There were questions being asked at a recent UH Manoa Faculty Senate meeting about HB2670, which would authorize a 66% increase in the amount that can be used from the UH Tuition and Fees Special Fund to pay expenses of the UH Foundation.
The bill, introduced by Rep. Mark Takai and Jerry Chang, originally removed the current $3 million cap on transfers of tuition money to the foundation, leaving the amount up to the Board of Regents. A spending cap was restored when the bill was amended by the House Higher Education Committee, but was increased from $3 million to $5 million.
The bill passed on second reading as amended and was referred to the House Finance Committee. It has not yet been scheduled for a hearing.
Retired professsor Victor Kobayashi submitted testimony opposing against the bill, arguing that tuition funds should direction support teaching and scholarship.
Kobayashi also questioned the legality of taking tuition money to pay for fundraising costs of the foundation, which has, in recent years, claimed to be an independent nonprofit agency despite its intimate ties to the university, in part to escape from the public disclosure requirements of the state’s public records law. However, it seems clear that the statute authorizes this use of tuition funds.
Tuition and fees already comprise the largest source of foundation revenue. If the increased tuition transfer is approved, tuition funds would amount to more than half of the foundation’s annual revenue, which averaged $9.5 million over the past two years (see the Tuition and Fees Special Fund Reports for FY 2009 and FY 2008).
A 2003 audit criticized the foundation for its secrecy and raised concerns about the foundation’s use of tuition and fees.
Despite the limitations imposed by the foundation, we were still able to identify a number of questionable foundation expenditures made under the guise of fundraising. For example, a number of social events and functions attended by foundation employees such as football games, holiday luncheons, and community fundraisers, were not justified as fundraisers for the university and do not appear to benefit the institution. We also found that student tuition-funded contract funds were used to entertain foundation employees. For example, foundation employees’ tickets for a rock concert were paid with state contract funds. State contract funds were also used to pay for at least two foundation employees’ farewell parties at a local restaurant and museum. Finally, we found that the university president used public contract funds to purchase a personal gift.
The foundation also derives substantial revenue from income from “expendable accounts”, along with fees from its endowments and from gifts.
These fees may have become a point of contention with donors, according to a February 2008 email from Bill King, foundation vice-president for administration and CFO, to a support forum.
We charge a 3.5% upfront gift fee. Nobody likes it but most times we can get them to understand the need. We now have a very large potential gift but the donor is pushing back hard on the fee. Actually wants NO fee. Has anyone come up with an alternative to the fee in special cases? The only thing I’m coming up with is to track the actual time we spend on the gift and charge the account for that. Would rather not do that and I’m not sure how the donor would react.
Another institutional fundraiser, commenting in the same forum, wrote that “the idea of ‘charging’ a gift, and moreover, having to be ready to justify the charge to a donor, is very troubling.”
The increased transfer of tuition and fees would more than offset fees charged on gifts, which amounted to just over $1.1 million in FY 2009, according to the foundation’s latest report to the legislature.
The foundation’s tax return for 2007, the latest year available, can be viewed by clicking here.