Audit questions
UH fund raising
An state audit of the University of Hawaii Foundation questions spending of donor money and suggests stricter guidelines for the private fund-raising organization.
Dollars and sense
AUDIT'S FINDINGS:
>> The $3 million contract between the University of Hawaii and the UH Foundation is "too vague" and lacks performance measures.
>> Excessive expenditures from donated funds suggest better policies, accountability and enforcement are needed.
>> The UH Board of Regents should exercise greater scrutiny of the foundation.
UH FOUNDATION RESPONSE:
>> Many of the changes suggested by the auditor are being addressed.
>> "Excessive" expenditures cited in the report can be justified when measured against the millions of dollars raised by UH directors and departments.
>> Questions whether regents or the foundation's own Board of Trustees should be responsible for auditing the private foundation.
State Auditor Marion Higa said donor funds were used to pay $19,000 for memberships to two private clubs and a country club, $4,000 for a table at the Honolulu Symphony Ball and $2,000 for a print bought at a charity auction for a university employee's office.
Acting UH Foundation President Donna Vuchinich said much of the spending cited is justified when matched against the millions of dollars in research and other funds raised by some university departments and deans and when compared with corporate spending.
"We have to deal in that (corporate) environment and have to deliver the same sort of environment," she said. "It's the cost of doing business. It doesn't go away just because you're a public university."
The country club memberships are used to entertain visiting doctors and high-ranking officials, and the artwork belongs to the university and decorates a conference room, Vuchinich said.
She said the buying of tables at charity functions is common in Hawaii, and the dean who purchased the symphony table wanted his faculty to meet donors to his department.
Vuchinich emphasized that the money to pay for those kinds of expenses comes from unrestricted donations, rather than money specifically directed to scholarships and other projects.
She said the people who give unrestricted money understand that they are supporting activities that cannot be paid for with public funds.
However, the audit questioned whether the nonprofit foundation is too vague when describing the purpose of those donations.
The audit looked at the $3 million-a-year contract the university has with the foundation to provide operating expenses for fund raising and to provide alumni relations services. The contract is paid with money from the university's tuition and fees special fund.
Among the audits other findings:
>> The fund-raising contract between UH and the foundation lacks performance indicators to assure that services are performed and donor interests are protected. The contract was also approved by the Board of Regents with "minimal questioning or scrutiny," the report said.Bill King, chief financial officer of the foundation, said the foundation has sent out thousands of letters to donors since 2000 explaining the situation.>> The board has no policies guiding the foundation's fund-raising activities.
>> Management of endowments favors funding programs over donor interests. The auditor said that without consulting donors, the foundation continued to spend money from endowment funds as the stock market dropped in 2000, reducing the principal amounts.
Kitty Lagareta, vice chairwoman of the regents, said the auditor's report covers a period before 2003, and the current board has been raising many of the same concerns that the auditor cited.
"We feel somewhat validated by this report," Lagareta said.
The auditor's report suggests that responsibility for auditing and monitoring foundation activities rests with the regents.
For the past several months, the university, regents and foundation have been renegotiating the foundation contract to provide more accountability.
The audit comes as the foundation and the university are trying to raise $200 million by 2007 to celebrate the 100th anniversary of UH.
Lagareta said donors should know that "there's increasing accountability for the use of every penny donated."
Vuchinich said the foundation is working on improving its accounting.
"We want to do everything possible to make sure we accomplish the goal for the benefit of the university," she said.
Vuchinich noted that contributions have been increasing every year. "Leveraging $3 million and returning $22 million to the university is a pretty good return on the investment."
