UF administrators were warned to be prudent in their plans to use money from the university's endowment funds despite positive investment returns this year.
Paul Robell, head of the UF Foundation, advised UF administrators in a Tuesday memo that although endowment fund investments earned 3 percent in the last fiscal year, a surprise in light of the struggling economy, they should plan how they will use endowment funds carefully because of the "volatile" investment market.
The amount of money that will be available to spend in the future cannot be guaranteed, he wrote.
UF's endowment is donor-restricted, meaning donations go to the scholarships, professorships and research earmarked by the donor.
A percentage of each donation is invested, and the returns from the investment go back into the endowment pool to ensure that the fund never runs out. The remaining portion is the "spending base," which is calculated quarterly. Each year, 4 percent of the spending base goes toward whatever the donor intended.
The foundation increased the spending base from 85 percent to 90 percent in February, which freed $2.4 million meant to lighten the burden of budget cuts on colleges.
Robell wrote that the spending base will not increase this quarter, and there is no guarantee that it will increase again because of declining markets.
"If investments don't do well, negative adjustments are very possible," Robell said in a phone interview.
However, it would take a long-term, downward trend in the market to have significant effects on UF scholarships and professorships, said Leslie Bram, associate vice president of the foundation.
The 3 percent investment return for the 2007-2008 fiscal year, which ended June 30, was surprising because the UF Investment Corporation, which oversees the university's investments, set negative 7 percent as the goal for investment returns in light of the dismal market, Bram said.
Smart investments saved UF from negative returns for last year, she said, unlike Florida State University, which reported a negative 3 percent investment return.
"It's much better than we all expected," she said.
