An Audit Report on Texas Southern University's Management Practices for Endowment Funds
August 2006
Report Number 06-055
Overall Conclusion
Texas Southern University (University) has not managed and protected its endowments adequately. The University's decision to distribute additional funds from its scholarship endowments in fiscal year 2004 caused it to (1) spend a portion of the principal of those endowments, (2) violate the purposes of those endowments, and (3) jeopardize the continued growth of those endowments. Auditors estimate that the University spent at least $285,934 from the principal of eight endowments. Exact amounts spent from principal cannot be determined because of the University's poor recordkeeping.
The University's monitoring of compliance with donor restrictions is not effective. First, the University does not have a central monitoring function to ensure that funds are spent in a timely manner and in accordance with donor restrictions. Second, the University does not have written, formal donor agreements for most of the endowments established prior to 2001. Third, the University's records regarding additional endowment contributions are inaccurate or significantly incomplete.
The University's investment practices also are not adequate to effectively manage its endowments. The University does not have a well diversified portfolio as required by its investment policy, appears to have unreasonably high investment return targets, and is not achieving those targets. The University is not monitoring the long-term performance of its endowment investments, and it does not ensure that it complies with established investment policies.
The University's calculation methodology for determining annual distributions from each endowment does not ensure equitable distributions from each endowment.
As a result of these issues, there is little assurance that each endowment's principal is protected, growth is ensured, or donor restrictions are met.
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