Honegger's letter this weekend

[Sandia Peak]

Mr. Honegger’s letter sent yesterday (2/11) included a “Fact Sheet” intended to address some of the issues raised by Mr. Hibbett’s letter. But it raises a lot of questions, too…

Honegger says that “over the past nine years we have cut endowment spending for operations by more than 75 percent – from $13 million to a budgeted $3 million this year, and it is expected to be even lower next year.”

But if you look at the alarming credit report from Fitch Ratings (look under In The News, up top!), you’ll get a different picture. Yes, endowment spending has been cut – but given the reduction in the endowment total, it’s a much larger percentage of the endowment. I don’t think this counts! From the report:

“The draw has increased an average 3.3% over the last five years, growing to 11.7% of endowment funds to support operations in fiscal 2016 from 8.7% in fiscal 2012.”

I’m not a financial professional by any means, but looking at these numbers as a percentage of the total endowment is downright scary. Mr. Honegger, am I missing something?

[tanzimat]

And read this carefully, also from “Summary of Facts”:

And as it relates to the assertion that he was given raises during years where teachers received none, that is false and is instead an artifact of reporting changes, payday schedules, and, in one case, what we believe is an incorrectly entered figure on one of our annual 990s.

1. What reporting changes and payday schedules would affect an annual salary figure?
2. If the Forms 990 of record are currently wrong, will the trustees file amendments?
3. And will they share those amendments?
4. And who is the Academy’s auditor?

The whole thing totally lacks credibility. Such a disappointment….

[mcs]

I don’t believe the letter provided by Mr. Honegger adequately addresses the concerns raised in the original “challenge” letter… it feels more like a collection of sound bites cobbled together to quell the crowd. These sound bites raise more questions than provide concrete “facts” and probably just deepen the distrust present.

The board needs to reach out to the community in a transparent manner and share concrete facts (including detailed financial reporting of the numbers/investments) outlining the complete financial history of the endowment, the current state of the endowment and the growth plan for the endowment moving forward. I wold suggest a community forum where questions and concerns can be raised and addressed. Any audits that may exist regarding the endowment should be released to the community in advance of that forum. If no audit exists, this may be a step worth taking.

[QED]

Right on, mcs. And now it looks like a plan to combine “divide and conquer,” with inconvenient times for different constituencies, and a “run the clock” strategy with little driblets of sound bites spread out over weeks.
My guess is that the BOD wants to get to April when everyone will have the end of year on their mind.
All the more reason to insist on a public forum at a convenient time in the evening.
I really have to say that the BOD’s behavior has been incredibly disappointing.

[SemperFi]

Interesting to read Mr. Hibbett’s latest email, and glad he found the NACUBO Endowment Report with spend rates for non-profit endowments. Across the board, spend rates are well below the Academy’s current 6.2% and target 5%.

Yale’s is the no. 1 performing college/university endowment in the US. Over the past 20 years, it has returned 12.1% per year. The average endowment has returned 7.5%. Even with that huge performance advantage, Yale spends only 5.25%.

The trustees say our “sustainable spend rate” is 5%. I am skeptical. I bet our real sustainable rate is 4% or lower.

So without a realistic budget, we will continue to spend away the endowment.

It would be nice if the trustees were honest enough to admit the truth.

[BeenThere]

Good post, Semper Fi. Most University and other large endowments are quite conservative now, with spend rates around 4.1% or 4.2% max.

[Author]

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