By Dan Hill
Voices
AAJA leaders are rethinking the purpose of the organization’s $900,000-plus endowment.
Started in 2004, the mission of the fund was to support programs on an annual basis using interest collected on what was hoped to be a $2 million principal.
“But the reality is we didn’t raise the full $2 million,” said national treasurer Rene Astudillo, who also served as executive director from 1999 to 2008.
The endowment received $1.2 million in pledges and now has $923,740 between its two investment accounts.
But the 2009 Boston convention left AAJA with debts to the hotel. Sponsors contributed less, and members felt the economic crunch.
“We were facing a deficit at the end of the year because so many people lost jobs in 2009,” said Sharon Chan, AAJA President from 2009 to 2010.
The AAJA board withdrew $154,000 from the endowment as an emergency response. The fund lost $255,620 – including investment losses and member withdrawals – in the 2009 fiscal year, according to tax records.
The withdrawal helped avert financial disaster for AAJA. The organization paid back $160,000 to the endowment after finances stabilized, according to executive director Kathy Chow.
Borrowing from the endowment was a controversial but critical move, one that brought into question the role of the fund.
“People who were giving [to the endowment] were a little upset,” said president Doris Truong. “It was not intended to be a rainy-day fund.”
Facing concerns regarding its use of endowment funds, AAJA then secured a line of credit. The relationship with banks allowed AAJA to take loans to fill budget holes.
“Most nonprofits set up a line of credit with a bond in cases of emergency,” Chow said. “It’s a safety net.”
With that safeguard now in place, the endowment is in an awkward situation. AAJA can access bank loans during financial emergencies rather than taking from its endowment. The fund’s investment returns are not strong enough to fund programming.
“We are not actively fundraising for the endowment because we need money that is unrestricted,” Truong said, adding that there are members who designate donations specifically for the endowment.
A task force that has reviewed AAJA policies and procedures for the past year will submit a report in conjunction with Saturday’s board meeting, Chow said.
The board has options in considering the fate of its endowment. It could reorganize its portfolio to target more returns or ride out the market on its current investments. Other decisions get to the root purpose of having an endowment in the first place.
“There’s two schools of thought here,” Astudillo said. “Some of those who were involved in raising the funds, like past presidents, think we shouldn’t touch the endowment. The other school of thought is that it’s there, it’s not earning interest, but at the meantime, it’s just sitting there.”
Follow Dan Hill @nudhill.
