Roughly 1,100 scholarships funded by endowments at Miami University may be cut back for the 2009-10 academic year due to the current financial situation.

Director of Student Financial Assistance Chuck Knepfle said compared to 2008, Miami is projecting a 25 percent reduction in scholarship funds available to award to students.

Prior to spring break, university divisions and departments were provided estimates regarding funds available to award for the 2009-10 school year based on the current market value of accounts.

Since the review process is conducted annually following the conclusion of the fiscal year, June 30, reduced amounts will be effective for the 2009-10 school year, Knepfle said. However, since the deadline is too late to award scholarships, financial assistance is currently providing estimates so departments can begin planning their fiscal year.

"The market could tank today, and that would really hurt us," Knepfle said. "If we've lost money, which is what we anticipate, that's when these cuts will kick in."

As of Dec. 31, 2008, Miami had $303 million in endowments, which is invested to generate a return rate, Knepfle said. Roughly $500 is typically generated annually for every $100,000 invested, which is used to fund scholarships.

Bruce Guiot, director of investments and treasury services, said Miami utilizes a two-part formula for all endowed funds, which is used to determine how much is provided for scholarships from endowments.

The first part of the calculation increases the previous year's distribution per unit (the amount of payments made to individual unit holders of a specified income trust), by the rate of inflation for the one-year period between April 1 and March 31, which accounts for 70 percent of the formula.

The second part of the formula includes a 4.5 percent distribution rate that is applied to the unit's market value as of March 31 to calculate the remaining 30 percent, he said.

Knepfle said this is the first time in the eight years he's been involved that endowments have not generated money.

"Some of our funds that have been here a long time aren't affected by the current market conditions because they've generated consistent interest," Knepfle said. "If they make more than normal, we put the extra money away in a 'rainy day' fund."

Guiot said endowment funds have until June 30 to generate return, which also makes it difficult to obtain concrete data.

"Funds today that can be conceivably underwater tomorrow may not be at the end of the fiscal year in June," he said.

Although concrete data is unavailable at this time, Guiot said a significant number of underwater funds-ones with market values below the gift value-will not be distributed.

According to Provost Jeffrey Herbst, effects on individual accounts vary depending upon when the account was established.

"Newer accounts that may be underwater cannot be used since their market value is lower than their initial principle," Herbst said. "Older accounts which have built up considerable savings which we haven't used will have expendable balances. There are many of these accounts, so it's difficult to make one statement on the whole class of accounts."

Knepfle said the university will honor any renewable scholarships offered students as well as scholarships offered to first-year students.

"If you were offered a $3,000 renewable scholarship when you enrolled, even if that account has no money in it, we will find you $3,000 for next year," Knepfle said. "If you're counting on money, we will do everything in our power to scrape up that money for you. We realize that if we don't have (first years), we will have more problems than just these scholarships."

While departmental scholarships awarded to upperclass students will be significantly less, Knepfle said, students will not be affected.

"It's like if you're on a job, and you get a bonus you didn't know about," he said. "But if the company doesn't have money to give the bonus, you wouldn't know you were going to get it. It's the same thing with these scholarships."

Martha Kyger, assistant dean of the Farmer School of Business (FSB), oversees divisional scholarships for the FSB and said there is an estimated 20 percent reduction in total dollars for the upcoming year.

Divisional scholarships from the FSB are typically awarded to juniors and seniors, and are scholarships not specified for a particular major or participation in a particular organization or program.

Kyger was surprised to find seven accounts with more money available than last year, with an equal number with less money. Of the roughly 40 scholarships divisionally managed, 12 are expected to have the same amount of funds while 15 will have no money to award.

Even so, Kyger said the number of accounts with no funds to award is not surprising because the FSB had eight accounts without funds last year.

According to Marc Rubin, accountancy chair, the department was notified of the amount of money in accounts not spent last year, as well as an estimated amount for next year.

Although there is clearly a reduction in the amount available for next year, the department may be able to award scholarships using "reserve funds" left in the account from last year.

Herbst said to combat the potential of decreased funds, the university is currently asking donors with underwater accounts to consider giving an additional gift equivalent to the amount that would have been produced from the endowments, which would roughly be 4.5 percent of the principal amount.

Likewise, the accountancy department plans to ask donors to award more money than originally designated if their accounts have adequate funds, Rubin said.

Overall, Rubin said he remains optimistic.

"It's a tough year, so if anything, we'd like to award more scholarships than last year," Rubin said. "We know students will probably need more money this year than they have in the past and we're going to do everything we can to give at least the same amount as last year."

The use of endowed funds depends on the purpose stipulated by the donor when the account was created, Guiot said. In 2008, roughly 45 percent of the university's endowment distribution went to scholarships, the biggest category of recipients, with the next biggest category for professorships, academic support and research at 31 percent, Guiot said.

"Scholarships are our biggest recipient of distributions from the endowments so they're going to feel it the worst," Guiot said, "We still have three and a half months to try to get some recovery in our asset values and hopefully that will bring some relief."