Endowment Fund (USM)
1.0 Definition
1.1 An endowment refers to financial assets donated to a non-profit institution, in the form of cash, shares, investment funds, or capital assets, where the terms of usage have been mutually agreed upon.
1.2 Endowments may be received in various forms, including monetary donations, investment shares, assets, building and infrastructure construction, investment returns, or any other form of endowment contribution subject to mutual agreement.
1.3 Any other definitions shall refer to the terms of reference specific to the respective fund.
2.0 Types of Contributions Received for the USM Endowment Fund
2.1 With reference to Section 1.0 above, and in accordance with the tax deduction provisions under Subsection 44(11D) of the Income Tax Act 1967, only endowments in the form of cash are eligible for tax deduction. The original principal amount must be preserved, and only the returns or benefits derived from it may be utilised, subject to the following conditions:
i. The donor specifies the intended use of the returns or benefits derived from the contribution.
ii. The donor does not specify the usage of the returns or benefits, thereby granting the University or the relevant PTJ full discretion in its application.
3.0 Objectives of the USM Endowment Fund
The objectives of establishing the Endowment Fund are as follows:
3.1 To ensure the sustainability of the University’s financial resources and to generate long-term income for the advancement of learning, teaching, research, equipment, infostructure and infrastructure of the University.
3.2 To fund the sponsorship of gifts, scholarships, and other forms of student welfare-based financial assistance.
3.3 To fund activities related to education, teaching and learning, research and innovation, skill development, welfare, and humanitarian outreach among students.
3.4 To fund facilities, equipment, infostructure, and infrastructure that benefit the University towards its advancement, as well as the advancement of teaching and learning.
3.5 To fund activities deemed appropriate for the interests of students and the University, subject to the approval of the USM Endowment Fund Committee.
3.6 To cultivate a culture of giving among members of the University and external stakeholders.
4.0 Sources of the Endowment Fund
The sources of the Endowment Fund are derived from the following contributions:
4.1 Direct Contributions
Cash donations made by companies, corporate bodies, foundations, associations, government-linked companies (GLCs), communities, or individuals, via cash, cheque, or online transfer. Cash pledges made in installments are also included in this category.
4.2 Retail Contributions
Recurring cash donations made continuously through the following means:
i. Individual Contributions
Individuals, whether internal or external to the University, may contribute according to their capacity, either through one-off donations, pledges, salary deductions, or any donation platform developed from time to time.
ii. Faculty or PTJ Contributions
Revenue generated by faculties through income-generating activities such as seminars, courses, consultancy services, and others that are contributed to the fund.
4.3 Funds received from unlawful sources or through activities deemed illegal under Malaysian law shall not be accepted as endowment contributions.
Note: The USM Endowment Fund is currently in the process of obtaining approval under Subsection 44(11D) of the Income Tax Act 1967 (ITA 1967).
FAQ
In line with current technological advancements, entities that have obtained the necessary approval may submit an application to the Chief Director of Inland Revenue in the State (KPHDN) to issue electronic receipts. This application must be accompanied by a justification for their issuance.
For waqf and endowment contributions, reference must be made to the Memorandum of Understanding (MoU) between the waqif/donor and the fund, particularly regarding whether the principal amount must be preserved. KPHDN has set a condition requiring 50% objective expenditure—that is, 50% of the income (i.e., returns or benefits from the waqf or endowment) received in the preceding year must be spent in alignment with the fund’s stated objectives. Compliance with this condition is necessary to maintain approved status.
Example: The waqf fund and the waqif have signed an MoU stating that the RM10 million investment is not to be spent but must be invested. However, the returns (dividends or interest) generated from that investment may be used according to the fund’s stated objectives. Therefore, the dividends or investment income are subject to the 50% expenditure requirement."
A tax-exempt official receipt under subsection 44(11D) of the Income Tax Act 1967 cannot be issued to the donor because the contribution is considered a refundable principal amount. Tax-exempt receipts can only be issued for non-refundable (consumable) contributions.