Gifts to UA Foundation drop off for second year

FAYETTEVILLE — Contributions slid for the second-straight year to the largest foundation supporting academics at the University of Arkansas, Fayetteville and the UA System, according to IRS records.

The University of Arkansas Foundation reported receiving contributions of $49.8 million for the 12-month period that ended June 30, down from $61.1 million a year earlier. The fiscal 2017 total was the lowest going back at least a decade, based on an Arkansas Democrat-Gazette review of tax returns dating to fiscal 2008. Earlier tax returns were not immediately available.

Most gifts to support the Fayetteville campus are made to the UA Foundation, according to UA-Fayetteville’s most recent financial statement. But the UA Foundation also oversees donations supporting other campuses, and UA-Fayetteville spokesman Mark Rushing said foundation contributions related to the Fayetteville campus actually increased to $26.1 million from $26 million the previous year.

Rushing said in a written statement that “any decrease in contributions to the UA Foundation would be due to decreases in contributions involving other campuses or divisions,” also noting that “donors can and do give directly to the institution in addition to gifts to the UA Foundation on behalf of the

university.”

The time period covered by the Internal Revenue Service filing does not include gifts of $120 million from the Walton Family Charitable Support Foundation and $40 million from the Windgate Charitable Foundation to support UA arts education. The gifts were made in the latter half of last year.

Another foundation, the Razorback Foundation, supports the Fayetteville campus’s intercollegiate athletics. It, too, reported to the IRS a decline in contributions, down to $36.5 million for the same 12-month period compared with $48.9 million a year earlier.

Scott Varady, executive director and general counsel for the Razorback Foundation, said in an email that the contributions should be described in the context of a successful effort to raise money for the expansion and renovation of Donald W. Reynolds Razorback Stadium.

“In other words, the Razorback Foundation sought and received the largest gifts in the stadium initiative during fiscal year 2016, and the Razorback Foundation sought and received more gifts (in terms of the number of gifts) but at lower amounts in fiscal year 2017,” Varady said, adding that the gifts collectively “have enabled the Razorback Foundation to meet its goal of providing $40 million or more” to support the stadium project.

“We have continued those fundraising efforts during fiscal year 2018 as well, and we remain grateful to our passionate Razorback fans — they are the reason we achieved this outcome,” Varady said.

The total cost of the stadium project has been estimated by UA at about $160 million, with financing coming in part from the issuance of bonds valued at about $115 million.

The Razorback Foundation’s IRS return shows for the 12-month period that ended June 30, it provided $28.5 million to support UA intercollegiate athletics, including $15 million for “capital construction.” Varady said about $11.2 million supported the stadium project that is still ongoing.

The Razorback Foundation’s IRS return was dated May 11, while the UA Foundation’s return was dated Monday.

The UA Foundation oversees what are known as endowed funds, including gifts from donors for a specific purpose such as scholarships for students within a particular academic discipline.

The total reported on IRS Form 990 does not reflect total yearly giving to support UA System campuses, however.

“Not all contributions flow to the UA Foundation and the 990 only captures certain types of contributions,” Clay Davis, the foundation’s president and chief executive officer, said in an email.

Despite the reported decline in contributions, Davis described the financial year as strong for the UA Foundation as the value of its net assets increased to $973.3 million as of June 30 compared with $890.2 million a year earlier, based on the IRS records.

Davis described an “outstanding +15.4% investment return for the year.”

The IRS return showed that UA Foundation expenses were higher than revenue for the second-straight year, with expenses of $72.9 million compared with $69.3 in revenue. Without rounding those totals, the annual loss was $3.5 million, and the previous year the foundation reported an annual loss of $12 million.

But Davis downplayed the importance of the annual losses.

“The 990 is for tax purposes only and it is misleading to report a loss for tax purposes as reflective of the overall financial position of an orga- for any given year,” Davis said.

He explained that the foundation oversees a large endowment.

“The benefit of having a large endowment fund is to provide a consistent stream of income in perpetuity,” Davis said.

Operating funds “come from this income stream and not annual contributions,” Davis said.

Foundations are common for public universities, though they vary in what they do, said Brian Flahaven, director of foundation programs for the Council for Advancement and Support of Education.

He said some university foundations lead the way with fundraising efforts, but roughly a third of foundations essentially serve as managers of gifts, as does the UA Foundation.

By having funds in a separate nonprofit entity, “they can be invested in strategies that can lead to a higher returns,” Flahaven said. “Essentially, they’re more flexible in terms of how the funds can be invested.”

Endowed funds are “invested with a long-term horizon in mind,” Flahaven said.

There can be ups and downs, however. The UA Foundation saw its net assets decrease over the 12-month period that ended June 30, 2016, falling to $890.2 million from $901.9 million a year earlier.

The foundation’s most recent Form 990 shows payments made to independent contractors in 2016 including $2.9 million to Boston-based Cambridge Associates for investment management services.

Davis earned base compensation of $349,207, up from $292,925, according to recent IRS returns.

Varady, with the Razorback Foundation, earned base compensation of $230,011, according to the IRS return.

The Razorback Foundation listed payments made to four coaches as independent contractors earning at least $100,000 in 2016. Former UA football coach Bret Bielema — still head coach in 2016 — was paid $500,000 for speaking engagements.

The Razorback Foundation also paid $257,548 to Van Horn Enterprises, a limited liability company founded by Razorback baseball coach Dave Van Horn; $200,000 to Mi-Mar Family Enterprises, which has an address matching that of head basketball coach Mike Anderson, according to property records; and $102,000 to former Razorback athletic director and head football coach Frank Broyles, who died in 2017.

Changes to the federal tax law took effect Jan. 1. Donors supporting collegiate athletics no longer may claim an 80 percent tax deduction on gifts made for the right to purchase tickets or seating at collegiate sporting venues.

Varady said the Razorback Foundation “continues to follow its policies on membership levels and Priority Points with regard to seating locanization tions in athletic venues.” Donors receive “Priority Points” based in part on their level of giving.

“We are also continuing our effort to examine the tax law and our policies,” Varady said.

Bruce Hopkins, a Kansas City, Mo., attorney whose specialty is representing nonprofit organizations, said tax-law changes such as increasing the standard deduction are generally expected to reduce charitable giving.

“My guess is that institutions like universities and colleges are going to be less affected than some of your typical charities that rely on much smaller gifts,” Hopkins said. “When you’ve got an alumni base, that’s a much stronger donor base than most charities have, and I think they’ll continue to give maybe not at the same level.”