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Business Officer Magazine

Business Briefs

Short news articles based on research surveys and peers’ business experiences that can benefit institutions

Tax Council Update: The Year in Review

Salary and Benefits Take Hit


The percentage of four-year private, nonprofit colleges and universities that plan to freeze salaries for at least some faculty and staff during FY10. Of the institutions planning to freeze base pay, 80 percent were doing so institutionwide.


The share of independent colleges that are reducing employee health care, retirement, or other benefits. This includes the 22 percent of private colleges and universities that are expected to offer early-retirement incentives.


The portion of independent institutions that plan to reduce or eliminate employer contributions to 403(b) or 401(k) retirement plans.


The proportion of private colleges and universities that announced plans to increase their employees' share of health insurance benefit costs.

Sources: Yaffee and Company, Recession's Impact on Executive Compensation at Independent Colleges and Universities, July 2009; Chronicle of Higher Education, August 12, 2009.

Business officers and campus tax directors are keenly aware that higher education institutions were the focus of a major Internal Revenue Service (IRS) compliance initiative in the past year, evidenced by the 33-page questionnaire that went out to a sample of 400 campuses in October 2008. The Tax Council Update session at the NACUBO 2009 Annual Meeting addressed the survey, as well as highlighting key current compliance issues on campus.

Session presenters included Joseph R. Irvine, development and tax council, Ohio State University, Columbus; Richard F. Klee, tax director, University of Notre Dame, South Bend, Indiana; and Amy A. Goodreau, director of corporate tax reporting, Duke University, Durham, North Carolina.

The single largest section of the IRS college and university compliance survey, noted session presenters, concentrated on unrelated and potentially unrelated business income (UBI) activities. Other focus areas were executive compensation and endowments.

In the coming year, the IRS plans to launch as many as 30 audits based on the information received from questionnaire respondents. An interim report on the survey results is not expected until later this year. Panelists urged the audience and all colleges and universities to use the IRS survey instrument as a road map to the Service's interests and plans for enforcement activities in the coming months.

Clarifying UBI Activities

Richard Klee gave a review of the compliance questionnaire's UBI-related aspects, which spotlight expense allocation methods and loss activities. He urged the audience to ensure that their institutions have clear policies and procedures to indentify UBI activities and related expense allocations. In addition, institutions should monitor exposure by periodically quantifying and assigning risks associated with taxable and potentially taxable activities.

New Reporting and Pension Plan Rules

Amy Goodreau reviewed the redesigned Form 990, along with the latest filing information related to the Form 990-EZ, which small campus organizations may use.

Joseph Irvine gave an update on the final rules related to 403(b) pension plans, including the latest extension from the IRS, giving employers until Dec. 31, 2009, to adopt a written plan. Mandatory plan requirements under the final rules are:

  • Identification of the contracts and accounts available under the plan.
  • Eligibility and contribution provisions.
  • Limits on annual additions.
  • Provisions coordinating and allocating compliance responsibilities.
  • Nonforfeitability.
  • Limit on elective deferrals.
  • Minimum required distribution rules.
  • Direct rollover rules.
  • Limitation on incidental benefits.

Plan documents may also include: loan and hardship withdrawals, plan-to-plan transfers, acceptance of rollovers, Roth contributions, post-termination contributions, catch-up contributions, and automatic enrollment. Irvine also noted the Service's announcement earlier this year of a program for pre-approval of prototype 403(b) plans.

NACUBO CONTACT Mary Bachinger, director, tax policy, 202.861.2581

Stay Current on Tax Developments

There's still time to register for this year's Tax Forum, October 21–23, in
Chicago, for ongoing coverage of campus tax issues. You'll learn about Internal Revenue Service enforcement and regulatory projects as well as congressional inquiry into the activities of higher education institutions. Also on the program: updates on a host of other tax issues, including rules and best practices related to executive compensation, tax research, fringe benefits, and deferred compensation. The program is designed to send you back to campus with new insights and tools for managing compliance and tax administration.

For further information and to register, call 800.462.4916.

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Establishing a Veteran-Friendly Campus

Outreach to veterans is a popular and enrollment-boosting trend among comprehensive and doctoral institutions. In January 2009, Youngstown State University (YSU), Ohio, established a formal Office of Veterans Affairs in anticipation of returning service personnel making use of the benefits of the Post-9/11 Veterans Educational Assistance Act of 2008 (commonly known as the New GI Bill or the Post-9/11 GI Bill). The OVA's mission is to accommodate all military personnel and veterans by making YSU a more welcoming place for them.

Targeted Recruitment

The challenge in recruiting veterans is that they are not gathered in great numbers in one place as are high school students, office professionals, or displaced workers seeking to retrain. What veterans do have, however, is a strong word-of-mouth network and family connections looking out for them. These realities are the basis for YSU's recruiting strategies, which include the following:

  • Recruit through houses of worship by placing notes in church bulletins, for example, and circulate information at veteran organizations, members of which will have children, nephews, nieces, and grandchildren who may be interested in higher education.
  • Establish relationships with local military recruiters and county veteran services, such as clinics, employment services, and social services, to present college as an opportunity.
  • Join the Servicemembers Opportunity Colleges (SOC), a consortium of colleges that recruit, enroll, and support current military personnel, veterans, and family members.
  • Distribute SOC's College Referral and Intent to Enroll Form, promoted by Army recruiters and filled out by new soldiers concurrent with their enlistment. New soldiers select a college and state their intent to enroll during or after enlistment.
  • Build an informative, specific, and welcoming stand-alone Web site.
  • Give up-close and personal attention to all queries and visits.

Implementation Model

When the university asked some campus professionals for recommendations on how to go about preparing for the anticipated influx of veterans from YSU's widespread recruiting efforts, a few employees who are themselves veterans formed an advisory council. That group has since grown to a formal, standing, nine-member body that acts independently of the OVA and includes as full members faculty, students, trustees, and community representatives.

The council advises the university through the OVA on all personnel issues and concerns of veterans and current military students. Additionally, the council has established strong contacts with our congressional leaders.

Examples of the council's significant impact include:

  • Establishing the foundation to grow toward a full-service center—the office being a separate entity reporting directly to the vice president of student affairs.
  • Implementing a waiver of application and orientation fees, a savings of $105, for this audience. We offer this benefit as a way to establish YSU as a veteran-friendly place and thereby facilitate recruitment.
  • Renaming a street on campus as Armed Forces Boulevard and organizing a ribbon-cutting ceremony for October 30 with U.S. Senator Sherrod Brown (D-OH).
  • Redesigning YSU's enrollment application to make it more pertinent to veterans.
  • Improving the process for tracking all veterans and current military personnel, not just those who are currently drawing GI benefits.

The university recognizes these efforts as solid business decisions, given that the guaranteed federal dollars that support GI Bill educational benefits completely cover the costs of attending our university.

SUBMITTED BY James Olive, program manager, Office of Veterans Affairs, Youngstown State University, Ohio

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UPMIFA Enhances Institutions' Ability to Manage Underwater Endowments

A new report by the Association of Governing Boards of Universities and Colleges (AGB) suggests that the enactment of the Uniform Prudent Management of Institutional Funds Act (UPMIFA) has had a positive effect on spending from underwater endowment funds (that is, funds that are now below the donor-restricted endowment gift amount).

In March and April 2009, AGB, in partnership with NACUBO and the Commonfund Institute, conducted a survey of colleges, universities, and affiliated foundations in states in which UPMIFA had been enacted (See sidebar, “State Adoptions of UPMIFA”). The purpose of the survey, “Management of Underwater Endowments Under UPMIFA,” was to determine whether spending and governing board practices have changed as a result of the enactment.

State Adoptions of UPMIFA

The following states have adopted the Uniform Prudent Management of Institutional Funds Act, in the years indicated:

Alabama (2008)

Arizona (2008)

California (Pending)

Colorado (2008)

Connecticut (2007)

Delaware (2007)

District of Columbia (2008)

Georgia (2008)

Idaho (2007)

Indiana (2007)

Iowa (2008)

Kansas (2008)

Minnesota (2008)

Montana (2007)

Nebraska (2007)

Nevada (2007)

New Hampshire (2008)

Ohio (Pending)

Oklahoma (2007)

Oregon (2007)

South Carolina (2008)

South Dakota (2007)

Tennessee (2007)

Texas (2007)

Utah (2007)

Virginia (2008)

West Virginia (2008)

Of the 181 institutions and foundations that participated in the survey, 53 percent were public institutions or foundations,
46 percent were independent institutions, and approximately 2 percent were other types of not-for-profit organizations. On average, 38 percent of the dollar value of survey participants' total endowment pool was underwater as of Dec. 31, 2008. Public institutions and institutions with smaller endowments reported significantly higher percentages of underwater endowment.

Overall, the survey results indicate that, for these respondents, UPMIFA has had a positive effect on spending from underwater endowment funds. Adoption of the act has also encouraged boards to strengthen their processes for determining prudent endowment spending. Institutions and foundations appear to be taking advantage of the flexibility afforded by UPMIFA to support their planned objectives.

Spending Flexibility

Report findings showed that the mean number of institutions and foundations that reported discontinuing all distributions from underwater funds decreased by 11.3 percent, and the number distributing only interest and dividends dropped by 9.8 percent. (See figure for information on spending practices pre- and post-UPMIFA adoption.)

Of the 104 institutions that said they had earlier discontinued distributions or distributed only interest and dividends under the previous Uniform Management of Institutional Funds Act (UMIFA), 76.1 percent are currently either (1) spending in keeping with their normal spending rate, (2) spending at a reduced rate that yields more than interest and dividends, or (3) spending according to a threshold or tiered policy.

According to the report, institutions might be also tapping quasi endowments and other resources. Only 10.6 percent of institutions vary their spending practice for underwater funds according to the purpose of the particular fund. Those that do, cite student financial aid as the purpose they continue to fund.

Quick Action

College, university, and foundation boards have responded quickly to adapt to the new standards of UPMIFA and demonstrate that they are actively engaged in decisions regarding underwater endowment spending. However, board processes could be strengthened in several areas. Only 56.5 percent reported that the board or a board committee has discussed spending from underwater funds since their state's enactment of UPMIFA.


RESOURCE LINK Access the full survey; see details on UPMIFA; and go to for additional resources.


NACUBO CONTACTS Sue Menditto, director, accounting policy, 202.861.2542, and Santiago Merea, research associate, 202.861.2596

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