4. Special Funds
The Board of Trustees of the Evanston Public Library does maintain and manage an Endowment Fund and encourages donors of large financial gifts to direct those funds to the Endowment. The Endowment Fund was established in 1907 to acquire and invest contributions that provide, in perpetuity, income to be used to support special projects and the acquisition of Library materials, equipment and capital improvements for which the Board of Trustees has determined a need, which projects and acquisitions could not be undertaken within the regular operating and capital budgets of the Library. It was expressed intent of the Board of Trustees that the Endowment was established to supplement and enhance the Library’s collections, operations and facilities, never to diminish in any way the funding for the Library that is provided by federal, state or local governments. The Endowment Fund has grown to include numerous distinct funds, most of which were established in honor or memory of an individual.
4.1.1 Investment Management
The Endowment Fund will be invested and administered by a three member Investment Committee appointed for two-year terms by the Board of Trustees. The President of the Board of Trustees will appoint the chair of the Investment Committee. Decisions will be made by a simple majority of Investment Committee members.
The Investment Committee will manage investments based on the terms of the investment policy statement and the needs of the Evanston Public Library. The Investment Committee may appoint a manager or invest the funds itself using a custodial account under the administration of the Library Director.
Should the Committee decide on a change of Investment Manager, three (3) months notice will be given. The Investment Manager must give six (6) months notice in writing to the Board if it wishes to resign the account.
The Committee may pay consulting fees not exceeding 0.10% of assets per annum for asset allocation advice.
4.1.2 Goal of the Investment Policy
The goal of the Endowment Fund investment policy is to provide the Investment Manager with clear objectives and limitations required by the Library to achieve a rate of return above inflation with the protection of the principal.
Prudence. The Investment Committee will follow the prudent person principle in taking any investment action. Any investment advisor or manager will follow the prudent expert principle in taking any investment action.
Diversification. The investment policy requires that investments be diversified to minimize unsystematic risk and that all fixed income investments be of investment quality.
Payout. After the end of a fiscal year, the Board of Trustees will determine the amount of income (from interest, dividends, and/or capital gains) to be drawn from the Endowment based on the investment performance of the previous fiscal year. The annual payout from the Endowment will not exceed 5% of total assets and the principal of the endowment will remain inviolable.
4.1.3 The Portfolio
Asset Mix. Assets can be distributed among equities, and fixed-income and convertible securities, index tracking instruments (e.g. “spiders”), Federal Instrumentalities, no-load (maximum 12B1 equal to 0.25%) mutual funds and other funds registered with the SEC. The Investment Committee will determine the tactical weighting of asset classes of the portfolio within the following target ranges:
Equity/Equity Funds 70% 20%
Fixed Income/Fixed Income Funds 70% 15%
Cash Equivalents 65% 10%
Stocks. Investments shall be only in marketable stocks. This precludes private placement, restricted securities and public or nominally public issues for which the market is severely restricted. All securities shall be of a class listed on the New York Stock Exchange, the American Stock Exchange, or the NASDAQ National Market system. Investments in foreign markets may only be made through no-load (maximum 12B1 equal to 0.25%) international or global-equity mutual funds, and may not exceed 20% of the portfolio value.
Fixed Income. Investments may be made in fixed-income securities, including U. S. Government and agency obligations, marketable corporate bonds and debentures, commercial paper, certificates of deposit, short-term investment funds and other such instruments. The quality rating of short-term paper purchased individually shall be rated A-1 or P-1.
Prohibited Transactions. The Library shall not directly purchase equity securities on margin, sell short, trade in commodity futures, derivatives (not to include convertible securities), or deal in put, call or other option contracts. Some mutual funds do engage in such dealings and this should not preclude these potential investments.
Some form of collateral must secure funds deposited in excess of FDIC limits. Any of the following assets will be accepted as collateral:
- a) Government Securities
- b) Obligations of Federal Agencies
- c) Obligations of Federal Instrumentalities; and,
- d) Obligations of the State of Illinois
The Investment Committee reserves the right to accept or reject any form of the above named securities. The amount of the collateral provided will not be less than 110% of the fair market value of the net amount of the Endowment funds secured. The ratio of fair market value of collateral to the amount of funds secured will be reviewed monthly, and additional collateral will be required when the ration declines below the level required and collateral will be released if the fair market value exceeds the required level. Pledged collateral will be held in safekeeping, by an independent third party depository (or the Federal Reserve Bank of Chicago) designated by the Investment Committee and evidenced by a safekeeping agreement. Collateral agreements will preclude the release of the pledged assets without an authorized signature from the Investment Committee.
4.1.5 Investment Performance Measures
Investment performance, net of fees, shall be compared to the following benchmarks with the expectation that returns will be consistent with such benchmarks over a market cycle of 5-7 years:
Domestic equity performance will be compared to the total return (including dividends) of the S&P 500 Index. International equity performance will be compared to the total return of the Morgan Stanley EAFE (Europe, Australia and Far East) Index.
Fixed Income/Fixed Income Funds
Domestic fixed income performance will be compared to the Lehman Brothers Intermediate Government/Corporate Index. International fixed income performance will be compared to the J. P. Morgan Non – U.S. Government Bond Index.
Cash investment performance will be compared to the IBC Financial Data Corp. All-taxable funds average, or the Merrill Lynch 3 month T-bill (actual prices) Index.
4.1.6 Investment Performance Reviews
Investment Performance: The Board of Trustees will review the performance of the Endowment Fund at least once each year and discuss any changes that seem desirable because of changes in the Library’s goals or changes in market conditions.
Policy review: The Board of Trustees will review the Endowment Fund investment policy every two years. The investment policy can only be changed with the affirmative vote of a majority of the Board of Trustees.
4.1.7 Investment Reporting
The Investment Committee and, if used, the Investment Manager is to provide performance information to the Library every three months as well as monthly statements.
4.2 Fund for Excellence
The Fund for Excellence was established in 1994 with the purpose of strengthening the Library’s collections beyond the tax-based level of support. The goal of the Fund for Excellence is to achieve a library of distinction, worthy of this exceptional community. Each year the Board establishes a goal for an annual campaign conducted by the Board and volunteers. The Fund for Excellence is also supported by a quarterly contribution from Book Sale funds. Contributions to the Fund for Excellence are spent exclusively for the purchase of library materials. None of the costs associated with the raising of these funds are charged to the Fund for Excellence.
Each March, at the beginning of the Library’s fiscal year, the Library Board will review staff recommendations and decide upon the allocation of the funds raised in the previous twelve months. The funds thus allocated will be expended during that fiscal year. The allocation of the Fund for Excellence is intended to enrich and enhance the Library’s collections with individual library materials that could not be purchased and with collection depth that could not be achieved through the expenditure of the tax money available for library purposes.
4.3 Book Sales
Book sales, at the Main Library and in the branches, will be planned and conducted by volunteers. The Library Board will designate one of its members to serve as a liaison to the book sale volunteers. The stock for book sales includes (1) donations to the Library (The Library’s staff will always be provided with the option of reviewing such donations for the purpose of selecting materials for inclusion in the Library’s collection.), and (2) books and other library materials that have been withdrawn from the Library’s collection. Branch book sales will be ongoing sales conducted in each branch. The Main Library book sales will include both ongoing sales in the Library’s lobby and special sale events which will be scheduled at times and in places agreed upon by the Library Director and the book sale volunteers.
The income from book sales will be deposited in the Library’s Gift Fund and credited to the Main Library or to a branch. All expenses associated with the conduct and promotion of book sales will be paid from book sale income. Such expenditures should not exceed two and a half percent of the annual book sale income. Sixty percent of book sale income will be transferred to the Library’s Fund for Excellence at the end of each quarter. Transfers from a branch book sale account will be reserved for purchases for that branch’s collection. All Fund for Excellence purchases made with book sale funds will be designated by a book plate stating: “Purchase of this library material made possible by a contribution to the Fund for Excellence from Book Sale revenues.” Twenty percent of all book sale income will be transferred to the Library’s Endowment at the end of each quarter. All Endowment Fund earnings from book sale income will be reserved for the purchase of library materials. For the period beginning March 1, 2005 and ending February 28, 2008 the allocation of book sale revenue shall be altered. Fifty percent of book sale revenue will be transferred to the Library’s Fund for Excellence. Forty percent of book sale revenue will be reserved for the Youth Services Renovation Project. After February 28, 2008 the allocation of book sale income will revert to the pattern shown above.
The remaining book sale funds will be used for outreach and marketing activities and for the purchase of furniture and equipment that cannot be supported from the Library’s regular budget. These expenditures will include any design, printing and postage costs associated with the annual Fund for Excellence mailings. All book sale expenditures will be proposed by the Library Director and approved by the Library Board. The Library Director may authorize the expenditure of Book Sale Funds, not to exceed $500, for purposes in accordance with the intent of this policy. All such expenditures will be reported to the Library Board on the monthly financial report.
4.4 Gift Book Fund
The Library Board encourages contributions to the library as memorials, to honor individuals and organizations, as a means of marking special occasions, and as an expression of gratitude. Such gifts are deposited in the Gift Book Fund and spent as quickly as practicable on library materials in accordance with the directions of the donor. See also section 3.4 Gifts.