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Business and Policy Areas
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Interim Report Released on IRS College & University Compliance Project

May 7, 2010

An interim report issued by the Internal Revenue Service presents initial data from IRS questionnaires that went out to 400 colleges and universities in October 2008.  The IRS has followed up with audits at more than 30 of those institutions. The report summarizes data collected from institutions on activities and reporting of activities that may result in unrelated business income, endowment management and investment activities, executive compensation, and governance.

The IRS divided responding institutions into three broad categories based on size (small--less than 5,000 FTE students, medium-5,001 to 14,999, and large---15,000 or more). The report further distinguishes between private and public institutions for many questions.  Key findings in the summary of data include:

  • Less than half (48 percent) of small colleges and universities reported never filing a Form 990-T, compared with 29 percent for medium and 4 percent for large institutions.
  • Generally, the percentage of colleges and universities that indicated engaging in an activity was much higher than the percentage of organizations that reported including that activity on their Form 990-T.
  • For endowments, the average and median target spending rates reported by each size category was consistent - ranging from 4.7 percent to 5.0 percent.
  • The majority of colleges and universities reported that their endowment funds engaged in foreign investments.
  • More than 80 percent of institutions reported having conflict-of-interest policies covering members of the governing body and executive management.
  • Many organizations also reported conflict-of-interest policies for full-time faculty (ranging from 58 percent to 100 percent).
  • More than half of the private institutions reported using a procedure to satisfy the rebuttable presumption process for at least one of the six highest paid officials.
  • At large institutions, the highest paid employee other than an officer, director, trustee, or key employee was most often a sports coach.
  • 76 percent of small colleges and universities reported making their audited financial statements available to the public while 91percent of medium institutions and nearly all (97 percent) of the large college and universities reported doing so.

The report summarized the responses for most of the questions, and notes areas of further analysis and inquiry, including matching up information reported on the questionnaire with other filings by the institution, such as the Form 990-T.  The final report, unlikely to be published this year, will include further analysis as well as information gleaned from the college and university audits conducted as part of the project. 

Contact

Mary Bachinger
Director, Tax Policy
202.861.2581
E-mail


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