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How do I set up an endowment to reinvest a portion of its distribution back to principal?

In order to tell a fund to reinvest a portion of its distribution back to principal, you must create at least two distribution rules in Fundriver, which will in turn create two (or more) transaction records.  The first transaction will record a distribution transaction for the entire amount and the second will show a reinvestment transaction for a percentage or fixed amount of the distribution.  

The training below shows two examples of reinvest scenarios.  The first is a simple scenario--the second involves multiple spending accounts and a reinvestment.  Both scenarios are helpful to review to get a full understanding of how Fundriver processes reinvestments.

To add a reinvest rule, navigate to ORGANIZE > FUNDS and search for the endowment to which the rule should be applied.  Directly below the FUND PROFILE for that fund is a DISTRIBUTION ACCOUNT section.  Click the green ADD DIST. RULE button at the bottom of the DISTRIBUTION ACCOUNT screen.

To add a reinvest rule, navigate to ORGANIZE > FUNDS and search for the endowment to which the rule should be applied.  Directly below the FUND PROFILE for that fund is a DISTRIBUTION ACCOUNT section.  Click the green ADD DIST. RULE button at the bottom of the DISTRIBUTION ACCOUNT screen.

Example 1:  An organization needs to reinvest 25% of the distribution (both percentage and fixed reinvestment amounts are both options in Fundriver).  The first step is to create a DISTRIBUTE ALL rule.

Example 1:  An organization needs to reinvest 25% of the distribution (both percentage and fixed reinvestment amounts are both options in Fundriver).  The first step is to create a DISTRIBUTE ALL rule.

First, make an entry in the distribution grid for a distribution of the full amount.  This setup will use the assigned Spending Rule to calculate the amount of the full distribution.

  1. Click the ADD button
  2. Select Distribute ACTIVITY TYPE
  3. Select All CALCULATION TYPE (the system ignores the amount)
  4. Optional: Enter a note and a Destination ID or internal account
  5. SAVE

Create a second entry to tell the program to reinvest a percentage of the earnings back to principal.

Create a second entry to tell the program to reinvest a percentage of the earnings back to principal.
  1. Click the ADD button
  2. Select Reinvest to Principal ACTIVITY TYPE
  3. Select Percentage CALCULATION TYPE
  4. Enter the percentage you want to distribute in the amount cell

NOTE: Be sure to enter percentage as a whole number.

Assume the spending formula results in a $500 calculated distributable amount.

Result: Two transactions are created:

1. A distribution transaction for the full calculated distributable amount ($500). 

2. A reinvestment transaction for 25% of the calculated distributable amount ($125).

The net cash flow on the reconciliation will be a cash flow out for the remaining 75% of the calculated distributable amount ($375).

Example Two:  An organization has a fund that needs to reinvest 5% of its earnings, payout $30,000 to a particular account, and direct the remainder to another account.  Setting up a DISTRIBUTE ALL rule will calculate the spending amount based on the spending rule.  The 5% reinvestment amount and the distribution of the remainder funds will be dependent on this calculation.

Example Two:  An organization has a fund that needs to reinvest 5% of its earnings, payout $30,000 to a particular account, and direct the remainder to another account.  Setting up a DISTRIBUTE ALL rule will calculate the spending amount based on the spending rule.  The 5% reinvestment amount and the distribution of the remainder funds will be dependent on this calculation.

First, make an entry in the distribution grid for a distribution of the full amount.  This setup will use the assigned Spending Rule to calculate the amount of the full distribution.

  1. Click the ADD button
  2. Select Distribute ACTIVITY TYPE
  3. Select All CALCULATION TYPE (the system ignores the amount)
  4. Optional: Enter a note and a Destination ID or internal account
  5. SAVE

The second step is to create a rule to distribute the fixed amount.

The second step is to create a rule to distribute the fixed amount.
  1. Click the ADD button
  2. Select Distribute ACTIVITY TYPE
  3. Select FIXED AMOUNT CALCULATION TYPE
  4. Type in the fixed AMOUNT to be distributed
  5. Optional: Enter a note and a Destination ID or internal account
  6. SAVE

Next, add the rule to set up the reinvestment amount.

Next, add the rule to set up the reinvestment amount.
  1. Click the ADD button
  2. Select Reinvest to Principal ACTIVITY TYPE
  3. Select Percentage CALCULATION TYPE
  4. Enter the percentage you want to distribute in the amount cell
  5. SAVE

NOTE: Be sure to enter percentage as a whole number.

Once all of the rules are set up, the DISTRIBUTION RULES grid should look like this.

Once all of the rules are set up, the DISTRIBUTION RULES grid should look like this.

Once distributions are created, you should be able to see the transactions that were created based on your distribution rules by navigating to ORGANIZE > FUND > TRANSACTION HISTORY and entering your FUND name and POST DATES.

Once distributions are created, you should be able to see the transactions that were created based on your distribution rules by navigating to ORGANIZE > FUND > TRANSACTION HISTORY and entering your FUND name and POST DATES.

The net cash impact on the fund in this example is $578,641.22 ($30K fixed amount + $577,517.07 spending calculation - $28,875.85 reinvestment).

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