10/8 In response to a Letter to the Editor

The lesson here (in the substance of the Chronicle report that is the subject of Letter to the Editor) is that the financial statements that Duke University makes available to the public -- including Chronicle reporters and alumni -- are confusing and not very helpful in finding out what is happening.

For example, suppose you are concerned about the balance between academics and athletics, and want to examine the out-sized growth of the athletics budget. There is not a single financial document available that uses the word "athletics."

Suppose you want to determine how much Duke is devoting to undergraduate need-based financial aid. You might find this needle in a haystack, but Fact Checker wishes you good luck, because there is a welter of labels and statistics. You will find some numbers that include merit scholarships, some that include athletic scholarships, and in some places the budget counts work that students do as financial aid. My father used to call this pay.

We also have a bug-a-boo mentioned by Mr. Schoenfeld. Sometimes Duke counts a gift when it is pledged, yet in other reports the gift is not included until it is actually forked over. There's even a budget line to write off pledges that are never received.

To top it all off, our biggest donor, The Duke Endowment, uses a different fiscal year than the university so it is impossible to trace a lot of money.

Fact Checker is thus not surprised that the Chronicle had an error -- a word Schoenfeld cannot bring himself to use, which is very revealing. The amount of private support for Duke in its last fiscal year was off, but not off the cliff as reported.

Why there's even confusion over what private support is, and from year to year the concept of "gifts" and "charitable gifts" has lived on quicksand. Not so long ago, if a pharmaceutical company wanted to test a new drug and contracted with Duke Medicine to do the work, this University counted that as a gift!

Mr. Schoenfeld has gone particularly wrong in two respects:

First, with respect to The Duke Endowment. All its beneficiaries have been told that current pledges will be honored, but no new contributions will be made. We do not know if that includes the money that accrues to Duke University automatically under James B Duke's Indenture, or if it only means special gifts like $75 million for the Financial Aid Initiative, $15 million for Duke Engage, and $50 million for a new Medical School education building.

When the impact of this hits Duke's total of contributions -- and it has not yet at all -- we'll really be in trouble.

And second, Mr Schoenfeld goes particularly wrong to assert that Duke's gift problems stem from the financial meltdown.

Fellow Dukies, there were plenty of signals of trouble brewing well before Wall Street imploded.

First, the Annual Fund (alumni etc). For several decades, the Annual Fund was able to boast that it not only raised a record amount of money each year -- but it was also able to exceed ambitious goals every year. Starting in 2004-05 (lacrosse anyone??) the amount of money raised began to go flat, not keeping up with inflation even. Each year, the Annual Fund contributed a smaller percentage of the money that Duke needs, with less and less impact on the budget.

In response, the alumni department set goals that were more and more modest.

In 2007-08, before the Wall Street crash, we hit a wall: the amount of money raised in the year ending June 30, 2008 (Lehman Brothers bankruptcy that started the Wall Street crash: Sept 15, 2008) through the Annual Fund actually was less than the year before! (Psst, that's a dirty little secret just between you and Fact Checker. The leaders of the Annual Fund sent out a letter thanking everyone for their generosity, and there was never any press release nor information on this provided to alumni).

Now here's another dirty secret: Most of the Annual Fund's biggest donors are not alumni at all, but parents of currently enrolled students. In fact there has been some considerable belief that these parents were in effect buying a seat at Duke for their marginal kids -- just like the Wall St Journal reported.

Duke got wind of attempts to do a match to prove this -- and guess what. Every year for decades Duke had published a list of major donors with their Duke affiliation and sent it to all alumni -- so parents of current students stood out like a sore thumb. Kaboom. Starting last year, Duke did not publish the affiliations anymore. It won't make this information available on the internet. Nor in a .pdf file.

Second -- You want some more evidence: look at the class gifts from alumni from the reunion classes -- that is, the classes that graduated five, ten, 15, 20 etc years ago. The gifts were shrinking -- again before Wall Street's meltdown.

In 2007-08, the last year that Fact Checker can obtain numbers, here's the Reunion Gift story:

a) not one class set a reunion record in contributions.

b) 4 of 10 classes did not meet their low-balled goal for the Annual Fund. 4 of 10 did not meet their combined low-balled goal for their Reunion Gift plus Annual Fund gift.

c) Looking at schools we like to identify with, according to information from President Tilghman herself at Princeton, 75.2 percent of the people in the class in held its first reunion sent in contributions. That's 75.2 percent of everyone, whether they attended or not. At Duke, it was 27 percent.

Again, from President Tilghman, 73.7 percent of the class returning for its second reunion sent in contributions while at Duke it was 25 percent.
In fairness, and Fact Checker is fair, I must add that Princeton's reunions do not match precisely the five year schedules at Duke.

d) all of the Duke numbers above for reunion gifts have eroded year by year -- well before the Wall St meltdown that our current Administration likes to blame.

Third - to obtain more evidence that gifts were falling off well before the Wall Street meltdown, Fact Checker analyzed the Financial Aid Initiative.

(Oh first a digression. The Initiative may have raked in $308.5 million, but Fact Checker calculates there's only about $220 million left because Duke Management Co lost the rest.)

Having gone through its one year "quiet" phase and two of three years in the public phase, it was obvious that that contributions were languishing. If you drew a straight line on a graph through the remaining months, you missed the goal. If you mentioned this to someone in the Administration, you were blasted as disloyal. I was.

The "development" people launched furious fund-raising efforts and personal pleas, but even so Brodhead suffered a great embarassment: while his signature effort was oversubscribed because some sectors like athletics unexpectedly raised more money than anticipated, his main goal -- undergraduate need based aid -- still needed about $8 million.

Here is what is most telling. Not one of the big boys on the Board of Trustees or any other major donor stepped forward to rescue him. He did not need cash; all he needed was a pledge to be paid over five years, and there was only silence. Morale: contributions were in trouble long before the Wall St crash.

And a final little dirty secret: while some of our Trustees have chipped in from time to time magnanimously as they were expected, as a whole the Trustees have not provided the same level of leadership in giving as at other schools. And behind the scenes in Allen Building, there is an occasional whisper too about the Duke family's not pulling its weight any longer. That's current members, not money from the foundations of past generations.

Fact Checker believes that only if we face up honestly to the source of the problem can we solve it. The reason Princeton's numbers are so much better than ours is that students and everyone else there are given the opportunity for involvement -- provided with information and encouragement to join in the governance and future of the school.

If there is any stakeholder at Duke - student, parent, faculty, employee or alumnus -- who feels that stimulus at Duke, please write Fact Checker immediately.

Thanks again for reading.