UA's $70M endowment move draws scrutiny
The University of Arizona says its plan to take direct control of tens of millions in donor endowment funds will help put philanthropic support to work more efficiently, but the foundation's own donor letter and the faculty senate chair say there’s another reason for the change.
The UA Foundation notified donors earlier this month that it will transfer $70 million in non-scholarship endowment payouts to the university by June 30, with all future annual payouts following the same path beginning in July.
The change gives the university direct legal ownership of funds previously managed and reviewed by the foundation before distribution, removing an independent check on how donor-restricted money is spent.
"This allows the university to more efficiently put philanthropic support to work for students, research and other donor-specified priorities," said UA spokesperson Mitch Zak, adding that the change gives the university more direct visibility into how payout funds are being used.
Zak said the shift would not affect the endowment principal, which will remain at the foundation under its board's fiduciary oversight.
In a second statement, Zak said the annual payouts "do not become unrestricted university funds" and that the change "improves visibility into those resources without altering the restrictions governing their use,” but did not explain what mechanism would enforce those restrictions once the foundation's review process is removed.
The foundation's letter to donors from President and CEO John-Paul Roczniak, however, was more direct: the change "will also assist the university in meeting the Days Cash on Hand targets mandated by the Arizona Board of Regents and the university's bond rating agencies."
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Days Cash on Hand measures how long a university can operate using available funds without additional revenue. The UA reported last week that it had between 78 to 84 days of cash-on-hand, well below ABOR's required minimum of 140, and the shortfall has weighed on the university's credit rating since its 2023 financial crisis.
In 2024 and early 2025, Moody's and S&P Global Ratings downgraded the UA's outlook to negative, with Moody's citing its "inability to right size operations," turnover in management, weaker financial monitoring and ongoing governance scrutiny.
In January, S&P Global Ratings revised its outlook on the university's debt from negative to stable, affirming its AA- rating and citing improved operations, though it warned that a weakening liquidity position, measured in part by Days Cash on Hand, could trigger a downgrade.
Zak did not respond to follow-up questions from Tucson Spotlight about whether the Arizona Board of Regents was informed of the change or whether the foundation's board voted on it.
A representative for ABOR did not respond to Tucson Spotlight's requests for comment about whether it was consulted before the change was announced to donors, what oversight role it holds over how transferred funds are spent, and how the shift affects the UA’s Days Cash on Hand calculation.
In a statement to the Arizona Daily Star, ABOR said university foundations are "legally separate and independent non-profit corporations whose charitable purpose is to aid and promote universities."
“The board does not run them, but sets clear expectations for how universities work with foundations to make sure donations are handled properly,” the statement said.
It is not clear whether those expectations extend to prior notification of a change of this magnitude.
Tucson Spotlight contacted three UA Foundation board members listed on the organization's most recent IRS filing, asking when the board voted on the change and whether the reinvestment commitment described by the university's spokesperson is reflected in any written policy.
Two did not respond by deadline; a third said they are no longer a trustee.
Zak said units may continue to reinvest unspent distributions "when appropriate," but did not respond to additional questions defining what that means, where reinvested funds would be held, or what guidance development directors received when the change was announced internally.
Zak also did not respond to a request for examples of where the current system has fallen short, despite the university's statement that the change will help ensure donor resources are used "in a timely manner and in accordance with the terms of each endowment agreement."
How endowments work
An endowment is not a bank account. Donors contribute principal that is invested permanently. Only the annual return, not the original gift, is distributed for spending.
The UA Foundation pays out at a rate of 4.25% annually, meaning a $1 million endowment generates roughly $42,500 per year for its designated purpose, indefinitely.
Most endowments are restricted: a donor specifies exactly what the money funds — a named scholarship, a faculty chair, a research program — and that designation is legally binding.
The UA Foundation, founded in 1958, is a separate nonprofit organization that exists to receive, invest, and steward private gifts on the university's behalf.
The separation is intentional: as a public institution, the university is subject to state budget rules and oversight that can complicate the management of private philanthropy.
The foundation operates under its own board of trustees and assumes fiduciary responsibility for ensuring donations are used in accordance with donor intent. It has historically served as an independent check on endowment distributions, reviewing requests to confirm they comply with donor agreements before releasing funds to the university.
Under the change taking effect June 30, the university receives those funds directly, without that review. The underlying investments remain at the foundation.
The cash on hand question
The funding shift comes as the UA continues to recover from a financial crisis that emerged in 2023, when the university disclosed a roughly $240 million budget shortfall. As of last June, the UA reported an estimated 77 days cash on hand, well below ABOR's required minimum of 140.
Faculty Senate Chair Leila Hudson said she believes the $70 million transfer amounts to roughly 10 days of cash on hand.
Hudson said she first learned of the change when a donor shared the foundation's letter with her a few weeks ago. She said that’s the same way most faculty found out, adding that the Faculty Senate's role is precisely to pump the brakes on decisions like this.
"Faculty governance is mandated to slow down the process, ask difficult questions and think long-term, not just about opportunities and profits, but about the mission and how you creatively keep on doing the mission in a compassionate way that does not hurt people and continues to serve the state," she said. "The administration never intended for us to know (about this.)”
Hudson has been scrutinizing the flow of money between the foundation and the university since 2022, when she launched a faculty senate committee to examine what she described as improper donor influence on academic programs, most notably funding from the Koch network directed to the university's Freedom Center.
That experience, she said, left her deeply skeptical of the foundation's transparency.
That skepticism now extends to how the university will manage the transferred funds. Hudson said she has witnessed endowments mishandled at the university level, including one case in which she said a donor's death was followed almost immediately by changes to the terms of their donation, and another in which she said an endowed professorship was seized by a college dean and converted into a five-year rotating position distributed among existing faculty.
"That is a shocking breach of protocol and in my opinion, law, as well," she said.
Hudson said she’s not opposed to the idea of greater transparency into how endowment funds flow. In theory, money moving from the foundation into the university should make it more visible to the public.
But she said she does not trust the university to honor donor intent once it controls the funds directly.
"It’s not clear that the ravenous administrators of the university are going to put principal and donor wishes and program integrity above this rather desperate hunger for Days of Cash on Hand," she said.
She also raised concern about the timing and the opt-out structure. The letter went to donors in late spring, she noted, and donors who did not respond will have their endowments transferred by default.
"Donors are, by definition, people with real lives in the real world who aren't necessarily personally managing or overseeing these aspects of their families' legacies or trusts," she said. "I can't help but notice it's a summertime move."
Donors who Hudson has spoken to about the change, she said, are worried.
"They're upset about this,” Hudson said. “They're concerned. They don't know what this means.”
The university, she warned, is taking a significant risk.
"We depend on the philanthropic donations of alumni and community members to advance the mission," she said. "My personal experience is that this will not bode well. The university is playing with fire."
Donors who chose to opt out may maintain the current arrangement. The change is subject to renewal on June 15, 2031.
This is a developing story. Check back for updates or contact Caitlin Schmidt at caitlin@tucsonspotlight.org with tips or information.
Caitlin Schmidt is Editor and Publisher of Tucson Spotlight.
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