Need for college watchdog not-for-profit questioned

October 15, 2007

Not everyone is welcoming the launch of an Indianapolis-based not-for-profit, backed by billionaire businessmen, that aims to curb colleges' discretion in spending donor contributions.

Founders of the newly launched Center for Excellence in Higher Education say development officers don't always spend gifts as intended, and schools need to be more accountable. But schools and others in higher education say donors already painstakingly detail their intentions in contracts. And imposing too many restrictions on gifts can impinge on academic freedom.

"It would certainly not be appropriate under any meaning of academic freedom for the donor to insist that in order for the school to accept their money, it must appoint professor X to a chair," said Jonathan Knight, director of the academic freedom and tenure program for the American Association of University Professors.

"It has long been a cardinal tenet of academic freedom ... to retain their independence from outside pressure and to not yield that to outside funding. He who pays the piper does not call the tune in higher education."

But the center's executive director, Frederic Fransen, strongly disagrees.

"This is not about donors versus universities," said Fransen, adding that one university president called him Satan upon hearing his pitch. "Schools that have a problem with letting donors be more restrictive probably need more oversight."

Launching the foundation are several prominent American philanthropists--including Bernard Marcus, co-founder of Atlanta-based Home Depot, and John Templeton, who made his fortune in the mutual fund business. They and others believe more oversight is needed over the billions in contributions U.S. colleges receive annually.

The center is starting with $5 million in seed money and a staff of two. It's based here in part because Indianapolis is home to Fransen, who spent 10 years at the locally based Liberty Fund, a private foundation that develops, supervises and finances its own educational activities.

Helping fuel the initiative are recent high-profile spats over donor intentions at Princeton University, as well as at Tulane University in Louisiana and Randolph College in Virginia. At Princeton, the family of a donor wants to take back a 1961 gift that has ballooned in value to $840 million.

But providing more oversight than already exists would be next to impossible, Knight said.

"Higher education is probably the most heavily regulated body in the world," he said. "Their levels of review are extraordinary."

Internal mechanisms in place at Indiana University guarantee donors' wishes are complied with, said Curt Simic, president of the IU Foundation, which oversees the school's fund raising.

"From our perspective, [the center] is not needed. If we didn't have the safeguards, then we'd be vulnerable to donor dissatisfaction. But we do." About 97 percent of donations to IU are restricted, he said.

In fact, only 8.5 percent of all contributions to higher education institutions nationwide have no restrictions, according to the New York-based Council for Aid to Education.

"The kinds of restrictions that are in place now do nothing but tangle existing or create new red tape," Fransen said. "We believe lots of donors come away later having wished they'd made different decisions. We want to shape the quality of the donor gift."

Fransen said, for instance, that donors could set time limits on gifts, reducing the likelihood that disputes later would erupt with second- or third-generation descendants of a donor.

But if so many college supporters were dissatisfied, that would translate into a decline in gifts to schools, Simic and others say.

And that's not the case. Colleges and universities nationwide raised $28 billion in private donations in the 2006 academic year, 9.4 percent more than in 2005, according to the Council for Aid to Education. It was the largest bump in six years.

Much of the increase stemmed from larger gifts from alumni. They gave 18.3 percent more in 2006 than they did a year earlier, even though the number giving was flat. Their gifts, which totaled $8.4 million, made up 30 percent of all donations.

"If it were a big enough issue, it would hit us as common sense," said Mark Helmus, vice president of advancement at Butler University, where nearly 90 percent of gifts for its ongoing capital campaign are restricted. "But there haven't been repeated issues of donor mistrust or misallocation. At Butler, we see no need for this."

But supporters of the new center say recent disputes, such as the one at Princeton, prove otherwise.

Simic countered that Princeton could have avoided that tangle merely by maintaining good communication with the donor's family.

He said the university should have decided the endowment had grown to more than it needed and opened discussions with descendants. That would have kept the relationship on good footing.

"No one gives you all their money. So if you can have a conversation about stewardship, you could go back to them at some point for more money," he said.

Tighter restrictions on the original gift would have prevented the dispute, Fransen argued.

"It is inevitable that gifts given 'forever' will become, effectively, part of the general budget of the university," he said. Similarly, endowing a chair but not getting to select the faculty member to sit in it causes problems later with the succession of that position, Fransen said.

"We don't get that specific of letting donors name faculty for a chair," said Murray Blackwelder, senior vice president for advancement at Purdue University. "I don't think that's the nature of the gift. The institution has to determine what type of person is needed. Otherwise, the donors would be running the school."

Therein lies the crux of the issue for schools and the American Association of University Professors.

"[The center] appears to have very strong views which are typical of a conservative bent," Knight said.

Backers' views

The foundation, which has set up shop on the north side of Indianapolis but will move to Fishers, is receiving its seed funding from three not-for-profits that historically weren't big contributors to higher education. The Atlanta-based Marcus Foundation, headed by Bernard Marcus, gives to medical research, children's causes, the promotion of free enterprise and Judaism causes. The Radnor, Pa.-based Templeton Foundation, launched by John Templeton, funds initiatives aimed at finding common ground between science and religion.

Another supporter, the Raleigh, N.C.-based John William Pope Foundation, funds libertarian groups like the Federalist Society and the Cato Institute. In addition, it has provided grants to schools for the study of Western thought and athletics. But its efforts to impose restrictions sometimes have sparked controversy. In 2005, the foundation rejected a proposal from the University of North Carolina for money to fund its Western cultures program, according to the school's newspaper, The Daily Tar Heel.

"The conservative philanthropic organization said the proposal was incomplete and asked UNC to fill in the holes by providing information including a complete list of potential courses and instructors," the article said.

"Such specific requirements provoked concern from some faculty members, who have long worried that the foundation will exert influence over the proposed curriculum. The center has openly criticized women's studies programs across the UNC system, and UNC-Chapel Hill's cultural diversity requirement."

Still, even critics believe the Center for Excellence in Higher Education could spur a positive discussion of how donors can make gifts that have the maximum impact.

"They're helping to share with philanthropists how effective they can be about effecting change in higher education," said Gene Crume, president of Indiana State University Foundation.

"Wanting to name the faculty for a chair opens a door to conversation. We do want to watch and monitor the academic freedom issue, but it should be a positive conversation because you're engaging the donor. That will be the real test of courage if schools stand by their principle of academic freedom."

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