A Selection of Concurrent Session Summaries
The following coverage of the NACUBO 2012 Annual Meeting, in the Washington, D.C., area, shows the variety and depth of programming at this 50th anniversary celebration of NACUBO’s founding. The four articles highlight sessions focused on (1) the cost of donor cultivation and lucrative relationship building, (2) translating institution data into specific plans for ongoing maintenance and capital renewal, (3) effective collaboration in developing research parks, and (4) advice on tax-exempt bond compliance. For expansive coverage of the 2012 annual meeting, see the October issue of Business Officer.
By Carole Schweitzer, Karla Hignite, and Dorothy Wagener
"Why do they need a $400 bottle of wine?" is a question Roger Bruszewski has asked himself when approving expenses for the advancement department. He's already learned the answer: To turn that bill into large gifts. So, even in 2008, when the bottom had dropped out of the financial markets, he realized that the receipts for two $400 bottles of wine—and even more in restaurant charges—were actually part of a strategic response to the downturn. The university needed to attract even more donations than before. And, when the development officer asked a key prospect to select the wine at dinner, it happened to be a pricey one.
Bruszewski, vice president of finance and administration for Millersville University, Millersville, Pennsylvania, joined in the panel discussion "Show Me the Money: Development for Business Officers" at the NACUBO 2012 Annual Meeting, in July. Kelly Brown, associate dean, office of development and external affairs, Johns Hopkins University, Baltimore; and Jessica Davies, director of donor relations at the University of Maryland, College Park, joined the panel in presenting ways that the business office and the development department can work together to support effective stewardship, development productivity, and decision making.
Ensuring Donor Intent
For Davies, a critical intersection of finance and development involves tracking contributions and reporting amounts by various categories. "Donor intent is huge," said Davies. "Donors need to see endowment and other reports that make them feel confident that their contributions are being used in the ways they have indicated. If we've been doing our stewardship well, we can feel confident that we can go back to that donor."
Davies explained that in times when investments are losing value, development officers sometimes have to reach out to a donor to restore the gift to its original amount. If it involves a scholarship fund, for example, that is now under water, the donor is often willing to contribute the additional amount to make up the difference. "To accomplish that, however," said Davies, "our record keeping needs to be excellent."
Issues of privacy are also measures of good stewardship, noted Davies. If the advancement office wants to mention a student by name in a publication, for example, "we need to check with that scholarship recipient for permission to use his or her name."
Measure for Measure
The industry standard, explained Kelly, calls for a typical development officer to manage 100 to 150 donors. Interactions generally include:
One visit per person per year. The development officer may choose to meet a prospect for a meal in order to gather more information, identify a particular passion, and explain how the person may contribute. With larger donors, the development office may think it appropriate to visit the person in his or her office or residence.
Several requests per year for contributions. The officer will judiciously make the follow-up calls or send correspondence after the initial introduction. The number of interactions will depend on the anticipated level of the gift. In deciding how much activity is appropriate, it is useful to consider the industry standard for costs compared to gifts. On average, the development office will spend between 10 and 12 cents for every dollar raised. For less-mature programs, that number is 20 percent. "Since cultivating donors is a relationship-building business," said Kelly, "every time a development officer leaves, you may need to start over." When you hire a new person, expect that by the end of year two that officer should be covering his or her own costs and raising approximately $2 million.
If you haven't received requests for additional development staff, you will, said Kelly. "Many institutions feel they need to get more feet on the street."
A Gift or a Gift Horse?
The development office receives many noncash gifts, pointed out Bruszewski. "These might include real estate; retirement plan assets; life insurance; personal property; publicly traded securities; and closely held stock, partnerships, and other investment assets." Eventually these all can be converted to cash. But, at what point does the business office get involved?
For Bruszewski, the answer is, "The earlier the better." A solid relationship with the chief development officer is so important, he said. "Pre-gift discussions are a particularly good way to know what's coming and what the challenges might be."
Bruszewski has learned some of this the hard way. "A development officer once accepted a collection of 142 stuffed wild animals—without asking for any funds for storage, sales promotion, and other associated costs of converting this gift to cash. In the end, we spent $1.8 million to figure out how to dispense with the $2.3 million collection." So, concluded Bruszewski, "realize that in considering noncash gifts, there can be many reasons to say, 'No.'"
CAROLE SCHWEITZER is senior editor of Business Officer.
Representatives from Upper Iowa University, Fayette, and Brigham Young University, Provo, Utah, discussed the experiences of their institutions with pursuing an asset management model driven by infrastructure data. "Embarking on a Journey to Total Cost of Ownership" examined how to translate information about your institution's facilities into actionable maintenance and capital renewal programs.
The basic thrust of the total cost of ownership (TCO) model is to help institutions get a better handle on infrastructure master planning and spending in order to prioritize decisions about when to maintain, when to retrofit, and when to recapitalize, says Lander Medlin, executive vice president of APPA. "Total cost of ownership is a philosophy, not a program; it is an institution strategy, not a facilities strategy," she stressed. The model itself transcends the particular size of the campus. Large or small, each campus must address design and construction, maintenance, and capital revitalization concerns.
For the best view, the TCO model entails bringing together university staff, business partners, and contractors to perform a facilities condition assessment to determine preventive and long-term maintenance needs, notes Bryan Jolley, executive director of facilities management at UGL Services. Determining a per-square-foot cost that can be tracked over a 40-year period brings to light the specific cash flow needs for a particular building. Done in conjunction with an assessment of the entire campus, this provides a big-picture view of short- and long-term infrastructure asset needs.
The TCO model doesn't dictate where resources should come from to address infrastructure needs. Instead, the model allows for a conversation about particular facilities within the context of the needs of your entire campus, explains Medlin. The value is to show total cost of ownership into the future. "When you look year to year, you end up wasting a lot of money," explains Jolley. "TCO provides a picture of what is really happening and shows when a particular building begins to cost more so that you can plan for this or determine how you may need to repurpose or recapitalize the facility."
KARLA HIGNITE is a contributing editor for Business Officer.
"If you've seen one research park, you've seen one research park," quipped Kevin Byrne, vice president and chief operating officer of the University Financing Foundation, during the presentation "University Research Parks Increase the Value of Institutions." The session offered examples of the ways different institutions are partnering with business to enhance the kind of intellectual exchange that can not only bolster the identity and value of the institution, but also strengthen communities and markets.
In truth, the types of partnerships created among universities, government, and industry take many forms, based in part on the nature of the collaboration—whether for business incubation, medical research, technology transfer and the creation of intellectual property, or for economic development and job creation. According to Byrne, the two types of university research parks that don't work are those that are (1) 100 percent–owned and –operated by higher education or (2) 100 percent–owned and –occupied by private sector entities. The ideal, suggests Byrne, is to combine all three sectors in a colocated space to allow ample opportunities for people to "bump into each other" to exchange ideas.
Michael Bowman concurs. Chairman and president of Delaware Technology Park, Bowman argues that for a university research park to be truly successful, it is critical that the university have some presence within the park to provide the necessary synergy for collaboration. That presence doesn't have to be academic, he adds. It may be an administrative component, such as a development office. Colocation also affords opportunities for cost sharing. Some technology and medical research instruments in particular are hugely expensive. However, when members of the research park can share, it not only saves space within the center, but allows all those involved to stretch their resource dollars further.
In Bowman's case, the collaboration is a partnership among the University of Delaware, the state, and the private sector. What began as an office park today includes wet labs and a strong focus on technology. "Consider what your institution already excels at and look to venture in those areas," suggests Bowman.
For the University of Maryland—with its close proximity to Washington, D.C.—primary collaborations include various federal agencies, with centers for global climate change and food safety, to name a few. Brian Darmody, associate vice president for research and economic development at the University of Maryland, notes another big success story of university research parks: the high-caliber human capital development and employment that these entities produce each year in the way of student graduates and new entrepreneurs.
New Realities, Revenue, Resources
While one marker of a university research park is its physical location as master-planned space, leaders must consider future needs even as they build a physical space, notes Byrne. The reality is that today's research park models are being disrupted to evolve into new models that may well take on altered physical forms as technology allows for remote and global connections, he says.
When developed correctly, research parks can be self-sustaining and can be a source of added revenue, notes Bowman. More importantly, they offer the possibility for significant economic development within the region.
An invaluable resource that all presenters pointed to is the Association of University Research Parks, which explains the what, why, and how of fostering centers of innovation and acts as an advocacy group for research parks around the world. AURP provides benchmark research, including the 2007 Battelle report, "Characteristics and Trends in North American Research Parks: 21st Century Directions," scheduled for an updated release this fall. The association also provides a "Research Parks 101" seminar and other training materials for universities whose leaders are exploring business and research opportunities for their campuses.
KARLA HIGNITE is a contributing editor for Business Officer.
"The government cares very deeply what you do with your bond proceeds," said Michael Larsen, attorney and partner, Parker Poe Adams & Bernstein, in the session, "Post-Issuance Tax Compliance for Tax-Exempt Bonds." Recently, the IRS has stepped up enforcement efforts because of the perception that compliance in some sectors of the market is low, resulting in loss of federal revenue.
Another panelist, Peter Keyes, deputy associate treasurer, Drexel University, Philadelphia, advised attendees that their institutions should:
- Adopt written policies and procedures, which should outline the federal tax law requirements and provide details about how those requirements will be satisfied at your institution.
- Review outstanding debt issuances and their covenants, which will run for the life of the bonds.
- Track expenditure of debt proceeds, including funds established for the financing, investments acquired with bond proceeds, and any arbitrage rebate liability associated with a bond issue.
- Track third-party use, which may include private business services, real estate space used, and contracts related to such services.
- Retain records as required. In the event of a refinancing, keep records back to the date of issuance of the first tax-exempt financing.
- Establish a continuing education program so that individuals responsible for compliance are up-to-date on tax law requirements. Available resources include IRS publications, CPE webinars, and NACUBO presentations.
DOROTHY WAGENER is editor in chief of Business Officer.