The IRS, as part of its focused effort to study key areas in the tax-exempt community, has undertaken a compliance project for colleges and universities. The project was launched in fall 2008 with the issuance of a Compliance Questionnaire which requested tax year 2006 information from approximately 400 public and private colleges and universities. “The information gathered will help us identify issues and areas that may need more outreach and education or further scrutiny,” said Douglas Shulman, IRS commissioner.
Given the scope and complexity of the IRS Compliance Questionnaire, the Association of Governing Boards of Universities and Colleges (AGB) and the National Association of College and University Business Officers (NACUBO) engaged Ernst & Young LLP (E&Y) to tabulate and analyze responses to the questionnaires submitted by higher education institutions to the IRS. NACUBO and AGB, along with the other sponsoring organizations, hope the Ernst & Young analysis will promote transparency and a greater understanding of the complex challenges facing colleges and universities.
Ernst & Young received copies of the submissions from 146 colleges and universities, over one-third of the institutions responding to the IRS questionnaire. This report presents the key findings from these responses on higher education governance and operations. Due to the length of the IRS questionnaire (33 pages, with over 1,500 possible responses), only certain key questions are analyzed in this report. Based on a review of the questionnaires submitted to E&Y by participating AGB and NACUBO members, it appears that, for the most part, the participating colleges and universities have adopted many governance best practices, provide strong oversight of endowment investments, set reasonable endowment spending rates, and follow a range of practices with regard to the realization and reporting of unrelated business income. Many of the participating private colleges and universities have meaningful policies for the review of executive compensation, but some have room for improvement.