Despite already reaching 76 percent of this year's $20 million fundraising goal, Ohio University must cope with a significant loss in the endowment during the past six months.
OU's $311 million endowment on June 30 of last year depreciated 23.9 percent by the end of November. As a result, endowed scholarships - especially those established within the past three years - have taken a great hit, said Howard Lipman, vice president for University Advancement.
Many new scholarship accounts are currently underwater
meaning their present value is less than their donation value and can't be used to fund scholarships or projects.
It means we have less money to spend said Lipman, who is also CEO of the OU Foundation.
Lipman said the 23.9 percent decline includes donations since July 1. OU raised $15.3 million through the end of December in new gifts and deferred income, money donors commit in their wills.
Compared to six-month totals of the past two fiscal years - $8.9 million and $13.7 million respectively - OU has done very well so far this year, Lipman said.
When money is donated to the foundation, the interest it earns goes into a temporarily restricted account. Four percent of the account is a spending allocation given to the area the donor originally specified, and one percent funds the foundation. The remainder goes into the temporarily restricted account, which grows in years of progress.
However, in economic downturns, endowed accounts do not earn positive interest.
This results in no spending allocation or operating money for underwater accounts and a loss in overall value of the endowment.
The restricted account protects the original gift amount, which is never depleted to fund the project or scholarship, Lipman said. More mature endowed scholarships have built up significant amounts of money in their temporarily restricted accounts to provide for down years such as this, he said.
Accounts created within the past three years do not have that buffer money.
These underwater accounts are the ones in critical condition, Lipman said. Once the economy improves, any interest earned must be put toward reestablishing the original value of the gift rather than on what the donor originally specified.
He said the fate of the university's endowment is directly tied to the performance of the market, so OU's losses will continue with the economy's.
When markets get better endowments grow
Lipman said.
Academic departments received about $3.1 million for 2,132 endowed scholarships this year. Last year, that number was about $2.9 million for 2,157 awards.
Michael Angelini, associate vice president for Finance, said scholarship calculations for next year will begin in about two weeks and will be made public in mid-February.
It'll probably be less
Angelini said. I don't have a feel for how many of these accounts will be underwater. Anything we do at this point is a sort of educated guess.
Craig Cornell, vice provost for enrollment management, said OU would do everything possible
to keep students from feeling the endowment's losses.
Our first priority is going to be to maintain all existing scholarships for students who are here
Cornell said. We know students have decided to come here based on their own financial aid packages
and they rely on those monies to keep Ohio University affordable.
The Gateway scholarships and trustee awards are the largest group of scholarships and come out of the general fund, Cornell said. They aren't currently affected by shrinking endowed accounts.
The smaller, specialized endowed scholarships are most at risk, he said.
If there are any changes
we will be looking at them through a very fine lens
Cornell said.
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