Editor’s Note: This will be the first installment of a five-part series about the University of Massachusetts’ finances and changes to the University’s endowment and assets since the start of America’s recession. In this series, the Collegian will investigate where UMass’ funds come from, how they are managed, and how they are then invested in the five campuses of the University system.

The University of Massachusetts had the nation’s 145th-largest endowment among colleges and universities at the end of fiscal year 2009, but despite that low ranking, the University’s finances could be much worse.

Though the UMass Foundation, the body which manages the University system’s assets, clocked in one spot behind the Medical College of Wisconsin and one notch ahead of the University of Mississippi in endowment resources at approximately $367 million, the Foundation actually ranked 53rd in overall losses in FY2009 in a survey of 842 schools conducted by the National Association of College and University Business Officers.

The University’s 2009 investment performance was negative 15 percent, compared to a nationwide average of negative 18.7 percent. Over three years, the University saw returns of 0.3 percent, and over five years, that figure jumps to 4.7 percent, putting UMass’ returns in the top quartile of all schools over those timetables.

The process is a technical one and involves many levels and individuals working in various departments throughout the campuses and the University system. At the start, though, UMass’ fundraising process originates with the Giving Office and the UMass Amherst Foundation.

The Giving Office, in addition to fund raising directors in each college and department, reaches out to alumni, parents, corporations with interest in UMass’ various programs, foundations which give grants to different academic fields and other friends of the University to seek donations, and works in a hands-on fashion to actively convince donors of the school’s need for gifts.

Mike Leto is the vice chancellor for development and alumni relations and the executive director of the UMass Amherst Foundation. He explained that UMass Amherst’s fundraising program is “comprehensive,” meaning there are development offices in each of the colleges and schools of the University which work with friends to solicit donations, which in turn collaborate with the Giving Office to bring in donations.

Leto explained that there are two primary forms of gifts: gifts to current funds and endowment funds. Gifts to the current fund will be put to use within the immediate fiscal year for a variety of purposes such as financial need and construction, while endowment funds are established over the long term and are pooled into the UMass system Foundation and then back to the campus for which they are established.

“There’s a central staff here that works in collaboration with the college-based fundraising offices,” he explained. “Sources of our private gifts run the gamut from private corporations, foundations, non-alumni individuals, alumni, friends, parents, and even students and staff.”

Leto explained that the Giving Office attempts to work with interested donors to specify a purpose for their gift.

“We encourage all donors to designate their gift to the program that interests them most,” Leto said. “Often times, alumni give back to their academic program, [while] corporations often fund the programs that support their basic industry,” he furthered.

Leto added that once a gift is established and directed to a specific purpose, it is placed in an account for its stated department to use.

“Most money is restricted by the donor, so it is placed in gift accounts for each department,” he said.

Many gifts presently coming to the University are for scholarships, Leto said, adding that there are also multiple types of scholarships which can be established.

“Quite a bit has been contributed for scholarships,” he stated, “there are named scholarships versus general scholarships, where if a person gives a sum of money at a certain level they can have a named scholarship.”

Tom Navin, director of annual giving, said the University is presently seeking to convince donors of the need for greater financial aid resources.

“One of the things we’re really trying to focus on is student need,” he said, “there’s a lot of people who’ve seen their portfolios lose value over the last couple of years, but when we try to show them the struggles some current students are having paying tuition, it puts things in perspective for some donors,”

Leto explained that financial aid is dispersed both by the financial aid office and through the Giving Office. The Giving Office contacts donors and hopes to make clear the need for more student aid, as students struggle to balance their finances, tuition and other expenses increase. The University generally has less funding to devote to student aid in a precarious economy.

“There are two sources of need-based aid,” he said, “part would be through University’s financial aid office through institutional funds, and part would be privately funded scholarships, basically where we identify that we need more need-based scholarships and we seek out individuals that might have an interest in that and reach out to them.”

Janet Muzzy, director of stewardship, is tasked with coordinating with friends of the University where gifts will go and in what amount.

“Usually people just say, ‘I want to create a scholarship,’” she said of the typical donor.

“It’s my job to figure out what are they talking about,” she elaborated, “are they talking about a one-time award, are they talking about an endowment, maybe a scholarship that’s going to follow a student for two years and that’s it. Then I get an idea what they’re thinking.”

From there, Muzzy works with the donor to solidify the agreement and establish a tangible purpose for the gift.

“The next thing I try to figure out is, what is the purpose of the fund. If it’s for any of the academic areas, I’m going to connect the donor with the fundraiser from that department or college. I just try to get people to think about the fund level and the fund purpose,” she said.

While a majority of donations come to the individual campuses of the University system and go into their current fund to be used immediately, large gifts, typically those over $27,500, are what are known as endowments. Endowments are permanent funds given for a stated purpose which are invested in the University Foundation in a pooled account, overseen by an investment committee composed of 20 highly-skilled financial experts elected annually by the Foundation’s board of directors, who are either alumni of the University system or friends of the University.

Endowments have a set distribution rate, or amount which is to stay invested and amount to be handed over to the University campus for which they are established yearly, typically 4 to 6 percent.

The next piece in this series will examine how the University Foundation operates and manages the school’s financial resources, how the endowment has fluctuated in the recession of the past two years, and how funds are distributed from the Foundation to the individual campuses of the UMass system.

Sam Butterfield can be reached at [email protected].