University assets

Here’s an interesting news item from Bloomberg. American university endowments are faring well again as investments are once more producing much better returns. That’s not what I am drawing attention to, however. The article also tells us that the 835 institutions surveyed between them hold $448.6 billion of assets. This means that the average US university has reserves of some $537 million. Wrapped up in that is Harvard’s mouth-watering  $32.7 billion, a sum that would allow it to bail out Greece if it wished.

We should not however sit around in amazement, those of us in other countries need to do something to build up viable reserves. University endowments are not about creating luxury in higher education, they are about creating an ability to invest in real excellence, and also to provide proper supports for students who not so well off. US graduates have long accepted that supporting their university is one of the things that you do, and this acceptance allowed American universities to become truly world-beating. We need to develop the same habits. We need to create the kind of reserves that allow universities to secure their future and to avoid that constant knife-edge budgeting that afflicts most universities across the world. We need our universities to be really excellent and to invest in the future of all parts of society.

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The answer to higher education problems: philanthropy?

At the Global Irish Economic Forum conducted over recent days in Dublin one of the topics for discussion was the state of Irish higher education. According to a report in the Examiner newspaper, Taoiseach (Prime Minister) Enda Kenny suggested in reply to a comment (that US universities rely on private donations for success) that the Irish government will put in  place a structured and transparent framework for philanthropic donations.

It should be emphasised that government support for philanthropy is welcome, but it is not without risk. I remember a debate in the Irish parliament about six years ago on university funding in which one member after another got up to suggest that private donations were the answer to all the funding problems. They are not. In the first place, almost no philanthropist will make donations designed to compensate for government funding cuts. More generally, donations are typically made to support capital investment, or perhaps make available support for disadvantaged students – but never to cover shortfalls in revenue for day to day spending. In my experience very few politicians understand that.

Philanthropy is playing – or certainly should be playing – a major role in allowing universities to develop themselves and to pursue innovative ambitions. But it is not a source of revenue to cover operating costs. Unless this is understood, fundraising will always fall short of its real potential.

Focus on philanthropy

One possible fall-out from the Libyan uprising and the resignation of Sir Howard Davies as Director of the London School of Economics (which I covered in the previous post) could be a new debate about the role and impact of philanthropy in building up universities. The LSE accepted donations from the Gaddafi régime, as is now known, but in some of the emerging discussion about this some are starting to ask whether other donations, particularly those from the Islamic world, are also suspect. An example given has been the Said Business School in Oxford University, which was set up on the back of a major donation provided by Saudi businessman and arms dealer Wafic Said.

Philanthropy, like all other activities that affect or influence higher education, must of course be approached with high ethical standards. But it would be ludicrous to suggest, as some appear to be prepared to do, that all private donations should be seen as suspect. DCU, the university of which I was President for 10 years until last July, is now a highly respected university which has come from nowhere (as a very young institution) to enter the global rankings, where it sits alongside and in some cases out-performs much older traditional universities. This was possible because of the hugely generous approach of some major donors, chief amongst them being Irish-American philanthropist Chuck Feeney. The support of these donors allowed the university to build state-of-the-art facilities and to equip lecture spaces and laboratories to the highest standards. If we had waited for government support to achieve this, we would still be a poorly equipped minor college.

Of course universities need to maintain high standards of ethics and probity when they seek out and accept private donations. Of course they must ensure that donors cannot influence the outputs of research and the integrity of scholarship and teaching. But philanthropy properly managed has a vital role to play in university development and renewal, and moreover represents an important bond between universities and some of their graduates. Particularly in these times, this is not something we should abandon.

Paying for tutorials

As English universities face up to what looks like a very challenging funding environment, Oxford University has disclosed that it has raised £1 billion from alumni and supporters and that it will use some of  this money to fund its traditional one-on-one tutorial system. While the university has not (as far as I know) disclosed what these tutorials cost on an annual basis, the Vice-Chancellor, Professor Andrew Hamilton, has indicated that the sum raised in its philanthropic campaign (while a European record) is not enough and more will have to be found to keep its traditional teaching methods alive.

While small group teaching has been at the heart of the British (and Irish) higher education system, most universities have long had to abandon it or restrict it for resourcing reasons, and realistically it will prove more and more difficult to sustain it as an idea in the light of very different funding principles now affecting the sector. While I have believed that small group teaching is highly desirable where it is affordable, I have long had doubts about Oxford’s one-on-one tutorials. For me the benefit of small groups is that they are small enough to encourage participation, but also large enough (i.e. more than one) to allow for student interaction with each other, which I believe to be a hugely important part of the learning process. I have moreover heard many times from Oxford graduates about the limitations of their tutorials, particularly where the tutor was struggling with an excessive sense of ego.

In any case, before any politician takes from this the lesson that philanthropy is the answer to under-funding, let me say that I also believe Oxford to be wrong is suggesting that donations can subsidise the recurrent costs of teaching; apart from being an unlikely prospect for most universities, I also think it is wrong in principle; philanthropy should be for capital programmes and start-up projects.

Of course I would congratulate Oxford on the success of its fundraising campaign. But I might just suggest to its donors, if any of them are listening, that there may be better value for money in some other institutions. £1 billion is a hell of a lot of money to need for tutorials.

Making philanthropy work for universities

As the debate about higher education funding and the return (or not) of tuition fees gathered pace in Ireland, most (but not all) politicians adopted the favoured posture of head in the sand: they didn’t want tuition fees in case this brought out hostile middle class voters, and they couldn’t offer much (or any) more public funding. So they tended to offer make-believe solutions: sometimes the prospect of higher taxes for the wealthy to provide funding (which can never be delivered, as they well know, because no tax revenues can be ringfenced for a particular purpose), sometimes the prospect of philanthropy to make up for missing public funds.

The latter ‘idea’ is particularly silly. No private donor in their right mind will donate funds to a university to compensate for declining taxpayer support, nor indeed will they give money to cover a deficit in recurrent spending. The major aim of a philanthropic donor will be to provide capital support for building projects or for pump priming a new initiative. To transfer responsibility for running costs from the state to private donors is an impossible prospect. The day to day spending of a university needs to be met from public funding, tuition fees or commercial activities; there is no other option.

However, there is a major role for philanthropy which we are only beginning to to address in this part of the world. The key ingredients of successful fundraising include engaging the institution’s alumni, ensuring that they still feel part of the university community and encouraging them in the habit of annual giving, however small in individual cases. In addition, institutions need to network with potential individual donors or trust funds and foundations, and to work with them in developing aims and objectives with which they may want to be associated.

We are, as is well known, far behind the United States in making all this happen. The culture of philanthropy which pervades the American culture – the idea of ‘giving something back’ – hasn’t yet established itself here in the same way. But at least there has been some progress. The University of Cambridge has just announced that it has been successful in raising more than £1 billion in its most recent campaign, and this is an important milestone on this side of the Atlantic. Of course Cambridge has greater opportunities to achieve this than most. but its success should give heart to others to work with alumni and friends to secure greater support.

The government and other stakeholders need to understand that philanthropy is not the answer to funding shortfalls. But the universities on the other hand need to see philanthropy as a key ingredient in the advancement of the institution and the pursuit of its objectives. And all of us who are graduates of a university need to adopt the idea that we still owe them our support, not least because the next generations of students will be the beneficiaries.

Philanthropic downturn

It is well known that Ireland’s university sector would not be where it is in terms of its international standing without the contribution made by philanthropy; in particular, without the very major contribution made so generously by Chuck Feeney through his philanthropic vehicle, Atlantic Philanthropies, and some of the other significant donors from Ireland and overseas.

For all that, Ireland still lags far behind the United States in particular in terms of fundraising and donations. Some Irish universities are only just beginning to tap the potential of their alumni, and indeed it is important that relations with alumni are built up in a broader and more mutual context than just fundraising. And more generally, many of those in Ireland who have recently acquired wealth are still reluctant to distribute some of this to good causes, and as a society we have not yet properly emphasised the importance of supporting the causes which may help to secure a better future for the country. We are generous donors to the needs of the international community when there is a crisis (and long may this continue), but we are bad at ‘paying something back’ to help build a better future at home.

Nevertheless, it is important to see the benefits of philanthropy in higher education in the correct context. Three or so years ago when the debate about tuition fees in Ireland began to heat up, a few politicians who were opposing the imposition of fees but who accepted that higher education was under-funded argued that the deficit could be made up through fundraising. This is nonsense, because almost no donor will ever give money to compensate for a deficit in a university’s running costs. And in any case, right now the recession is taking its toll on philanthropy also, and even in the US, college fundraising campaigns have seen a substantial drop in their success rates over the past year as has been reported recently by the Chronicle of Higher Education. The trend, from a much lower base, is bound to be similar in Ireland.

If right now we cannot depend on philanthropic donations to solve all our financial problems, we can however take steps to ensure that in the future it can be an important aspect of our development plans and our ability to compete internationally. We can ensure that the external environment is right, and in particular that the tax regime supports donors. We can ensure that we develop the right relationships with our alumni and with potential supporters. We can ensure that we have charitable foundations or development offices that are properly established to develop the agenda. We can ensure that we have proper capital plans for our institutions in which there are opportunities for fundraising and giving. We can ensure that we have a framework of good practice and ethics that will reassure all those who work with us that fundraising is pursued in the right way and for the right reasons. And we can try to ensure that there is a national mood that emphasises the value of philanthropy.