Fiscal Responsibility: Make a budget & stick to it

`Ano`ai kakou…  As part of my fiduciary duties as a Trustee of OHA, I attended a forum conducted by one of OHA’s money managers.  The Commonfund Forum 2015: Converging Ideas – Creative Answers was held from March 14 17, 2015, is one of the preeminent annual conference for institutional investors.

The forum examined the many challenges endowments, foundations, charities, pension funds and other long-term investors are currently facing.  I had a productive and informative discussion with Commonfund regarding OHA’s spending policy and budget process.

Commonfund had several recommendations:

  1. The Board of Trustees should have a clear understanding of their role as fiduciaries to the Native Hawaiian Trust Fund. Trustees must be disciplined enough to hold the line on budgets and expenditures, otherwise OHA’s budget will continue to swell to unsustainable levels.
  2. Trustees should broaden their knowledge regarding budgeting and investments by regularly attending informative conferences such as the ones presented by our money managers. I have attended several forums by Goldman Sachs, JP Morgan, and Commonfund that have providing me with invaluable information and a world view on market trends.
  3. Board Leadership can also engage all of its members by giving Trustees meaningful work and allowing them to gain further financial experience;
  4. Board and Committee meetings could be improved by focusing agendas on specific themes and similar issues. This would allow Trustees to express their opinions while keeping the meeting on topic.
  5. The Board of Trustees should consider conducting role playing exercises. For example, how would we react to worse case scenarios, such as catastrophic terrorist attacks or natural disasters? This would prepare us for the worst and it would also allow Trustees to understand the choices and processes that may be necessary in a market crash or some other catastrophic event.
  6. OHA should learn from the past as it plans for the future. The Trustees can easily analyze past asset allocations and determine what worked and what didn’t work.
  7. When considering new spending everyone at OHA, whether they are staff or Trustees, we must always consider: (a) Whose money we are spending and investing; (b) Whether we are being prudent; (c) Whether we have we developed priorities and timelines for spending; and (d) Whether we have clarified our short term and long term goals.
  8. Changing our spending policy limit to 4-½ percent of the Trust Fund would be a wise move in the current economy.

Prudent spending, sticking to budgets and getting rid of the Fiscal Reserve slush fund are all much needed changes that were recommended by Commonfund.  Commonfund has also agreed to look at our spending policy and make recommendations for the future.

After attending another workshop with our two money managers, it appears clear that the stock market will not be a place for OHA to look for great returns on our investment over the next few years.  The predictors are very gloomy; all the more reason to be cautious and prudent with spending.