The profit in being a not for profit school
This is a list of ten Southern California private schools that I selected from a list obtained from the California Association of Independent School's website. The search criteria was "West Los Angeles" although they cover a wider area.
They are:
Each of these schools is a not for profit organization, recognized by the Internal Revenue Service as such under the provisions of Section 501(c)(3) of the Internal Revenue Code. Each of them does an annual fundraising drive, commonly known as "Annual Giving" which is marketed as necessary to close the "gap." That gap refers to the difference between the amount of tuition these schools charge and the amount that they claim it costs them to provide the outstanding education they provide to their students. My question is how real is the gap given the surpluses these schools recognize year after year?
There is no denying that the education provided is outstanding. The question is, do they deserve to be labeled as "not for profit" institutions, given certain financial factors. The notion that not for profits need to break even is a myth. But when they run million dollar surpluses year in and year out, one begins to wonder why. Over the years 2012 through 2014, only one of these schools had a deficit and that was for one year only. The average annual surplus of these schools during that period was:
2012 - $3,771,152
2013 - $4,271,705
2014 - $4,576,092
The range of deficits/surpluses ran the gamut from the one deficit of -$586458 to a surplus of $15,598,509. Harvard-Westlake's annual average surplus during that period was $9,627,071, with Crossroads running a close second at $7,579,744.
If there is a gap between the cost of tuition and the cost of providing education, are these surpluses the result of fundraising being much more successful each and every year than called for in the initial budget? I don't believe so. What's happening is that the amount of that "gap" is being overstated to enable these surpluses to be created. That's fine, if that was advertised in the annual giving campaign. It isn't.
Then there is the question of the compensation of those who run these schools. During that same three year period, the average total compensation of the person at the top of the organization chart at these schools was:
2012 - $482,453
2013 - $595,335
2014 - $548,445
The reason for the "bubble" in the 2013 numbers is that the head of Windward received total compensation that year of $1,479,866. Compare that to the total compensation of the President of the University of Southern California, which was $1,942,935 that same year. USC had a budget that year in excess of $4 billion and over 19,000 employees, serving over 40,000 students. Windward's enrollment is less than 1,000 students and I'm certain they have less than 300 employees in all.
I know that running a private school is not an easy task, and these schools have to pay top salaries to get the top people into those corner offices. But in some cases, the compensation seems to be excessive, especially since there doesn't seem to be any correlation between compensation and the size and scope of the institution.
And without going into detail, it is worth noting that the average total compensation of the five most highly compensated employees at these ten schools for 2014 was over $300,000 per year.
I'm not advocating these schools lose their not for profit status. They are doing incredibly important work. I'm just a bit cynical about that "gap" and what causes it. How much smaller would that gap be each year if these institutions weren't running multi-million dollar surpluses? That's my question
They are:
Archer School for Girls
Brentwood School
Buckley School
Chadwick School
Crossroads School for Arts and Sciences
Harvard-Westlake School
Marlborough School
Milken Community School
Wildwood School
Windward School
Each of these schools is a not for profit organization, recognized by the Internal Revenue Service as such under the provisions of Section 501(c)(3) of the Internal Revenue Code. Each of them does an annual fundraising drive, commonly known as "Annual Giving" which is marketed as necessary to close the "gap." That gap refers to the difference between the amount of tuition these schools charge and the amount that they claim it costs them to provide the outstanding education they provide to their students. My question is how real is the gap given the surpluses these schools recognize year after year?
There is no denying that the education provided is outstanding. The question is, do they deserve to be labeled as "not for profit" institutions, given certain financial factors. The notion that not for profits need to break even is a myth. But when they run million dollar surpluses year in and year out, one begins to wonder why. Over the years 2012 through 2014, only one of these schools had a deficit and that was for one year only. The average annual surplus of these schools during that period was:
2012 - $3,771,152
2013 - $4,271,705
2014 - $4,576,092
The range of deficits/surpluses ran the gamut from the one deficit of -$586458 to a surplus of $15,598,509. Harvard-Westlake's annual average surplus during that period was $9,627,071, with Crossroads running a close second at $7,579,744.
If there is a gap between the cost of tuition and the cost of providing education, are these surpluses the result of fundraising being much more successful each and every year than called for in the initial budget? I don't believe so. What's happening is that the amount of that "gap" is being overstated to enable these surpluses to be created. That's fine, if that was advertised in the annual giving campaign. It isn't.
Then there is the question of the compensation of those who run these schools. During that same three year period, the average total compensation of the person at the top of the organization chart at these schools was:
2012 - $482,453
2013 - $595,335
2014 - $548,445
The reason for the "bubble" in the 2013 numbers is that the head of Windward received total compensation that year of $1,479,866. Compare that to the total compensation of the President of the University of Southern California, which was $1,942,935 that same year. USC had a budget that year in excess of $4 billion and over 19,000 employees, serving over 40,000 students. Windward's enrollment is less than 1,000 students and I'm certain they have less than 300 employees in all.
I know that running a private school is not an easy task, and these schools have to pay top salaries to get the top people into those corner offices. But in some cases, the compensation seems to be excessive, especially since there doesn't seem to be any correlation between compensation and the size and scope of the institution.
And without going into detail, it is worth noting that the average total compensation of the five most highly compensated employees at these ten schools for 2014 was over $300,000 per year.
I'm not advocating these schools lose their not for profit status. They are doing incredibly important work. I'm just a bit cynical about that "gap" and what causes it. How much smaller would that gap be each year if these institutions weren't running multi-million dollar surpluses? That's my question
posted by me at 2:34 PM
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