Fact Checker here.
On October 18, 2007 President Brodhead delivered his "annual" address to the faculty focusing on Duke's international aspirations. He made a very astute observation:
"Duke’s international efforts to date have been somewhat opportunistic in character..."
In other words, Duke followed the money, and it lead to a splattering of international programs that lacked all focus. As Brodhead put it, "we are nearing a time when the university’s internationalization will need to become more concerted and more strategic."
Which brings us to this weekend's Trustee meeting and the sudden emergence of a city in China named Kunshan. I looked it up: the city makes all of the iPod Touches for the world, and the same local corporation turns out computers under the Toshiba, Dell, Fujitsu, and Hewlett-Packard labels. Other industries also thrive.
Yes, the city has set aside a parcel of land. And yes they are willing to put up a building, no cost to us, and even pay for electricity. This will be used first by Fuqua's international MBA program.
I hope the people in Kunshan got it straight: Duke will have MBA students there precisely nine days a year. Because that is what this five city circus requires.
And if Mr Brodhead ever gets around to delivering his "annual" address to the Faculty this academic year, I will be interested to see if he tags this venture as "opportunistic" or if he can define what strategy he pursues.
Time after time the Fuqua people talked Shanghai. Suddenly, that's not needed.
In other words, once again we are following the money, rather than sitting down and thinking through what all this means. And once again it looks as though Fuqua is just flailing with its dream for an MBA program located around the world.
Second, Fact Checker also wants to comment on a paragraph that is just slipped into the Chronicle story that demands a lot of focus:
We will be "....reassessing the University’s endowment spending rates, which are set at between 5.5 and 5.75 percent for the financial aid endowment and at 5 percent for the University’s general endowment."
In other words, using a complicated formula, each year Duke spends "five percent" of the value of its general endowment. That rule held for years
The 5 percent rule is fair enough -- this generation is entitled to use some of Duke's wealth, with the understanding that we will use only so much as to insure the perpetuity of this source of revenue.
The 5 percent rate was arrived at very carefully. It assumed we'd earn 8.5 percent on average, and we'd salt away 3.5 percent a year to protect the long term purchasing power of the endowment.
This division between the current generation and future generations must not be tinkered with behind closed doors, with only an oblique reference.
Already we have seen some of that occur. In the area of financial aid, Duke found its commitment to need-blind admissions needed far more than was at hand. So a year ago, we increased our spending from endowment sources by 28 percent! The formula for endowment related to financial aid was silently shifted to 5.75 percent.
Folks, that's huge. It means we're eating far more of the pie than we are morally entitled to, at the expense of future generations of Dukies.
As Fact Checker stated, Trustees should tamper with this only in full light. It is far more than what Trustee Chair Blue is quoted as saying, "to juggle things"
during a budget crisis.
The words, once again, are transparency and accountability. Dan Blue, let's do this in the sunlight.
One final point. And of course it is complicated too. In the world of endowments designed to last in perpetuity, you are not supposed to dip, ever, into the original gift, the principal. Ever. In some states, this is provided for by law.
And Blue is technically right that Duke has not dipped, as it spends 5 percent or 5.75 percent.
Loyal readers should understand, however, that in addition to its "permanently restricted endowment," Duke appears to have lodged some extra earnings from the endowment over the years in a separate categories called "temporarily restricted" and "funds functioning as endowment."
My reading of the rather occluded reports indicates we have indeed dipped into these two latter pools, which allows us to technically say we have not tampered with endowment. But only technically.
✔Another Fact Checker report is complete! Enjoy the holidays.