Department managers were told in an email in early August payments had ceased on August 1 and no more would be made until at least the end of this year.
The Otago Daily Times obtained a copy of the email this week.
The charitable trust was established in 2002 to administer donations, bequests and sponsorship money.
Money received has been invested and the interest used to fund activities including fellowships, scholarships, research projects, student services and some salaries.
The trust had budgeted to distribute $5.19 million this year and had handed out $3.51 million by the time the freeze was imposed.
Last year, $4.28 million was distributed.
The freeze means departments will have to find money from elsewhere to fund some programmes and salaries until at least the rest of this year and possibly into next year as well.
Vice-chancellor Prof Sir David Skegg said yesterday the decision, which he supported, was necessary.
The total value of the fund had grown to about $100 million, he said.
The average net return on investments over the past 10 years had been about 8%, with about 5% distributed and the remainder reinvested to maintain the real value of the fund.
However, the global financial crisis had reduced investment income last year and this year.
"The trust could have continued to distribute money . . . but it seemed prudent to suspend distributions at a time when the university has sufficient funds to support the same activities from other sources," he said in a statement.
Trust payments were a "very small part" of the university's total income - $518 million last year, he said.
The email to staff made it clear the university expected all activities supported by the trust to continue, Prof Skegg said.
Managers having difficulty meeting that directive were advised to approach their pro-vice-chancellor for assistance.
In August, Prof Skegg announced the establishment of a task force of senior academic and financial managers to oversee cost-cutting across all departments over the next 18 months.
The decision to freeze trust fund distributions was not a recommendation from that group, he said.
"Indeed, the task force had not had its first meeting when this decision was announced."
