University foundation to reduce payouts
By Beverly Creamer
Advertiser Education Writer
The University of Hawai'i Foundation will have to reduce payouts to some of the UH programs supported by funds it administers because of fluctuations in the value of donations because of continuing weakness in the stock market.
Bill King, chief financial officer for the foundation and its vice president for administration, said he won't know how much the reductions will be until the first payout on Sept. 30.
Typically a large bulk of the foundation's endowments are scholarship accounts, said King. "Our normal practice is not to make scholarship awards until we've distributed the money out of the endowment and put it into where the award goes," said King.
"We're keeping all the deans and directors apprised of what's going on," he said.
The reductions come as the result of a change in policy at the foundation, a change that is also occurring at other charitable college foundations across the country, said King.
Over the summer the foundation sent letters to more than 900 of its major donors giving them the chance to choose whether they want to continue payouts to the program they support even if the actual value of their donation has slipped below its original amount, or book value.
About two-thirds of the donors are choosing to continue the payouts, as suggested by the foundation, said King.
"The other third are saying that it's more important to them to try to get the principal built back up," said King. "They don't want the original gift value to have the risk of diminishing."
In the past, the foundation has made all payouts if the aggregate value of all donations is up, even if individual accounts are down. The funds are pooled for investment purposes, said King.
"Given the uncertainty of the markets, it really makes sense to understand what the donor wants to do," he said.
Though the market changes constantly, said King, about 25 percent of the donations are below book value now.
In making contact with donors, the foundation has also asked some of the very biggest ones if they would consider a new, current donation to support the program until the market value of their original donation increases.
Donors received letters if they gave $10,000 or more to the foundation to be used in perpetuity to benefit UH programs. Those who paid $1,000 or more into a single account also received letters asking them for a payout preference.
In administering accounts for private donors, the foundation charges a 2.3 percent fee annually, which helps support its fund-raising efforts. It also charges a 2 percent fee to set up the gift account.
Reach Beverly Creamer at bcreamer@honoluluadvertiser.com or 525-8013.
