Endowment Utilization Policy

Summary of Policy

Dartmouth's endowment utilization policy balances support of the current generation of students and faculty with the need to preserve the College's endowment for future generations.

Affected Parties

All Groups

Policy Statement

Utilization Policy

Dartmouth's endowment utilization policy balances support of the current generation of students and faculty with the need to preserve the College's endowment for future generations. While peer institutions have various endowment management policies, Dartmouth's is a common one, and all such policies embody the same goal of balancing current use with long-term preservation. Dartmouth's utilization policy provides that an annual amount of current and accumulated endowment investment return will be distributed monthly from each individual endowment fund which can be utilized by the College for operations. The amount of endowment return actually utilized for operations must be spent in accordance with donor restrictions, if applicable, or with Board approved directives.

Distribution Policies

The amount to be appropriated from the endowment each fiscal year is approved by the Board of Trustees. In making this determination, a distribution formula is used as a guideline and consideration is given to the seven factors included in the prudency standard required by the Uniform Prudent Management of Institutional Funds Act (UPMIFA) as adopted by the State of New Hampshire effective July 1, 2008, as follows: 1) the duration and preservation of the endowment fund; 2) the purposes of the institution and the endowment fund; 3) general economic conditions; 4) The effect of inflation or deflation; 5) the expected total return from income and the appreciation of investments; 6) other resources of the institution; and 7) the investment policy of the institution.

Dartmouth's distribution formula is designed to moderate the potential volatility of endowment distributions during periods of large positive and negative investment returns. The general guideline for this smoothing formula uses the prior year's distribution amount as the main factor of the distribution. More specifically, subject to the modification described below as the Infrastructure Renewal Distribution, 70% of the current year distribution is based on the prior year's distribution, times an inflation factor, and the remaining 30% is based on the 4 quarter average calendar year market value times the long term payout goal of 5%. This formula helps manage volatility in budgeting, but it also takes into account changes in the market value of the endowment. The distribution amount derived from the formula, including the Infrastructure Renewal distribution, will be monitored to ensure compliance with the State of NH Prudent Management of Institutional Funds Act.

To fund the distribution as approved by Dartmouth's Board of Trustees accumulated investment appreciation may be expended; and surplus appreciation is retained in the endowment. In some instances, there may be investment losses that cause the market value to fall below the original gift amount (also known as historic book value). In this scenario, a fund is considered to be "underwater".
In order to provide stable funding for the programs supported by the endowment, effective October 2016, spending from a portion of historic book value on underwater funds will be permitted provided there are no donor-imposed restrictions that prohibit such spending. Taking into account the prudency standard factors listed above, no more than 20% of the historic book value shall be distributed for programs, with the remaining 80% of historic book value remaining intact. It is expected that over the long-term, positive investment performance will allow underwater funds to regain prior losses, support a full formula distribution, and experience real growth.

Total Program Cost Distribution Policy

Endowments are expected to contribute to, if not underwrite entirely, the total costs of the programs such funds support. Most of the annual endowment distribution offsets direct program costs incurred. The balance is reserved to defray associated program costs (such as space and support) and infrastructure renewal, as described below, which make up a significant portion of a program's total cost and represent the many dimensions of underlying support essential for any program to succeed.

Effective July 1, 2011, this allocation was adjusted to 19.1 percent for support of associated program costs, and 80.9 percent for direct program costs.

Effective July 1, 2021, this distribution policy has been modified to incorporate the Infrastructure Renewal Distribution ("IRD") adopted by the Board of Trustees February 18, 2021. Subject to the Board of Trustees approval of the annual operating budget, beginning in FY 2022, the total distribution will be comprised of the formula distribution (as described above and modified below) plus the IRD. The IRD will be 50 basis points (0.5%) applied to all eligible endowed funds. Beginning with FY 2023, the long-term payout rate component of the distribution formula will decrease (from 5.0%, as described above) by 5 bps (.05%) until the long-term payout rate component is 4.5%. The effect and objective of this is to increase the total distribution to approximately 5.5% in FY 2022, and then decrease the total distribution to approximately 5.0% over time, dependent on investment returns, inflation, and other factors.

The IRD will be credited to the Infrastructure Renewal Fund. Capital expenditures and operating expenditures from this Fund must be for infrastructure renewal projects approved by the Board according to the Infrastructure Renewal Criteria and Priorities adopted by the Board of Trustees February 18, 2021.

Disclosure in Donor Gift Agreements

Statements of Understanding for new restricted endowments are required to have the following disclosure:

As with other endowment funds, Dartmouth's Office of Finance & Administration will oversee this fund in accordance with the endowment management, distribution, and utilization policies established by the Trustees. These policies govern the investment of endowment funds and the distribution and utilization of endowment earnings to defray the total costs of programs designated for support by donors. This includes direct costs, associated costs and infrastructure and renewal costs essential for programs to succeed. These policies may be revised from time to time by the Trustees of Dartmouth College. A summary of current policies is available from the Development or Finance Office upon request.

There is a small subset of gifts, such as bequests, that established endowments where the College either has no Statement of Understanding, or the documents that establish the fund do not contain the above disclosure. These funds are treated the same way as funds that were established with the disclosure unless expressly advised otherwise in the applicable gift instrument.

The policies described above may be revised from time to time by the Trustees of Dartmouth College.

Policy ID


Effective Date

September 16, 2016

Last Revised Date

February 18, 2021


Finance & Administration

Office of Primary Responsibility


Office(s) of Secondary Responsibility

Last Reviewed Date

February 18, 2021

Next Review Date