Really Stupid Financial Management

Last week I posted about the financial woes here at The University of Western Ontario. A snippet for review:

The financial folks here gambled with our rent money: they invested huge chunks of the university's operating revenues AND endowment funds in equities. They looked like geniuses when stock prices were rising, but who is suffering now? Not them. In fact, they blame the market, not their own injudicious investment strategies.

Instead, the admin types here are reneging even on re-negotiated agreements. As a result, our department is losing a very dynamic and energetic chair and will likely lose other very creative economists.

In response to the resignation of the Economics Department Chair (and his straight-forward criticism of the financial mismanagement of the university), the university VP in charge of such things responded:

Gitta Kulczycki, Vice-President (Resources & Operations), disagrees with Sussman’s [i.e. Nathan Sussman, economics department chair] characterization of the investments.

 

For more than 20 years up until Dec. 31, 2008, the university’s investment strategy has generated an average return of 7.8 per cent, she says. The funds are invested in a broadly diversified portfolio which includes an asset mix of 35 per cent bonds, five per cent hedge funds and 60 per cent equities.

 

“The strategy of investing endowed funds, and that portion of non-endowed funds not required for short term purposes, has been in place since 1984,” she says...

So the fin-admins were merrily cruising along, earning 7.8% or more, investing zero in money markets or other low-risk assets, and were holding nothing back in reserve? Spending the entire proceeds like drunken sailors? Nothing to prepare in case there was a downturn? And counting on all the income and capital gains as continued growth in operating income? And they didn't adjust even a year ago when it was clear there were economic problems?

These folks should be fired without severance pay.