Foundation spending requirement

J

June06

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My understanding is its depensd on type
Independent: 5% of average market value of assets
Company sponsored: 5% of average market value of assets
Operating: at least 85% of dividends plus interest income
Community: None

Is above in line with the practice question you have done?
 
That matches what’s in Schweser. For the CFA AM questions the minimum spending requirements are explicitly stated.
 
dead on man, just remember mgt fees would not be included in what constitutes the 5% so you would need to include that too
 
2013 mock AM Q6 says the foundation’s risk tolerance is above average because “it does not have contractually-defined liability stream. Its 6% annual spending requirement is not a contractual obligation.”
But I remember reading in the text that one of the key difference between foundation and endowment is that foundation have mandatory spending requirement (to maintain their tax-exempt status?)
so foundations have discretionary spending requirement?
 
jmsp wrote:
2013 mock AM Q6 says the foundation’s risk tolerance is above average because “it does not have contractually-defined liability stream. Its 6% annual spending requirement is not a contractual obligation.”
But I remember reading in the text that one of the key difference between foundation and endowment is that foundation have mandatory spending requirement (to maintain their tax-exempt status?)
so foundations have discretionary spending requirement?
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Only endowment has spending rule. Foundation depends…like my original post.
 
schweser reading 14 chapter summary under endowment IPS says no specific requirement.
but as your original post says, only community foundation has no spending requirement so i guess university type foundation is community?
 
To be honest, I’m still struggling to distinguish foundation vs. endowment….
 
whatsyourgovt wrote:
dead on man, just remember mgt fees would not be included in what constitutes the 5% so you would need to include that too
Click to expand...
Yes, management fee in required return and liquidity requirement.
But inflation only add into required return and no liquidity requirement.
 
sachin_patel wrote:
is it average market value of assets or beginning market value of assets?
Click to expand...
average, curriculum exhibit 2.
Beginning market value of asset is for spending rule.
 
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