New York Codes, Rules and Regulations
Title 10 - DEPARTMENT OF HEALTH
Chapter V - Medical Facilities
Subchapter A - Medical Facilities-minimum Standards
Article 8 - New York State Annual Hospital Report
Part 442 - Reporting Principles And Concepts
Reporting Principles
Section 442.16 - Pooled investments

Universal Citation: 10 NY Comp Codes Rules and Regs ยง 442.16

Current through Register Vol. 46, No. 39, September 25, 2024

[ 1360 ]

(a) Investments of various funds may be pooled unless prohibited by law or the terms of a donation or grant. Gains/losses and investment income on pooled investments must be distributed to participating funds on a basis utilizing market value.

(b) To illustrate the market value method of distributing gains/losses and income on pooled investments, assume the following facts:

(1) A hospital decides to create a pool of investments from funds provided from the following sources: Market value at inception of pool [FN*] Amount % of total pool Unrestricted fund $1,000,000 20% Endowment Fund (single endowment) $3,000,000 60% Plant Replacement and Expansion $1,000,000 20% (PR&E) Fund $5,000,000 100%

FN* This serves as the initial distribution basis.

(2) Gains/losses on the Endowment Fund must be added to or deducted from the principal; however, the investment income is available for unrestricted purposes under the terms of the gift.

(3) Gains/losses and investment income for the Plant Replacement and Expansion Fund must be added to or deducted from fund balance pursuant to the wishes of the donor.

(4) There were no gains/losses on the sale of investments for the first year the pool was in existence. The income generated by the pool for that year was $400,000.

(5) Any gains on investment sales and investment income are not reinvested in the investment pool. The cash is remitted to funds that are entitled to the gains and/or income.

(c) The distribution of the income for the first year would be based on each participating fund's percentage of the pool based on its contribution at market value at the initiation of the pool.

(1) Therefore, the distribution would be as follows: Distributed to Income distributed Unrestricted Fund (total income of $400,000 x 20%) $ 80,000 Endowment Fund (total income of $400,000 x 60%) 240,000 PR&E Fund (total income of $400,000 x 20%) 80,000 $400,000

(2) The accounting entries necessary to account for the distribution of income from the pooled investments would be as follows: Account Dr. Cr. (i) Unrestricted Fund Cash 1010 $320,- 000 Unrestricted income from Endowment Fund (nonoperating 9050 $240,- revenue) 000 Income, gains and losses from unrestricted investments 9040 $ 80,- 000 To record the income from pooled investments for the year. (ii) PR&E Fund Cash 1510 $ 80,- 000 Fund balance 2690 $ 80,- 000 To record the income from pooled investments for the year.

(d) In the second year the following facts are assumed:

(1) On the first day of the year the hospital decided to add $1,000,000 of unrestricted funds to the pooled investments. On that date, but prior to making the aforementioned addition, the pooled investments had the same cost, $5,000,000, as at inception, but a market value of $6,000,000. There were no other additions to the pool during this year.

(2) There were net gains on the sale of investments of $100,000 for the year and the investment income was $500,000 for the same period.

(e) Based on the above facts, the distribution percentage (%) for the income and gains on pooled investments for each of the participating funds would be based on the market value of the investment pool as of the date of the last addition and would be calculated as follows: Revised distribution basis Units % of total units (1) Unrestricted Fund. Market Value $6,000,000 x 20% (distribution % prior to $1,200,000 addition) Addition to pool at fair value as of that date 1,000,000 $2,200,000 31.4% (2) Endowment Fund. Market value $6,000,000 x 60% (distribution % prior to $3,600,000 51.4% addition - no new additions) (3) PR&E Fund. Market Value $6,000,000 x 20% (distribution % prior to 1,200,000 17.2% addition - no new additions) $7,000,000 100.0%

(f) The income and gains from pooled investments for the second year would be based on the newly computed distribution and would be as follows: Current Gains to be Income to be distribution % distributed distributed Unrestricted 31.4% $ 31,400 $157,000 Fund Endowment Fund 51.4% 51,400 257,000 PR&E Fund 17.2% 17,200 86,000 100.0% $100,000 $500,000

(g) The accounting entries necessary to reflect the above distribution would be as follows: (1) Unrestricted Fund. Account Dr. Cr. Cash 1010 $445,- 400 Unrestricted income from Endowment Fund (nonoperating 9050 $257,- revenue) 000 Income, gains and losses from unrestricted investments 9040 188,4- 00 To record the income and gains on pooled investments attributable to these funds for the year. (2) Endowment Fund. Cash 1810 $ 51,- 400 Fund balance (gains on sales of investments) 2890 $ 51,- 400 To record the gains on pooled investments attributable to this fund for the year. (3) PR&E Fund. Cash 1510 $103,- 200 Fund balance 2690 $103,- 200 To record the gains and income on pooled investments attributable to this fund for the year.

(h) As the above example illustrates, each time an addition is made to the investment pool a new distribution basis must be calculated. This is also true for any reductions to the pool. All gains/losses and investment income from the beginning of the accounting period up to the date of the addition must be determined and distributed on the basis of account balances prior to the addition. Any gains/losses and investment income subsequent to an addition would be distributed on the new basis until another addition or reduction is made.

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