Finance and Fundraising

Annual Budget

An annual budget is to be submitted, in a timely fashion, by the board to the FSM President and the Congress of the Federated States of Micronesia for the annual expenditures of the college. Congress makes annual appropriations to the college for operating and capital expenditures.

The college is committed to the following principles in planning and preparing its budget: open communication and transparency, dialogue and discussion, participatory governance, data-driven decisions, and clearly stated outcomes.

The vice president for administrative services (VPAS) leads the development of the annual budget. The budget process starts in April with the VPAS preparing the budget guidelines and ends in December with the balanced budget approved by the Board of Regents (BOR) and transmitted to the FSM government.

The twelve stages in the preparation of the budget are:

Stage 1: VPAS prepares the budget guidelines.

Stage 2: VPAS, in coordination with other vice presidents (VPs), makes a list or statement of assumptions and revenue projections.

Stage 3: VPAS, in coordination with other VPs, develops the budget timeline based on the guidelines, assumptions and revenue projections in Stages 1 and 2.

Stage 4: VPs determine resource allocations for their respective departments.

Stage 5: IRPO (or other designated unit supervisor) conducts budget preparation training workshops, during which campus deans and office directors prepare their respective unit budgets.

Stage 6: VPs hold budget hearings within their respective departments.

Stage 7: VPAS consolidates the budget.

Stage 8: Planning & Resource Committee (PRC) and Finance Committee (FC) jointly review the resource allocations in the budget and submit recommendation to Executive Committee (EC).

Stage 9: EC reviews and endorses the budget to the president.

Stage 10: President approves and submits the budget to BOR, or rejects and returns the budget to EC.

Stage 11: BOR approves the budget, subject to any final revisions it deems necessary.

Stage 12: President transmits the BOR-approved budget to FSM government.

Financial Management

The board at its discretion shall:

1. Enter into and perform such contracts, leases, cooperative agreements, or other transactions as may be necessary in the conduct of its business and on such terms and conditions as it may deem appropriate, including contracts to perform organized research, training, and demonstrations on a reimbursable basis;
2. Receive, manage, and invest monies, and receive and manage other property, real, personal or mixed, tangible or intangible, or services which may be appropriated, or in any manner received from any source for the purposes of the college, its improvement or adornment, or for the aid to the students or faculty of the college, and in general to act as trustee on behalf of the college for such purposes or objects:
3. Approve rates of per diem and policies relating thereto for officials, faculty members, and other employees of the college; and
4. Approve such rents, fees and charges, as the board deems appropriate, for the private use of facilities of the college or services provided by the college.

The board is responsible for ensuring that the college develops, implements, and maintains, in accordance with generally accepted accounting principles, accounting and record-keeping, financial reporting, and financial management systems which provide for full disclosure of the results of financial operations, adequate financial information needed in the management of operations, and the formulation and execution of the annual budget adopted by the board. Such systems are to ensure effective control over income, expenditures, funds, property and other assets of the college and be designed to prevent the misappropriation of funds. Records relating to the financial transactions of the college are maintained for at least five years.

Limitations on Authorized Expenditures

Unless otherwise specifically authorized by the board, no officer or employee of the college is to make or otherwise authorize expenditure from or create or authorize an obligation of funds of the college:

1. After the period of time available for obligation and expenditure as provided by the board;
2. In excess of the sum approved by the board;
3. In advance of the availability of funds; or
4. For purposes other than those for which an expenditure or obligation has been authorized by the board.

The board may require that an officer of the board or an official or employee of the college furnish a bond of a kind and in an amount required by the board.

Reports and Auditing Procedures

ANNUAL REPORT

The board is to provide to the FSM President and the Congress of the Federated States of Micronesia by April 1 of each year, or as soon as practicable thereafter, an annual report concerning the activities, programs, progress, condition, and financial status of the college in the fiscal year most recently completed. The annual report shall provide comprehensive financial information which accounts for the use of all funds available to the college from the national government or otherwise and which shall be prepared in accordance with generally accepted accounting principles. The annual report shall also describe implementation of the college’s long-range plan and include information on student enrollment, costs per component and per student, and the status of students who graduated from or terminated studies at the college.

AUDIT

The board is to request and utilize the Public Auditor or a duly accredited licensed independent auditor who shall inspect and audit all accounts of the college at least annually and report thereon to the board and to the national government. Audit means financial, compliance, program results, and economy and efficiency audits, including determinations as to whether the college has met the requirements set forth in the enabling law and determination as to the propriety of the financial transactions of the college. The board of regents and officials, faculty, and other employees of the college are to cooperate fully with the audit officials to enable them to fully discharge their responsibilities, and provide such audit officials access, without cost and during normal working hours, to all personnel, records, documents, working papers, automated data, files, and other information such audit officials deem relevant to their work. See appendix 16­­ for the most recent audit report.

Board Expenses, Compensation and Honorarium

The members of the board receive per diem and car rental, where justified and necessary, at standard national government rates while on board-approved business of the college. Those members who are employees of the national or state governments are granted administrative leave and receive their regular salaries while on business of the college. Other non-government members who are not otherwise being compensated receive compensation on a daily basis while on board-approved business of the college. The rate of compensation as established by the board is $30.00 per day.

Consultants or advisors participating in board activities that are not officials or employees of the national or state governments or the college may receive a reasonable honorarium at the discretion of the board. The president of the college is not entitled to receive expenses, compensation or honorarium as provided in this section.

Indemnification of Members

Members of the board are indemnified by the college against all expenses and liabilities reasonably incurred or imposed upon the members in connection with any threatened, pending, or completed action, suit or proceeding to which the members may be made a party or in which the members may become involved by reason of being or having been a member of the board, or any settlement thereof, whether or not the member is a member of the board at the time such expenses are incurred, except in such cases where the member is adjudged guilty of willful misfeasance or malfeasance in the performance of the duties of the office; PROVIDED, however, that in the event of a settlement, the indemnification herein applies only when the board approves such settlement and reimbursement as being in the best interest of the college. Private property of members of the board is not subject to the debts or obligations of the college. The foregoing right of indemnification is in addition to, and not exclusive of, all other rights to which members of the board may be entitled.

Endowment Fund

COLLEGE ENDOWMENT FUND

The Endowment Fund was established in 1993 with the goal of growing in size through a combination of contributions and investment return to twenty million dollars ($20,000,000). At which time, endowment income can be used to fund operational and special needs of the College of Micronesia-FSM. The board and the Investment Committee are to discharge their responsibilities to the endowment solely in the long-term interests of COM-FSM.

The objectives of the endowment are:

• To defray the operational expenses and other special needs of COM-FSM;
• To maximize return within reasonable and prudent levels of risk in order to minimize the dependency upon contributions;
• To exceed earnings assumptions as set forth in the Investment Policy Statement; and
• To control costs of administering the endowment and managing the investment.

The board is to carry out their duties as fiduciaries with the goal of achieving the established objectives with the realization that the endowment is faced with an uncertain funding stream, which may inhibit or delay the achievement of these objectives.

No funds may be withdrawn from the endowment until such time as a principal value (at market) of twenty million dollars has been attained. The only exceptions to this policy are:

• As needed to pay normal and reasonable costs associated with the management of the endowment; and
• As required by conditions attached to specific gifts, donations or grants.

FRIENDS OF THE COLLEGE OF MICRONESIA-FSM, INC.

To promote and raise funds for the college, an private foundation, Friends of the College of Micronesia-FSM, Inc., was established. The foundation is registered in the District of Columbia with 501(c)3 non-profit corporation status from the U.S. Internal Revenue Service which allows charitable donations to the foundation to be eligible to be claimed as tax deductions on federal tax returns filed in the United States. The Friends Foundation is independent of the College of Micronesia-FSM administered by its own board of directors with its own endowment to benefit the college.

Investment Policy

TIME HORIZON

Investment guidelines are based upon an investment horizon of greater than twenty years, so that interim fluctuations should be viewed with appropriate perspective. Similarly, the endowment’s strategic asset allocation is based on this long-term perspective.

RISK TOLERANCES

Recognizing the difficulty of achieving the endowment’s investment objectives in light of the uncertainties and complexities of contemporary investment markets and that some risk must be assumed to achieve the endowment’s long-term investment objectives, the following factors bearing on the ability and necessity to withstand short and intermediate term variability are identified in establishing risk tolerances:

• The endowment currently is significantly under-funded, in light of the current size of the endowment and its goal of attaining a market value of $20 million prior to making meaningful distributions; and
• The board has set the goal of achieving a fully funded status by the year 2025.

PERFORMANCE EXPECTATIONS

The desired investment objective is a long-term nominal rate of return on assets that is at least equal to 7.1% annually, net of all investment related costs. The target rate of return for the endowment has been based upon the assumption that future real returns will approximate the long-run rates of return experienced for each asset class in the investment policy statement.

It is acknowledged that the specified rate of return may not be achievable each and every year. It is the objective of the COM-FSM Endowment Fund to meet this objective over a complete market cycle.

The investment objective of the endowment is to strive for positive real rates of return. As inflation statistics are more readily available for the United States than for the FSM, the U.S. Consumer Price Index (CPI) will be used when determining the real rate of return.

Each investment security utilized in the management of the endowment must have a competitive market rate of return if it is to be included in the endowment.

The board realizes that market performance varies and that a 10% nominal rate of return may not be meaningful during some periods. Accordingly, relative performance benchmarks for the managers have been identified.

Over a complete market cycle, the endowment’s overall annualized total return, after deducting all investment related costs, should exceed a customized index comprised of market indices weighted by the strategic asset allocation of the endowment.

See appendix 18 for the Investment Policy Statement in its entirety.

Fundraising

Based on the target date of 2025 and on the expected return on investments, the board has targeted annual fundraising at $100,000 for the endowment to be fully funded.

The Fundraising Steering Committee, which is chaired by the president and includes a regent, is responsible for coordinating fundraising activities. The committee is divided into three subcommittees: Local, Governmental, and International. The local subcommittee is charged with raising funds locally through various fundraising activities. The governmental subcommittee is charged with lobbying for legislation that supports the endowment. The international subcommittee is charged with seeking major donors and working with the alumni.

Return to Table of Contents