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Are Small Colleges a Safe Philanthropic Bet?

University campus

A Boston Globe article on November 19, 2019 “Under pressure from colleges, advising company yanks report on their financial health” addresses an important topic few in higher education want to discuss.

With a recent spat of college closures, mergers and acquisitions, a college advisory services firm called Edmit was about to publish its report that identified 200 US colleges that could run out of money in the next decade. A threat of a law suit by Utica College stopped the release of the report.

Utica College and others questioned the criteria used to make these judgements and claimed it did not include other key criteria. What I find of keen interest is that fundraising prowess is not addressed at all in any of the key criteria that were used or recommended to forecast the financial health and stability and long-term viability of a college.

Advancement is a Key Indicator

A few things are at play here, whether or not the findings of this report had integrity. The following were not apparently considered by Edmit and critics alike:

  • The size of the college endowment.
  • Annual contribution income and its relationship to operating revenue and debt.
  • The size of the advancement office and the cost to raise a dollar.
  • The percentage of alumni who contribute.
  • The estimated value of the major donor and alumni pipeline.

In an era when Moody’s, Standard & Poor’s and Fitch Group all consider the integrity and success of fundraising when assigning its credit rating on nonprofit hospital systems, the same consideration should be included in determining the long-term viability of colleges.

It is not a stretch to say that advancement office success is a proxy indicator of the strength of college leadership, the financial success of alumni, the quality of faculty and the value the college represents for present day philanthropic investment.

Tough Decisions

These should also be the sort of variables potential donors must consider when making a gift – large and small – to their small college alma mater. In the present-day environment when the higher education paradigm is increasingly fluid, and scale and innovation is increasingly aligned with long-term viability – decisions by donors and rising freshmen are more complex and fraught than ever before.

Your takes:

  1. Things we always took for granted in higher education should be revisited.
  2. Legacy institutions of all stripes must continue to evolve and attract strong and smart leadership to survive.
  3. Do not be complacent with “brand fog” and assume that a storied institution has what it takes to stay relevant and successful.

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