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Open to public inspection

With relatively little fanfare, Duke submitted its Form 990 to the IRS and made it available to the public over the summer. This extremely important document details Duke’s financial activities over the most recent tax year and, more importantly, justifies to the U.S. government and to the public why Duke University should retain its non-profit, tax-exempt designation. By law, the public is privy to these filings and the University is obliged to turn over copies to anyone who requests them.

At the time the 990 was released, The Chronicle carried a story that focused on one small section—the compensation of the five highest-paid individuals at Duke. Aside from the realization that Coach K made the most money that year and that the second-highest paid individual (netting $1.2 million in salary and benefits) hasn’t worked at Duke in five years, not much else was detailed. This 65-page document, however, contains information about nearly all of the University’s operations and includes several crucial revelations about its financial activities and status.

The most important of those revelations is that, between tuition income, investment returns, sales and other sources of revenue, Duke operated with a net excess of $291.3 million. Having brought in only $241.6 million in tuition after financial aid, Duke essentially profited more than it charged its students tuition. Even when considering that Duke has a reasonable desire to hedge some money to protect against inflation, it could have easily tripled the $50 million financial aid budget and still made money in real terms.

Duke’s gain, while greater than in some other years, was not extraordinary. In the 2000 fiscal year, Duke earned $980 million on the endowment alone. Duke currently holds $3.618 billion in investments and securities, and $6.195 billion in total assets, but spends less than 1 percent of the value of those assets on student aid per year. In the midst of all this, the administration is undertaking a new campaign to further endow student aid and not fund it through the operating budget. How much this will actually increase financial aid remains to be seen.

But aside from tuition and financial aid, the 990 reinforces the fact that Duke milks its students and their parents through other ways as well. Duke sold $23 million worth of food and merchandise for $60.1 million, representing a gross profit of 165 percent. Because of both inefficiency and profit-gouging, students pay inflated prices for everything from food to housing to cable television. All of these services are buoyed by the requirements of students to both live on campus and purchase a meal plan. As dean of Residence Life, Eddie Hull put it in a letter to RAs, “occupancy drives the budget and it is important that we are full!”

Given that 4,552 students are currently forced to pay rent and food expenses to Duke, it is not surprising that Duke claimed a total of $63.3 million in revenue from “Ancillary Student Services.” Last year, RLHS and Auxiliary Services refused to disclose their budgets and other financial information that would have indicated how much profit (or loss) they incurred. However, confidential Auxiliary Services budgets indicate that several years ago, Duke was banking, in some form or another, anywhere from $500 to $1,500 per student per year in housing revenue alone.

But, while students and their families shell out $100,000 or more to attend this school, our administrators seem to fare relatively well. The 990 detailed an $189,000 interest-free loan granted in 2001 to an “officer” of the University. This “officer,” according to an e-mail from Senior Vice President for Government Affairs and Public Relations John Burness, is University Counsel David Adcock. The loan was originally made (and is now being forgiven) as incentive for him to stay on. As he chose to retire at the end of this year, Adcock will only have to pay back $39,000 of the original balance. Under the 2002 Sarbanes-Oxley Act, it is now unlawful for a corporation to extend “a personal loan to or for any director or executive officer (or equivalent thereof).”

Thanks to the requirements of Sarbanes-Oxley and other non-profit disclosure requirements, we do see a remarkable picture of our University in the pages of the 990. Duke has an operating budget greater than the gross domestic product of French Polynesia and, based on its IRS filings, seems to have simply turned into an equity firm that just happens to fund a University. And as we are all heavily invested in this University, either financially or otherwise, I encourage every Duke student to examine this important document for themselves. It is after all, by law, “open to public inspection.”

http://www.duke.edu/~egw4/financials/

Elliott Wolf is a Trinity sophomore. His column appears every other Tuesday.

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