To the Editor:
Your recent article, “Unpleasant Surprises (The Chronicle, August 29), uncovers important but relatively unexplored aspects of the presidential search process — the amount and quality of financial data provided to candidates.
Occasionally, an institution may deliberately withhold or hide crucial financial information from candidates. More common are institutions that may provide only the most basic information. We know from a recent investigation that “some universities provide only minimal information to those with oversight, for instance handing trustees pie charts or high-level summaries rather than detailed budgets.” Why should a presidential candidate expect more?
My colleague, Judith Wilde, places part of the blame on search firms, mainly because they promote secrecy as the foundation for a successful search. One search consultant recommends that candidates review the institution’s tax returns, accreditation reports, and bond ratings. They are both right, although neither goes far enough.
At the very least, search firms should provide candidates with appropriate information — not just the budget documents provided to the governing board, but also audited financial statements (tax returns for private universities or tax returns for public university foundations) as well as the opportunity to meet with the institution’s CFO and chairs of the audit committees.
Years ago, I interviewed for, was offered, and accepted, a position as the executive director of a major national honorary society — some of the leading researchers in the world are among its members. The chair of the search committee was the organization’s treasurer. While he disclosed some of the society’s challenges, such as declining membership, he and other search committee members provided assurances that the organization was fiscally sound.
I wasn’t provided with an opportunity to talk with the outgoing executive director. While I did meet with the staff, it was in a group setting after they learned the board intended to offer me the position. I later learned they even were told not to “scare [me] off.”
The evening after I accepted the job, I received a call from the society’s financial officer. I was told that the organization had missed its last three mortgage payments and would have to find a way to refinance or be in default, risking foreclosure. I also learned that they needed to lay off several staff members and close programs or risk being unable to meet payroll in a matter of weeks. Finally, I was told that the treasurer had authorized “borrowing” from the endowment principal, including restricted gifts, to cover current expenses. I resigned less than a day after signing my contract.
In that sense I was no different from most candidates seeking a university presidency for the first time. While I had been an associate dean for many years and was responsible for managing a $20 million budget, and I could read a budget, I didn’t know how to read a CPA-prepared audited financial statement or know what a 990 was. A dean who manages a budget of $50 million, or even more, that is essentially presented as a fait accompli, has a very steep learning curve when it comes to understanding the finances of a billion-dollar institution.
While there may be unexpected surprises for a new president, perhaps we really should be surprised by their surprise.
James H. Finkelstein
Professor Emeritus of Public Policy
George Mason University