruments, donors often stipulate that the principal may not be spent. In these cases, the principal is to remain inviolate in perpetuity and is to be invested for the purpose of producing income. This investment income is then available for use as specified by the donor. These types of funds are called true endowment funds.

Quasi-endowment funds are similar to true endowment funds in that only investment earnings are available for expenditure. However, the Board of Trustees, upon recommendation from the party responsible for the stewardship of the funds, makes the decision to retain and invest the principal. The responsible party may request that the Board reverse its decision at any time, allowing for invasion of the principal for the purpose(s) designated by the donor of the funds.

Unless prohibited by the gift instrument, the Foundation pools funds available for long-term investment (i.e. endowment and quasi-endowment funds) in order to provide economies in administration and accounting. The identity of separate funds is maintained through a separate balance sheet for each fund. The following policy applies to funds invested with the Foundation.

  1. Effective April 1, 1991, only endowed and quasi-endowed funds will be included in the investment pool, unless approval is obtained from the Foundation Board of Trustees for investment of other types of funds.
  2. Effective March 1, 1991, any new funds must have a principal balance of $5,000 or more in order to be classified as an endowment or quasi-endowment. The principal or quasi-endowed funds must remain intact for at least one year from the date that the Board of Trustees makes the decision to retain the funds for investment. If the principal is invaded within one year, interest will be allocated retroactively as determined under item (4) below. On April 17, 1998, the Board of Trustees changed the endowment policy. The changes are reflected in Section 1.04A.
  3. Investment earnings (cash earnings which includes interest and dividends and realized gains that are held in the pooled investments) on pooled investments will be allocated quarterly, based on the market value of the fund's principal balance at the beginning of the quarter. Investment earnings will be allocated based only on the principal portion of the endowment or quasi-endowment.
  4. Because of the fluctuations inherent in funds other than the principal of endowments and quasi-endowments, these funds will earn interest only if their month-end balance exceeds $25,000. The interest allocation will be based on the average balance in the fund for the month. The interest rate will be the rate paid by the CFSB on passbook savings accounts.
  5. Agency funds, those funds held by the Foundation as an agent for others, will not earn interest except under direction of the Foundation Board of Trustees.
  6. Cash in excess of operating needs will be used to purchase additional pooled investments. The General Fund's share of the investment pool will be increased/decreased as these additional investments are purchased or redeemed.
  7. All investments will be made in accordance with the guidelines established by the Joint Investments Committee of the Murray State University Foundation.

    Revised October 15, 1999, October 23, 2014

Policy 1.04A
Subject: Endowed Funds
Date: October 2, 1998

Policy
The Murray State University Foundation, Inc. (Foundation) Board of Trustees established the following procedures for a named, endowed fund:

Procedures

  • Minimum endowment level: $25,000.
  • Initial investment required to establish the account: $5,000.
  • The Foundation will include the fund in the investment pool when the $25,000 endowment level is reached.
  • The fund has 5 years to reach the minimum $25,000 level for endowment.
  • One year after the minimum endowment level of $25,000 is reached, the first award can be made from the earnings.
  • Should the endowment level not be reached by that time, the donor will have the choice to either "roll-over" the funds into the general foundation fund, or distribute the principal of the fund for University purposes.
  • Awards will not exceed the spending cap as established by the Foundation Board of Trustees in Section 1.04 "Endowment Income Spending" of the Foundation Policies and Procedures manual.

    Revised: April 28, 2000, May 1, 2006, October 12, 2007, October 23, 2014

Policy 1.05
Subject: Investment Policies and Procedures
Date: October 2, 1998

Purpose
Investments made by Murray State University Foundation, Inc. (Foundation) are to be managed in such a way that maximizes the Foundation's ability to contribute to the goals of Murray State University (University). The investment policies and procedures for the investment of monies and securities owned or under the custodial care of the Foundation are established by a Joint Investments Committee. The Joint Investments Committee is comprised of three trustees of the Foundation, two members of the Board of Regents, and two members of the Murray State University Alumni Council.

The Joint Investments Committee meets twice a year just prior to the regular Board meetings of the Foundation, and at such other times as deemed necessary. A report of invested funds is prepared by the Foundation staff and distributed to members of the Joint Investments Committee and the Treasurer at quarterly intervals and to the full Board of Trustees at semi-annual meetings. Periodic reports are made to the Board of Regents by the Chair of the Regents Investments Committee. In addition, quarterly earnings reports are given to the Alumni Association and any other entities having substantial investments in the Foundation.

Policies Governing Investment Discretion & Authorized/Prohibited Transactions

The Joint Investments Committee authorizes the outside investment manager to invest in equity securities as of October 13, 1995.

The Joint Investments Committee authorizes the outside investment manager to also invest in fixed income accounts as of June 10, 1998. The policy is included in Section 1.05A

The Joint Investments Committee authorizes its Chair to make investments of excess cash not being invested through the investment manager as follows:

  1. Cash funds available for investments shall, whenever possible, be pooled into amounts of $100,000 or more.
  2. Cash funds shall be invested for periods of three months to seven years, generally in non-speculative financial institutions or government securities through a process of competitive bidding. Investments may also be made in Government Securities Funds or Trusts offered by sound, well-managed financial institutions or financial service institutions based on their respective rating and performance records. The Foundation may buy up to 35% of the investment portfolio in Government Agencies, and 50% in mortgage-backed securities. In some cases, when deemed advantageous to the Foundation, investments may be negotiated.
  3. A maximum investment of $250,000 - $300,000 shall be held in any institution at a given time. (Exception: A local negotiated arrangement for a 14-day investment of checking account funds, as permitted by cash flow requirements.)
  4. All scholarship funds matched with Hurley bequest funds shall be held in and invested by the Foundation.
  5. No investment shall be placed with any institution on the basis of political favor, friendship, or influence by any officials, alumnus or friend of the University. Competitive, safe, and best bids shall be sought for all funds invested by Foundation officials.
  6. Funds in checking accounts will be invested in negotiated short-term (14-30 days) certificates of deposit, prime accounts, money market accounts or other insured, interest bearing accounts.
  7. The purchase of investment securities (stocks and bonds) and investment real estate shall be authorized by the Investment Committee.

    Other Policies
  8. Pooled investment earnings, including realized and unrealized gains and losses, shall be pro-rated to the individual investment accounts in accordance with the amount of funds invested. This allocation will be made based on the market value of each fund's principal balance at the beginning of the quarter.

Evaluation Criteria

Both long and short term investments should produce a yield that when compared to the current marketplace would be described as competitive by investment managers.

Policy Review Cycle

This policy will be reviewed annually by the Board of Trustees of the Foundation.

Revised October 11, 2002, October 23, 2014

Policy 1.05A
Subject: Investment Guidelines for Fixed Income Managers
Date: June 10, 1998

Purpose
The investment objective of the Murray State University Foundation, Inc. (Foundation) is to produce a high total return, consistent with conservation of capital while producing a dependable source of income to fund the Foundation's spending needs. To achieve this, investments will conform as follows:

Investments will be mostly limited to marketable debt securities rated at the time of purchase within the four highest investment grade ratings (BBB, Baa or better) assigned by Moody’s Investors Service, Inc. or Standard & Poor’s Corporation or which, although not rated by either agency, are deemed as being of investment quality equivalent. Convertible securities of less than “BBB” or “Baa” rating may be considered on a limited and selective basis, as may fixed income securities of lower quality, for up to ten percent (10%) of the income portfolio.

Exposure to any one non-government/agency issuer is limited to 5% of the Foundation’s total fixed income securities (including fixed assets not managed by the Foundation’s outside investment managers) at the time of purchase.

Fixed income securities return expectations are to exceed the Barclays Capital Aggregate Bond Index or other similar index, as deemed acceptable to the Foundation Investment Committee over one, three and five years.

Not more than twenty percent (20%) of the fixed portfolio may be invested in any one broadly defined industry, regardless of the number of individual holdings. Not more than five percent (5%) of the fixed income portfolio may be invested in any one corporate issuer, at cost, specifically excluding U.S. Treasury, GNMA, FNMA, FHLB and any other government sponsored enterprise securities. (U.S. Treasury and GNMA also excluded from the 20% limit above.)

The account may invest any portion of its assets in securities of Canadian issuers and up to 20% of its assets in securities of other foreign issuers, including emerging markets securities. It may invest without limit in obligations of supranational entities (e.g., the World Bank). It may also invest in mortgage related securities, including mortgage dollar rolls. The account may also engage in futures transactions.

The fixed income securities in which the account may invest include corporate securities, U.S. Government securities, zero coupon securities, mortgage-backed securities, collateralized mortgage obligations, when issued securities, REITs, Rule 144A securities and structured notes.

In order to ensure overall diversification (maturity, sector, issuer, quality, etc.), all the Foundation’s fixed income holdings will be taken into consideration when making investment decisions.

Mutual funds and other types of commingled investment vehicles provide, under some circumstances, lower costs and better diversification than can be obtained with separately managed portfolios pursuing the same investment objectives. However, commingled investment funds cannot customize their investment policies and guidelines to the specific needs of individual clients. Therefore, if the Foundation selects a mutual fund or other type of commingled vehicle for investment, either directly or through an investment management agreement, then the written guidelines and policies of the commingled fund or the prospectus and statement of additional information for the mutual fund, and any provisions set forth in any investment management agreement will replace this Policy Statement for these particular type of investments. The Manager or other fund representative will provide a copy of the applicable commingled or mutual fund guidelines, policies, prospectus and other governing documents to the Foundation.

These guidelines are subject to revision and will be reviewed by the trustees on an annual basis or more often as needed. Changes may be made at their discretion and in consultation with the manager.

Revised: October 11, 2002, November 2, 2007, April 17, 2010, October 23, 2014

Policy 1.05B
Subject: Investment Guidelines for Common Stock Managers
Date: October 11, 2002

Purpose
The investment objective of the Murray State University Foundation, Inc. (Foundation) is to produce a total return with investment policies that, over the long-term, strive to provide growth while preserving the value of assets. To achieve this, the managers of the Equity Investment Portfolio should apply the following objectives and guidelines:

Common Stock performance expectations are to exceed the following benchmarks:

  1. The S & P 500 stock average and the Russell 1000 Growth Index over a full market cycle, from a major market peak to peak.
  2. The Consumer Price Index plus 300 basis points, on an annualized basis, over any five-year period of measurement.

It is also the desire of the Trustees to allow the managers maximum flexibility regarding the capitalization of the individual common stock holdings. However, in no instance should the managers invest in a common stock with a capitalization of less than $500 million. This limit applies to purchases only and not to existing holdings.

Managers should be allowed maximum discretion in choosing broadly defined industries and industry concentration. However, not more than six percent (6%) of the portfolio may be invested in any one corporation at cost. Otherwise, there are no restrictions on the managers regarding individual holdings or the percentage share of the portfolio committed to any one industry.

Managers may also engage in selling securities short. These are securities the managers sell, but do not own, in anticipation of a decline in the market price of such securities. The managers may borrow the securities sold short in order to make delivery to the buyer. The managers then are obligated to replace the securities borrowed by repurchasing at the market price at the time of replacement.

Trustees will determine the appropriate mix between stocks and fixed income. Trustees may choose to invest up to 70%, or more, of available funds in common stocks. However, the Trustees may also reduce common stock exposure to as low as 40%, or less, when they deem it appropriate. The remainder will be invested in fixed income securities, including cash reserves, which Trustees may retain separate from the managers from time to time.

These guidelines are subject to revision and will be reviewed by the trustees on an annual basis or more often as needed. Changes may be made at their discretion and in consultation with the manager.

Revised November 2, 2007, October 23, 2014

Policy 1.06
Subject: Purchased, Leased or Donated Vehicles
Date: January 1, 1991

  1. GENERAL
    In certain circumstances, vehicles may be purchased or leased by the Murray State University Foundation, Inc. (Foundation) or donated to Murray State University. Individual faculty or staff members may not accept donations of the use of vehicles, or contract for the lease of vehicles in the name of the University or the Foundation. The President of the University or Foundation are the only officials authorized to accept these donations or sign these contracts on behalf of the Foundation.
  2. RESPONSIBILITY FOR ASSIGNMENT OF VEHICLES
    A. President of Foundation assigns vehicles to Vice Presidential area or Department.
    B. Vice President, Department Head, or Director assigns vehicles within area or Department.
    C. Athletic Department
         1. Athletic Director assigns vehicles to sports 
         2. Head Coach assigns vehicles to individual coaches
  3. FRINGE BENEFIT VALUATION AND WITHHOLDING
    A. General - The value of the use or the availability of a vehicle to an employee is generally a taxable fringe benefit and must be included in the employee's income as compensation. The amount to be included as compensation will be calculated using the "lease valuation" rule. Any exceptions to this method must be reviewed and approved in advance by the Director of Accounting and Financial Services.
    B. Withholding - This compensation is subject to Federal and State income tax and FICA (Social Security) withholding.
    C. Lease Valuation Rule
      • Under the method, the total value of use will be included in compensation. Annual lease value will be determined from IRS tables, based on the estimated fair market value of the vehicle on the date of first availability to the employee.
      • Estimated fair market value is not redetermined once a vehicle has been made available to the employee.
      • Estimated fair market value will be based on dealer's written statement (which should include description of vehicle, date of valuation and value) of the estimated selling price to an unrelated third party. These estimates will be compared to NADA book or other standards. The department will be responsible for justifying any significant discrepancy.
      • Amount to be included as compensation will be determined based on continuous days the vehicle is available for use as follows:
        • Less than 30 days - Annual lease value, times 4, times number of days available, divided by 365.
        • 30 or more days - Annual lease value, times number of days available, divided by 365.
  4. TRAVEL VOUCHERS, REIMBURSEMENT, AND OTHER COSTS

    A. Lease Valuation Rule - For individuals using vehicles valued under the lease valuation rule, the maximum reimbursement for travel will be at the rate established in the general University travel policy (currently 30 cents per mile).

    B. Other Costs - Insurance and normal operating maintenance will be paid by either the Foundation or the donor/leasor, depending on the agreement with the donor/leasor. The employee will be responsible for repair and payment of any damage to the car (including the deductible amount on collision insurance in the event that repair costs exceed the deductible amount) which occurs during personal use of the car outside of Calloway County, Kentucky.

  5. PAYROLL REPORTING
    A. Leased or Donated Vehicle (Exhibit 1) - This form must be completed and a copy filed with the Foundation accounting staff within one week after vehicle is acquired or within one week after vehicle is reassigned to a department, or turned in.

    B. Leased or Donated Vehicle Assignment (Exhibit 2) - This form must be completed and filed with the University Payroll office for each employee to whom a vehicle was assigned during the previous month; it must be filed with Payroll no later than two weeks prior to the next scheduled pay date (generally the 15th, except when the scheduled University pay date is prior to month-end.)

    For example, use for March should be reported to Payroll no later than April 15. Because, under IRS regulations, use for December can properly be reported in the next tax year, this will not necessitate any year-end adjustment in the reporting cycle.

    When an employee is terminated, this form (reflecting final use) must be filed with Payroll no later than two weeks prior to the employee's last scheduled pay date.

 Revised October 23, 2014

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