Crossroads Academy

Part V, Line 4: Intended uses of the endowment fund.

“The Schools endowment consists of approximately four individual mutual funds established for a variety of purposes. Its endowment includes both donor-restricted funds and funds designated by the Board of Trustees to function as endowments. As required by generally accepted accounting principles, net assets associated with endowment funds, including funds designated by the Board of Trustees to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions.The Board of Trustees of the School has interpreted the Uniform Prudent Management of Institutional Funds Act (UPMIFA) as requiring the reservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the School records donor restricted endowment funds as temporarily restricted net assets until those amounts are appropriated for expenditure by the School in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the School considers the following factors in making a determination to appropriate or accumulate donor restricted endowment funds: (1) the duration and preservation of the various funds, (2) the purposes of the donor restricted endowment funds, (3) general economic conditions, (4) the possible effect of inflation and deflation, (5) the expected total return from income and the appreciation of investments, (6) other resources of the School, and (7) the Schools investment policies.Investment Return Objectives, Risk Parameters and Strategies. The School has adopted investment and spending policies, approved by the Board of Trustees, for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment funds while also maintaining the purchasing power of those endowment assets over the long term. Accordingly, the investment process seeks to achieve an after-cost total real rate of return, including investment income as well as capital appreciation, which exceeds the annual distribution with acceptable levels of risk. Endowment assets are invested in a well diversified asset mix of mutual funds that is intended to result in a consistent inflation-protected rate of return that has sufficient liquidity to make an annual distribution of 5%, while growing the funds, if possible. Therefore, the School expects its endowment assets, over time, to produce an average rate of return of approximately 6% annually. Actual returns in any given year may vary from this amount. Investment risk is measured in terms of the total endowment fund; investment assets and allocation between asset classes and strategies are managed to not expose the fund to unacceptable levels of risk.Spending Policy. The School has a policy of annually appropriating for distribution up to 5% of the fair value of the donor-restricted endowment fund at calendar year-end. In establishing this policy, the School considered the long-term expected return on its investment assets, the nature and duration of the individual endowment funds, and the possible effects of inflation. The School expects the current spending policy to allow its endowment funds to grow at a nominal average rate of 1% annually. This is consistent with the Schools objective to maintain the purchasing power of the endowment assets as well as to provide additional real growth through new gifts and investment return.In May 2014 the School adopted a new policy whereby 4% of the average market value of the endowment portfolio at the end of the preceding 12 quarters is applied to operations. The calculation is made each December 31st. In the event of a substantial gift (greater than 50% of the market value of the endowment), the Board may apply a transitional spending policy. In establishing this policy, the Board seeks to protect the real purchasing power of the endowment over time;”