I.Historyof the Program 1

STATECOUNCILOFHIGHEREDUCATION

POLICIESANDPROCEDURESFORTHEEMINENTSCHOLARSPROGRAM

(ExcludesAppendices)

ApprovedbyCouncilApril6,1988

RetypedandupdatedDecember20,1996 ConfirmedbyCouncil,May1997

POLICIESANDPROCEDURESFORTHEEMINENTSCHOLARSPROGRAM

TABLEOFCONTENTS

I.Historyof the Program...... 1

II.EligibilityRequirements...... 2

III.Use of Funds...... 4

IV.FundAllocation Procedures...... 4

V.AllocationMethodology...... 5

VI.ReportingRequirements...... 5

POLICIESANDPROCEDURESFORTHEEMINENTSCHOLARSPROGRAM

I.HISTORYOFTHEPROGRAM

In1964theGeneralAssemblyestablishedtheEminentScholarsprogram. Underthisprogram,facultymayreceivespecialsalarysupplementsfundedfromendowmentincomeandmatchinggeneralfundappropriations.Theamountofthesupplementsisdeterminedbytheinstitutionsubjecttotheavailabilityofqualifyingendowmentincomeandgeneralfundappropriations.Thesupplementsareintendedtobeincrementaltotheregularannualsalaryofthefacultymemberandarenottobeusedinlieuofbasesalaries.Thefacultymember’sregularannualsalaryisestablishedinaccordancewiththeinstitution’sownsalarystandards.

The1964AppropriationAct,establishingtheEminentScholarsprogram,readsasfollows:Item631

Forattractingandretainingeminentscholarstoinstitutionsofhigher education,asumsufficient,estimatedat$25,000.00.

ItisprovidedthatthissumshallbeapportionedbytheGovernorto institutionsofhighereducationtoequalinterestearnedbyendowmentfundscreatedforthepurposeafterJune30,1964.

Theauthorityfor theEminent Scholars program continuesto beprovided throughsimilarlanguageintheAppropriationAct.Item161,Chapter912,1996ActsofAssembly,reads,inpart,

1.Thisappropriationincludes$7,071,960thefirstyearand$7,196,960thesecondyearfromthegeneralfundwhichistobemadeavailablefor attractingandretainingeminentscholarsininstitutionsofhighereducation.

2.Thesesumsshallbeapportioned,inaccordancewithplansapprovedbytheSecretaryofEducation,toinstitutionsofhighereducation,tomatchtheinterestearnedbyendowmentscreatedforthispurposeafterJune30,1966.

3.However,thisstipulationshallnotprohibittheappropriationandexpenditureofinterestearnedontheseendowmentsthatexceedthematchforthestateappropriation.

SpecificproceduresfortheadministrationandimplementationoftheprogramareprovidedbytheSecretaryofEducationandthe“ConsolidatedSalaryAuthorizationforTeachingandResearchStaffsinInstitutionsofHigherEducation.”Throughoutthehistoryoftheprogram,interpretationsofithavebeenprovidedthroughvariouslettersandopinionsoftheAttorneyGeneral.ReproductionsofthelettersandopinionsoftheAttorneyGeneralareincludedasAppendixB.

II.ELIGIBILITYREQUIREMENTS

1.EvidenceofQualificationsofEndowmentandRelatedIncome

Theearningsonproperlyrestrictedfundsgiventotheinstitutionitselfortoitstax-exemptfoundationforthepurposeofestablishingatrueendowmentfundmayqualifyformatchingStatefundsfortheEminentScholarsProgram.ForpurposesofdeterminingtheamountofeligiblematchingStatefunds,theterm“earnings”meanstheincomeavailableforexpenditurefromqualifyingendowments,or,forthoseinstitutionsemployingaBoard-approved“TotalReturnConceptandSpendingRule,”theyieldonqualifyingendowmentsplustheamounttransferredfromtheEndowmentFundtotheCurrentFund.

Trueendowmentfundsarefundsreceivedfromadonorwiththerestrictionthattheprincipalisnotexpendableonacurrentbasis.TheUniformManagementofInstitutionalFundsAct,adoptedbytheCommonwealthin1973,definesendowmentfundas“...aninstitutionfund,oranypartthereof,whichisnotwhollyexpendablebytheinstitutiononacurrentbasisunderthetermsoftheapplicablegiftinstrument...”(CodeofVirginia,1950,55-286.1).Aquasi-endowmentfundisafundestablishedbythegoverningboardtofunctionlikeanendowmentfundbutwhichmaybetotallyexpendedatanytimeatthediscretionofthegoverningboard.

ToqualifyundertheEminentScholarsprogram,giftstoinstitutionsorgiftstotheirrelatedtax-exemptfoundationsmustmeetthefollowingcriteria:

1.The gift mustbe restrictedby externaldonors forthe establishmentof trueendowmentsforthesolepurposeofgeneratingincometoattractandretaineminentscholars.

2.Therestrictionsbythedonormustbestatedinwritingatthetimethegiftismadeto theinstitutionorrelatedfoundation.

3.Noinstitutionoritsrelatedtax-exemptfoundationmaydesignateanexistingunrestricteddonation,endowmentorquasi-endowmentinordertoqualifyitforEminentScholars’matchingfunds.

Documentation,signedbythedonor,ofagiftestablishinganEminentScholarsEndowmentshouldbemaintainedbytheinstitutionandshouldincludethegiftinstrumentunderwhichthepropertyistransferredtotheinstitution.Thedocumentationshouldconfirmthedonor’sintenttoestablishatrueendowmentandshouldstateclearlythattheincomefromthetrueendowmentistobeusedforthesolepurposeofattractingandretainingeminentscholars.Thedocumentationshouldalsoincludeastatementofthecurrentvalueofthegiftandanestimateoftheannualincometherefrom.

Theguidelinessetforthinthisdocumentcannotanticipateallpossiblecircumstancesunder whichthesolicitationandestablishmentofendowmentsfortheprogrammightoccur.Institutionsshoulddevelopinternaladministrativepolicies,inconjunctionwithappropriatelegalcounsel,for

soliciting,establishing,orenhancingqualifiedEminentScholarendowments.ThefinaldeterminationoftheeligibilityofanyfundtoparticipateintheprogramlieswiththeAttorneyGeneral.

Trueendowmentsnotheldbytheinstitutionoritstax-exemptfoundationmaybeeligibletoparticipateintheEminentScholarsprogram.In1984,theAttorneyGeneralindicatedthat“Thelegislationdoesnotlimittheendowmenttooneownedorcontrolledbytheinstitution,solongastheendowmentiscreatedforthepurposeofattractingandretainingsuchscholars.”SuchendowmentsmustbecertifiedaseligibletoparticipateintheEminentScholarsprogrambytheAttorneyGeneral.ActualandestimatedearningsfromfundsnotheldbytheuniversityoritsfoundationmustbeseparatelyidentifiedbytheinstitutioninitsreportstotheCouncilofHigherEducation.

DocumentationforallendowmentsparticipatingintheEminentScholarsprogramshallbemadeavailable,uponrequest,totheCouncilofHigherEducation.

2.EvidenceofPeerReview

Theselectionofeminentscholarswithininstitutionswillbeinfluencedbytheuniquecharacteristicsandmissionsoftheinstitutions.Withinthisbroadframework,thecriteriafor appointmentofaneminentscholarare:

1.Theappointeeshallholdtherankofassociateorfullprofessor.

2.Theappointeeshallbeapersonwhohasachievednationaleminenceinthedisciplineasjudgedbytheperson’speers.Eminenceshallbejudgedonevidenceofeffectiveteachingandproductivescholarship.Incertaininstanceseminencemaybejudgedonthebasisofartisticachievementordistinguishedaccomplishmentsinareaswhichliebeyondacademicendeavor,butforwhichthereisevidenceofsuperiortalent.

3.Eminentscholarswillholdfull-time,facultypositions. ThisrequirementwillbeeffectiveJuly1,1989.

Thecriteriaforappointmentofaneminentscholarsaretobeusedforallappointmentsand reappointmentsafterJuly1,1988.Documentationshouldbemaintainedforeacheminentscholar describingtheformofpeerevaluationandreportingonthenatureofthedistinguishedworkandtheeminenceoftheindividual.

AppendixAincludesthefollowingsampleforms,letters,andreportingformatsforuseintheadministeringtheEminentScholarsprogram:

1.BoardofVisitors’resolutionestablishinganendowedchairordesignatinganeminentscholar.

2.TypicalformatusedbyadonortoestablishanEminentScholarendowment.

3.TypicalreportofchangesinEminentScholarfundbalance.

4. / TypicalreportonprincipalandincomeforeachEminentScholaraccount;
5. / Sampleuniversitypolicystatementonappointmentofeminentscholarsandsalary determination.
III. / USEOFFUNDS

ThepurposeoftheEminentScholarsprogramand,therefore,theintentgoverningtheutilizationofsuchfundsasmaybeappropriatedistoattractandretaincertainindividualfaculty memberswhohaveachievednationaleminenceintheirchosenandacknowledgedfieldofendeavor.Theprogramisnotintendedtoaugmentthesalarydollarsforthegeneralfaculty.Itprovidessupplementalfundingforahighlyselectivegroupoffacultywhohavebeendesignatedeminentscholars.CompensationfromEminentScholarfundsisasupplementtothebasesalary,whichisthesumoffundspaidascompensationtoanindividualwerehenotaneminentscholar.Compensation fromEminentScholarfundsmayincludethecostofincreasedfringebenefitsfortheeminentscholarwhichresultfromthesalaryenhancementfundedbytheprogram.

Institutionsshallestablishabasesalaryforeacheminentscholarequaltoorgreaterthantheminimumsalaryfortherank(professor,associateprofessor)identifiedintheinstitution’sFacultyCompensationPlanfileannuallywiththeDepartmentofPersonnelandTraining.Forfacultyemployedbytheinstitutionpriortodesignationasaneminentscholar,thebasesalaryshouldbeequaltoorexceedthesalaryatthetimeofthedesignationortheminimumsalaryforthedesignatedrank,whicheverisgreater.Fundingforthebasesalarymaybeprovidedfromanysource.

Situationswillarisewheretherequirementofabasesalarycomponentcreatesaconflictwiththedesiresoftheoriginaldonor.Institutionsmayrequestspecificexceptionstothebasesalary requirementbywritingtotheCouncilofHigherEducation,whichwillmakearecommendationtotheSecretaryofEducation.Exceptionswillbeconsideredonceforeachgiftorbequestand,if approved,incorporatedinsubsequentrequestsforfunding.FinalauthoritytomakeexceptionsfromthebasesalaryrequirementrestswiththeSecretaryofEducation.

Thedispositionofeligible,unmatchedearningsonEminentScholarendowmentsisgovernedbythetermsofthegiftinstrumentunderwhichthepropertyistransferredtotheinstitutionortotheinstitution’sfoundation.

IV.FUNDALLOCATIONPROCEDURES

TheappropriationofEminentScholarsfundsismadetotheCouncilofHigherEducation.ThesefundsaresubsequentlydistributedtoinstitutionsofhighereducationbasedontheCouncil’srecommendations, asapprovedbytheSecretaryofEducation.InordertoreceivestatematchingfundsfromtheEminentScholarsappropriation,eachinstitutionofhighereducationshall,attherequestoftheCouncilofHigherEducation,filewiththeCouncilaletterofintentprovidingthefollowinginformation:1)anestimateofthecorpusofeligibleendowmentfundsasoftheendofthefiscalyearprecedingthebienniumforwhichtherequestisbeingmade,2)theestimatedearningson

theendowmentineachofthefiscalyearsforwhichtherequestisbeingmade,3)thetotalrequestforstatematchingfundsforeachyearofthebiennium,4)theestimatedexpendituresforsalariesand relatedfringebenefitstobemadefrominstitutionalfundsundertheprogramduringeachfiscalyearforwhichtherequestisbeingmade(seeAppendixA).Estimateearnings(2)shouldbecalculated usinganassumedrateofreturnequaltoorlessthantheactualrateduringthepreviousfiscalyearonthisclassoffunds.TheuseofalternativeratesorcalculationmethodsmustbeapprovedbytheCouncilofHigherEducation.IfarequestformatchingStatefunds(3)exceedstheestimatedearningsoneligibleendowment(2)foranygivenfiscalyear,therequestinginstitutionshallprovideastatementtotheeffectthatitintendstouseunexpendedeligibleearningsfromapreviousperiodtosatisfyitsmatchingrequirement.Followingthisfiling,theCouncilshallprepareandtransmittotheSecretaryofEducationaplanrecommendingthedistributionoffunds.

V.ALLOCATIONMETHODOLOGY

EminentScholarsfundswillbedistributedannually.Theannualdistributionwillbebased onthefollowingtwo-stepallocationmethodology.

Stepone:Subjecttotheavailabilityoffunds,ineachyearofthebienniumeachinstitution participatingintheprogramwillbeallocatedanamountequaltothelesserof:1)itsactualexpendituresofstatematchingfundsforsalariesandfringebenefitsundertheprogramintheprecedingfiscalyear,or2)itsrequestforstatematchingfundsforthecurrentperiod.

Steptwo:Remainingfundswillbeallocatedproratabasedonthepercentageofunmetrequestsaftertheapplicationofstepone.

AnticipatedsurplusesofstatematchingfundsshouldbereportedtotheDepartmentof PlanningandBudgetandtotheCouncilofHigherEducationbySeptember1toallowfortherevisionofinstitutionalallocations.

Ifaninstitutionfailstoexpenditsallocationofstatematchingfundsunderthisprograminanyfiscalyear,thefundswillbesubjecttothegeneralfundreversionprovisionsoftheAppropriationAct.

VI.REPORTINGREQUIREMENTS

EachinstitutionparticipatingintheEminentScholarsprogramshallsubmitannuallytotheStateCouncilofHigherEducation,nolaterthanJune30ofeachfiscalyear,informationabouteachfacultymemberwhoreceivedfundsundertheprogramduringthatyear.Thereportwillidentifytheperson’sacademicrankanddisciplineandabriefdescriptionoftheaccomplishmentsorasummaryoftheactivitieswhichqualifiedthisindividualfortheaward.Thereportshouldalsoshowtheactualsalaryandfringebenefitsexpendituresfortheperson,separatelyidentifyingeachfundsource(seeAppendixA).

ExpendituresbytheinstitutionsfortheEminentScholarsprogramaretoberecordedinspecific subprograms within Educational and General Programs or Financial Assistance to

EducationalandGeneralProgramsinconformancewiththeguidanceprovidedintheChartofAccountsforVirginiaState-SupportedCollegesandUniversities,July1,1990.Furthermore,eachinstitution’sexpenditureplanwiththeDepartmentofPlanningandBudgetshallreflectitscurrentperiodEminentScholarsallocationandappropriation.

EminentscholarsandtheirsalariesmustbeassociatedwithanappropriatedpositionandidentifiedinthePersonnelManagementandInformationSystemaccordingtotherequirementsoftheDepartmentofPersonnelandTrainingandthe“ConsolidatedSalaryAuthorizationforTeachingandResearchStaffsinInstitutionsofHigherEducation.”

Reports,certification,appropriationandallotmentforms,andotherdocumentsrequiredbythepoliciesandproceduresshouldbemaintainedbytheinstitutioninaccordancewiththeinstitution’sstandardrecordretentionprogram.ThesedocumentswillbesubjecttoroutineauditbytheAuditorofPublicAccounts.

TheforegoingisatalltimessubjecttopertinentlegislationandpolicyoftheSecretaryof Education,asitshallbeineffectfromtimetotime.