ALBUQUERQUE, N.M. — The University of New Mexico Foundation ran a deficit of about $5 million in fiscal year 2010, according to the foundation’s most recent IRS report.
Revenue including donations and investment income distributed to the foundation fell by 28 percent to $31.1 million while expenses and distributions to various university recipients increased by 15 percent to $36.5 million. That included a $900,000 increase in administrative costs, according to the report.
“My feeling is the foundation should operate within its budget,” said UNM Regent Gene Gallegos, who stepped down from the foundation board earlier this year citing a lack of regents’ oversight. “I’m surprised to see a loss, and I just don’t remember anything like this being brought to the attention of the board when we received reports from the foundation.”
Chief Financial Officer Rod Harder said the IRS report is a misleading account of the foundation’s operational budget.
“If you look at this report and say, ‘Could the foundation absorb a $5 million loss this year, next year and the following year?’ No. We’d be out of business. But that (earnings report) is not a true reflection of revenues and expenses,” Harder said.
The foundation is a private entity exempt from state open records laws, which means the annual nonprofit report filed with the IRS is the only public documentation of the foundation’s financial health.
Citing an internal operating budget summary, Harder said the foundation had a $400,000 operational surplus in 2010.
That budget reports net operational expenses of $9.4 million, nearly $400,000 less than what the foundation reported to the IRS. The disparity is based on different accounting practices for the IRS report and the foundation books, Harder said.
A majority of the deficit reported to the IRS is based on delayed reimbursements of donations given to UNM recipients, Harder said.
Much like United Way of Central New Mexico, the foundation allows donors to designate specific recipients of a gift – the law school for example. The foundation acts as a pass-through, and donations can sometimes be awarded to UNM in the fiscal years after they were received, skewing the IRS report data.
In all, the foundation gave UNM $26.8 million for scholarships and other purposes in 2010, which was $3.9 million more than the previous year, according to the IRS report.
“It was not an operating loss and simply a difference in timing between when contributions came in and when they (are) transferred to the university,” Harder said.
Also, he said that when you take into account investment results, the Foundation’s financial health is sound. The IRS report, he said, does not include $10 million in unrealized investment gains because the asset was not withdrawn.
Foundation board Chairman Gary Gordon, through a spokeswoman, declined to comment.
The foundation in 2010 told the university it had received $75.1 million in donor pledges. The $31.1 million in revenue reported is much lower because it represents only money received, Harder said.
The full fundraising claim also includes money given to other areas of the university, including the athletics’ Lobo Club or the public broadcasting station KNME-TV.
Regent President Jack Fortner, who now represents regents on the foundation board, said the reported net operating loss is reasonable considering the transition of university employees onto the foundation’s budget.
“I think that was part of the added expense,” Fortner said. “… For the foundation to do well is good for everybody.”
In addition to raising donations for UNM, the foundation also manages university endowment funds worth about $300 million. The foundation in 2010 also received about $1.6 million directly from UNM to help pay operational expenses. That subsidy has since been cut to $1.2 million.
“Every report we get from the foundation, every (donation) report is everything is perfect, it’s great,” said Regent Jamie Koch. “I didn’t know we had a net loss. Obviously it’s a separate entity from the university because we don’t get those reports.”
The 2010 IRS report was filed in May but not made public until requested by the Journal earlier this month. Following the request, the document was posted on the foundation’s website.
Spokeswoman Wendy Antonio said the delayed release was an oversight.
Total foundation payroll in 2010 was about $6.3 million, up by $1.2 million over 2009, according to the IRS statement. The increase includes a 42 percent hike in executive salaries and a 19 percent increase in non-executive pay. Total employment increased from 58 to 75, according to the report.
“When we’ve got that many more employees, how would compensation not go up?” Antonio said.
The employment spike is due largely to the phased transition of foundation employees from UNM payroll to the foundation after the organization was privatized in April 2008, said foundation Vice President Sandra Liggett. The previous year’s payroll report was artificially low because many employees were still on the university’s books. The number of foundation employees now is 67, Liggett said.
“The salaries have stayed the same. It’s just that they had a full year of service at the foundation” before the 2010 report, she said.
The IRS payroll data excludes another $1.2 million paid to foundation employees in 2010 who remained with UNM after the transition.
The foundation previously operated under the umbrella of UNM. Regents, however, approved making the foundation a private entity in 2008 following the recommendation of President David Schmidly.
As a private fundraiser, the foundation is not required to make its records public, a feature that officials say allows donors to remain anonymous if they choose.
Five foundation employees earned more than $100,000 in the 2010 fiscal year, according to the annual report.
The executive pay includes $305,000 paid to former foundation President John Stropp. The foundation says Stropp’s replacement, Henry Nemcik, earns $281,000, plus benefits. Nemcik began work last summer, after the 2010 fiscal year, so his salary is not reflected in the report.
Other top foundation earners include vice president Michael Kingan at $212,000 in salary, Liggett at $152,000, vice president John Welty at $180,000 and development director Hazel Tull-Leach at $137,000.
— This article appeared on page A1 of the Albuquerque Journal