UH Foundation responds to audit
By Beverly Creamer
Advertiser Education Writer
State Auditor Marion Higa got tough with University of Hawai'i fund-raising efforts in her latest audit, calling for firmer controls on all of the approximately 150 fund-raising entities at the university and criticizing as excessive some 2002 expenditures by the UH Foundation.
At the same time she suggested the UH Board of Regents increase scrutiny of the more "significant" funds.
In response, acting UH Foundation president Donna Vuchinich said that the foundation is "committed to making the university the best it can be" and to working with the Board of Regents to make that possible. She said Higa's auditing suggestion reflects "a misunderstanding of the relationship between a public university and its private institutionally-related foundation."
In the audit, Higa called for clearly defined purposes for the use of accounts under the foundation and picked out a series of expenditures that she questioned as excessive and "even abusive," including: $4,000 spent for a table at the Honolulu Symphony Ball by the dean of the Medical School; a $664 luncheon for a visiting dignitary — one item among $40,000 spent on meals and entertainment in 2002-03; $19,000 for membership in a private club for the head of the Cancer Center of Hawai'i.
Vuchinich said the foundation uses only "unrestricted" discretionary funds — about 1.5 percent of its $22 million donations so far this year — for activities that involve planning seminars, luncheon meetings with donors or dignitaries and other activities to support fund raising.
She said that every expenditure is thoroughly scrutinized and evaluated.
"If you're just looking at receipts, you don't have an understanding of what these people do and why donors would provide money for this," she said.
Vuchinich said when she saw the auditor's report "we went back and looked at some of this" to re-evaluate it. For example, she said, the $664 luncheon noted by the auditor included 19 people and honored the visiting director of the National Cancer Institute, which provides major funding for research at the Cancer Center of Hawai'i. The private club membership was used for the purpose of entertaining donors and visiting dignitaries.
Meanwhile, the Honolulu Symphony Ball table was used so Medical School faculty could mix with people and donors important to the school.
The auditor also got tough with the regents, the president, university attorneys, and the huge array of small fund-raising entities, calling for regular audits of the most "significant" funds so that the university's reputation is not placed at risk by any kind of faulty action.
She criticized the regents for not scrutinizing more closely the 2002 contract with the UH Foundation, a charge Regent chairwoman Patricia Lee denied, showing extensive copies of minutes where the board raised detailed questions. As a result, for the past year the foundation has been making detailed monthly reports to the board.
At the same time Higa criticized UH President Evan Dobelle for the administration's preparation of the contract saying it had failed to follow proper procurement guidelines. Chief of staff Sam Callejo replied that the contract was exempt from requirements of the state procurement code.
Higa also faulted the foundation's investment policy, saying the equities component which is 85 percent of the portfolio is made up of "relatively risky" company stock investments.
Foundation chief financial officer Bill King said the policy has completely changed over the past year and a half with the portfolio designed "to minimize market volatility."
The endowment now stands at an all-time high of $116 million, he said, after falling to around $82 million in the wake of Sept. 11.
Reach Beverly Creamer at bcreamer@honoluluadvertiser.com or 525-8013.
