Systemic Stress: Is the UT Foundation Foundering?

In 2011, facing a steep decline in state appropriations, the University of Tennessee launched a major effort to boost private donations by centralizing its fund-raising efforts.

Some 60 development officers who had been attached to the university’s several campuses were transferred to a UT Foundation that had been little more than a shell. While many universities domicile their fund-raisers in a foundation, UT’s method for doing so by leasing the development officers to the unit was unusual, to say the least.

In one of his early missions after taking the UT system helm, President Joe DiPietro guided a bill through the state Legislature authorizing the lease arrangement. An Employee Services Agreement with the university stipulated that the foundation “shall at all times have the exclusive right to direct and control” the leased employees “not only as to the result to be accomplished but also as to the task and means by which the result is to be accomplished.”

To head up this authoritarian regime, UT brought in Johnnie Ray, who headed an Arizona State University foundation that had been fraught with controversy and who bore the same name as the legendary singer whose most famous song was “Cry.”

And cry is what many on the campus figuratively began to do under the new scheme of things that ran counter to UT’s campus-centric culture and academic ethos of collaboration. A big part of Ray’s mandate was to double the number of development officers over time in the belief on the part of some trustees that this would double UT’s harvest of donations to some $300 million a year. But budgetary as well as relationship constraints got in the way, and the increases didn’t materialize. Instead, fund-raising actually fell from the more than $175 million in fiscal year 2010 to less than $150 million in each of the next three fiscal years.

In September 2013, Ray resigned after less than two years on the job, and a move back to a more decentralized modus operandi gained momentum. The foundation’s outgoing director of communications, Tiffany Carpenter, says development officers now have “solid reporting lines” to the chancellors—and in some cases deans—on their campuses and a “dotted line” to the foundation.

The foundation has also lost some of the sources of revenue that were intended to support it. Until recently, it has been receiving an annual 1 percent slice of the university’s endowment. But in the fiscal year that began July 1, this $6.7 million revenue stream is being allocated to the campuses based on their respective shares of the endowment. The foundation also gets the interest income on the university’s fund balances and based on historic rate levels, over $3 million in such revenue was originally projected for the current fiscal year. But ever since the global financial meltdown in 2008, short-term interest rates have hovered near zero, and only $300,000 of interest income is now expected.

Budget cuts have included eliminating the position of chief operating officer from which Bruce Downsbrough was fired a year ago after being charged with, and subsequently convicted of possessing, child pornography. Three communications jobs, including Carpenter’s, are also being eliminated, and the university’s longtime director of alumni affairs, Lofton Stuart, is now doubling as acting president of the foundation.

A UT trustee says a big part of the affable Stuart’s job has been “fence mending.” And if fund-raising results for the fiscal year just ended are any indicator, he’s done a good job. Donations rose to a record $180 million from $148 million the preceding year. Stuart is quick to attribute the increase to “Really great work by our campuses and institutes.”

To be sure, the foundation still has a role to play in supporting fund-raising efforts that continue to represent an important source of prospective revenue growth. Donor record keeping, accounting, and other “back office” functions are most efficiently provided on a system-wide basis as is expertise on complex issues surrounding the trusts and estates that loom large in university fund-raising. And if UT is to conduct another system-wide campaign akin to the one that yielded $1.3 billion between 2003 and 2010, it will need to be coordinated.

With Stuart due to retire next year, the search for a new foundation president is to get underway within the next few months. Just as with the search that led to DiPietro’s elevation to the UT presidency in 2010 from his previous post as chancellor of the Institute of Agriculture, this one is likely to place a premium on someone who knows his or her way around the university.

An obvious and compelling candidate would be Keith Carver, who is presently DiPietro’s executive assistant. Carver has served as a development officer at both UT’s Martin campus and its Health Science Center in Memphis, which gives him perspective on the totality of the university’s fund-raising needs.

Importantly, and almost ironically, his UT doctoral dissertation was entitled, “A Study of Presidential Derailment in Public Research Universities.” Without naming them, two of his case studies chronicled the failures of prior UT presidents, Wade Gilley and John Shumaker. Along with other flaws, he identified “problems with interpersonal relations” as a major one that led to their downfall—one that bears some similarities to Ray’s abrupt departure. These are mistakes that Carver will certainly avoid, and a more collaborative foundation could become a more successful one.

 


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