When David Evans assumed the presidency of Southern Vermont College in 2015, he knew the job came with baggage.
The college’s enrollment was faltering, especially after its popular programs for nursing nearly lost accreditation in 2013. That same year, the college’s then-interim president was accused of embezzling nearly half-a-million dollars from the institution. The former official died by suicide soon after.
Still, Evans thought he was the kind of person who could turn around the situation at the small private college. “You’re a high achiever. You’ve been successful all along. You sort of get the idea that you can do this. You can make whatever it is that you need to make work, work,” Evans says. “And I was wrong.”
After years of struggling, Southern Vermont College closed in 2019.
Evans, who is now the departing president of American University in Bulgaria, acknowledges that he underestimated some of Southern Vermont’s problems. But there were pieces of the college’s financial picture that he knew nothing about when he accepted his previous presidency. It was only during his first months on the job that Evans says he learned about pending defaults on bond covenants and escalating legal bills, which hindered Southern Vermont’s ability to save itself.
There’s some things that I should have known — that’s my fault. And there are some things that I just simply wasn’t told.
And if he had known the full extent of the institution’s financial burdens at the outset, Evans says, he wouldn’t have taken the job. “There’s some things that I should have known — that’s my fault,” he says. “And there are some things that I just simply wasn’t told.”
Nearly one in three presidents reported that they didn’t receive a “full and accurate disclosure” of their institution’s financial condition during the search process, according to this year’s American College President survey, by the American Council on Education. That was a four percentage-point drop from 2016. The differences were even more stark among presidents of color, 63 percent of whom reported that they felt like they received a full disclosure of an institution’s finances, about six points lower than white presidents. Just 58.8 percent of Black female presidents reported they received a complete disclosure.
As more institutions face fiscal challenges amid declining enrollment and the loss of crucial Covid-relief funds, incoming leaders will increasingly be called on to make tough financial decisions in their new jobs. But the ACE data, along with several notable examples like Evans’s, point to a combination of structural and interpersonal dynamics that can create a damaging disconnection between institutions, trustees, search committees, consultants, and incoming presidents. The situation can create real problems: A recent Chronicle analysis of five years of presidential departures found that “financial concerns” were the third-most-common reason for the ending of a presidency, occurring in 16 percent of the cases examined.
Who and what are to blame for these breakdowns?
“This is not something where there’s an easy finger to point. I really think everybody is acting in good faith for the most part,” says Marjorie Hass, president of the Council of Independent Colleges. “So why is there so much, ‘I didn’t know’?’’
The problem is rooted in the norms and rhythms of the search process. Typically, little sensitive financial information is shared at the early stages of a search, says Melissa K. Trotta, associate managing principal of AGB Search, the executive-search arm of the Association of Governing Boards of Universities and Colleges. At the semifinalist level, candidates start to learn more, receiving materials like the summary of the operating budget, data on enrollment trends, advancement activity, and endowment performance. As institutions start to zero in on their top picks in the finalist stage, candidates have the chance to see more informative documents, such as audited financial statements.
Even so, confidentiality concerns remain top-of-mind for institutions throughout the process, and it influences the nature of these conversations, says Felecia Commodore, an associate professor at Old Dominion University. “There can be a fear that if we tell too much, we will not only lose out on talented candidates, but those talented candidates will, for lack of better word, tell our business all over the place,” she says. “There is a reputational risk that comes with sharing too much.”
No matter the stage in the process, Commodore, who studies presidential leadership and governing-board culture, says institutions are not likely to share certain information unless asked about it directly. As candidates make their way through the search process, though, the dynamics often shift. At the beginning, they often seek to appeal to the institution, but as they get closer to the top spot, they try to gauge whether the college is the right fit for them. Even then, however, they may shy away from asking tough questions.
If you are looking to get a job, you probably won’t want to start poking around during your interview process in ways that might make you not a candidate anymore.
“If you are looking to get a job,” Commodore says, “you probably won’t want to start poking around during your interview process in ways that might make you not a candidate anymore.”
The type of institution also plays a role in the level of financial disclosure. According to ACE’s analysis of its survey, which it completed at The Chronicle’s request, leaders of private, nonprofit institutions reported they did not feel as accurately informed about finances as their peers at public ones — amounting to a gap of nearly eight points between the two groups.
Such findings seem plausible to John W. Garland, a president emeritus of Ohio’s Central State University who now works as a search-firm consultant. While public universities are often required to share information openly, Garland has found that private institutions appear less willing to fully disclose what their finances look like, for a host of reasons.
A lack of institutional resources and of in-house expertise can obstruct those who work at smaller public and private colleges from seeing the full picture. Larry Ladd, an AGB Search consultant who has advised over 100 colleges and foundations on governance and finance, says people who work for such institutions also tend to look at their financial situation through rose-colored glasses. Their blinkered view then gets passed on to prospective presidents.
“Sometimes institutions don’t know how bad off they are,” Garland says.
A combination of these factors came into play at Finlandia University, a small liberal-arts college in Michigan’s rural Upper Peninsula that closed at the end of the academic year. Timothy Pinnow arrived to lead the university the summer before its closure. He quickly discovered that the balanced budget the board had promised him depended on 20-percent enrollment growth, when it had been losing students for years, The Chronicle reported.
But that is not what ultimately sank Finlandia. Almost the entire campus had been put up as collateral for loans taken out in the 1990s, and no current administrators knew about it. Despite several potential buyers and hopes that the cash from selling off land could sustain the college, Pinnow’s hands were tied.
“I’ve never seen anything like this,” Pinnow told The Chronicle. “It’s crazy.”
It can be difficult for candidates to adequately probe their prospective employers for sensitive financial details, even when warning signs are flashing. Evans, who was aware of Southern Vermont’s precarious situation going into the job, didn’t know that the college would default on its bond covenants mere months after he started. It cost Southern Vermont hundreds of thousands of dollars in legal fees — and diminished its reputation with donors and lenders. The persistent reputational damage of the college’s 2013 embezzlement scandal didn’t help matters, either, and the extent of the legal fees that were associated with it took Evans by surprise.
Looking back, he wishes he had asked more questions during the search process. Evans felt he had a good grasp of institutional finances and budgeting from his experience as vice president for academic affairs at Buena Vista University, in Storm Lake, Iowa. But Buena Vista was not in financial danger. Southern Vermont certainly was.
“On some level, you sort of don’t know what to ask — especially if you’re moving from an institution that’s in relatively good shape to an institution that has much more substantial challenges,” Evans says.
He also acknowledges he should have read deeper into some warning signs. For example, when Evans asked Southern Vermont’s director of development how many significant donors the college had — people who typically give $10,000 or more a year — the response was none. In hindsight, he says, it was an indication of weak donor confidence and the impact negative publicity was having on the institution.
“I thought about that one a lot,” Evans says, recalling the location of the conversation — in a car, driving around Bennington. “The fact that I remember this nine years later tells you something about it.”
He also remembers the prospectus he received during the search process, which was full of positive and promising notes about the college. When he showed the prospectus to his vice president for advancement a year and a half into his tenure, she was stunned.
“She said, ‘Well, this was kind of a fantasy.’”
In many ways, Ladd says, the factors that hamper a full exchange of information during presidential searches are not that different from those of a budding romance.
Each party in the developing relationship puts their best foot forward — emphasizing their triumphs with the goal of winning each other over. Candidates fall in love with institutions. Institutions fall in love with candidates. By the finalist stage, the parties are in a classic honeymoon phase. It can be beautiful. It can also be blinding.
It’s very easy for somebody who is swept up in the excitement of falling in love with an institution to sort of downplay in their mind or to mishear or to overlook some of these potential institutional warts or challenges.
Hass, the Council of Independent Colleges president, calls it the practice of “magical thinking” in the search process. Both sides can fall victim to it.
“It’s very easy for somebody who is swept up in the excitement of falling in love with an institution to sort of downplay in their mind or to mishear or to overlook some of these potential institutional warts or challenges,” Hass says.
Evans experienced this sensation, too. While he was happy in his job at Buena Vista, he felt it was time to move out of the town with a population of just over 11,000 people.
Southern Vermont College seemed to have everything he was searching for. He was excited to move closer to a metro area, with the campus located about 40 minutes from the center of Albany, and live in a beautiful part of the country. His wife, a professional costume designer, was drawn to the local arts community.
“There were things where I was not sufficiently apprised by the board. Absolutely. For sure,” he says. “But I think part of it was the idea of the sort of romance of going to Vermont.”
Another factor that can hamper full disclosure is who sits on search committees and how those searches operate. Hiring committees or governing boards might not disclose certain challenges because they themselves don’t realize the extent of the institution’s financial troubles. Board members may have a macro-level understanding of the finances, but they may be out of touch with the day-to-day details. They may also lack the expertise to understand more nuanced parts of the budget.
“Most boards are, but some boards are not as fully informed as they should be,” says Ladd.
That’s why boards often look to search firms to ensure a smooth introduction between candidates and institutions. As search-firm consultants, Ladd, Garland, and Trotta believe those in their industry take their responsibilities seriously and advocate for transparency with candidates.
“Search firms tend to try to fully inform candidates and encourage institutions to disclose as much of the finances as possible,” says Garland, the president emeritus. “This may not be something that the university does or institution does if they’re conducting an internal search.”
But Judith A. Wilde, a research professor at George Mason University who has written about presidential searches for The Chronicle, questioned how much support less-experienced applicants get from search firms. In particular, she worries that some firms’ advocacy for closed or secret searches hinders transparency during the hiring process and may harm candidates seeking answers to hard questions.
“Whenever you have that closed bid, not only is the search committee less likely to open up about issues,” Wilde says, “but it’s more difficult for the applicant to ask questions because you don’t have a broad audience with whom you can talk.”
It’s rare, say the consultants who spoke with The Chronicle, for information to be intentionally withheld. If, however, something important in the finances is hidden from a candidate, Garland says, it’s possible that one person, like a departing president or member of the administration, held too much information that others lacked access to.
“It’s in a desk drawer that’s not been opened, or a file that has not been gone through,” he says. “It’s not unusual.”
A notable example involved Missouri Western State University, a small public institution in Saint Joseph that declared financial exigency in March 2020. The president, Matthew Wilson, and a new chief financial officer, Darrell Morrison, had only just begun their jobs, along with a majority of the governing board.
Morrison told The Chronicle that he found discrepancies between what the previous administration reported to the Board of Governors and the university’s actual fiscal health. Instead of $12 million in cash and a $45-million budget, the university had $6 million in cash and a nearly $80-million operating budget, Morrison said. A series of realizations surrounding finances led university leaders to eliminate some 50 majors and cut about a quarter of the faculty.
Multiple faculty members pointed the finger at the previous administration. The former president, Robert Vartabedian, denied wrongdoing, writing in an op-ed that Wilson’s administration misinterpreted the numbers and exaggerated the university’s financial troubles.
During the search process, Wilson says he was told that the endowment had steadily grown, there were strong community donors, and the board chair was a CPA. In his first day on the job, Wilson learned a different story. Morrison, the CFO, said, “‘Matt, if I tell you what I discovered, you’re gonna hop in the car. You’re gonna go back to Ohio,’” Wilson recalls. “And I’m like, ‘It can’t be that bad.’ And he’s like, ‘No, it’s probably even worse.’”
Wilson says he generally doesn’t shy away from challenges. Prior to Missouri Western, he assumed the presidency at the University of Akron, where he took a budget that had a substantial deficit and turned it into one with a healthy surplus in a year. At his current post as president of Temple University in Japan, he led the campus through another financial storm as the pandemic strained enrollment.
But it’s different, he says, being blindsided by financial challenges, like he was at Missouri Western. “If you know what you’re getting into, that’s one thing,” he says. “If not, it is a different beast.”
Despite the many ways that communication can break down and disclosure can be diminished during a president’s recruitment, there are steps all parties can take to improve the situation. One is nondisclosure agreements. In her experience at AGB Search, Trotta has seen the practice work well for universities that want to divulge more information while protecting their confidential data.
“Candidates,” she says, “are willing to do that, knowing that they would not want to jeopardize the institution in any way.”
Another fix is including chief financial officers in the search process. While they are rarely a part of search committees, Hass says their addition can illuminate financial conditions that no other board or hiring committee member can.
When she was in the hiring process to become president of Austin College, Hass was able to spend significant time with the CFO and saw firsthand how much candidates can learn from what she called a “heart to heart.”
“I felt like I was able to come in understanding some things that I wouldn’t have if I was just perusing the audited financials,” she says.
Better fiscal education for boards can also make a difference. While board members may have business backgrounds, they may not understand the politics, trade-offs, and values that characterize higher-education budgeting. And prospective presidents may have a background as a provost or dean but not be fully conversant with the intricacies of nonprofit accounting. Commodore, the Old Dominion associate professor, says better education for future presidents should start with more courses in doctoral and masters programs.
Knowing what to ask, and how to ask it, can help, too. Most finalists see audited financial reports but only scratch the surface when analyzing the numbers.
For example, many candidates look simply at the size of the endowment. Hass says it’s just as important to understand its structure and makeup — how much of the money is restricted, whether the funds are invested in stable stocks and bonds or in alternative vehicles with more complicated payout structures. She says the same principles apply to understanding debt structures, discretionary versus nondiscretionary spending, and other nuggets of financial information that might be buried in audited reports.
“Those are sort of details that can have a really big impact on how much flexibility you have as a president,” Hass says, “but that might not come up in the course of the conversations that you have.”
When interviewing with private nonprofit colleges, Ladd says, candidates should examine the institutions’ federal tax forms, or 990s, to see if they have run deficits and, if so, to look for clues about why.
Ladd also advises candidates to request the institution’s most recent accreditation report and the accreditor’s most recent determination. While the university’s report provides insight into their on-the-ground finances, the accreditor’s independent evaluation can be an equally valuable resource, though these, too, may miss important details. Bond-rating agencies offer another useful outside look at institutions’ finances. Colleges with negative outlooks should be a “red flag” for future presidents to ask more questions, Ladd says.
While barriers to providing accurate financial information — and the incentives to hide it — persist, Trotta believes the stigma surrounding financial struggles in higher education has decreased as more institutions face declining enrollment and shrinking budgets. Transparent communication on financial issues helps colleges find the best candidate, one who is eager to take on challenges.
The goal in a search is to match the institution with the right candidate. The success of that match is improved the more that each party knows going into the agreement.
“The worst-case scenario,” Trotta says, “is when things don’t work out, and there’s quick turnover and one party or another, or both, feels like we really didn’t make the right match when they’ve done the search.”
Plus, Trotta says, if a search fails, “Who wants to go through all of that again?”
