Tuesday, January 12, 2010

IRS Auditing Harvard and 39 Other Colleges and Universities

According to a report in Bloomber news, Harvard is one of 40 colleges and universities whose backsides the IRS will crawl into and look around.  In all the cases, we will probably find a few minor adjustments relating to UBTI but that's about it, I betcha:  

The audit “is just now beginning,” the Cambridge, Massachusetts-based university said in documents detailing plans to sell $400 million of tax-exempt securities this week. The “examinations typically extend over more than a year and involve a team of agents reviewing a broad array of activities,” according to the documents.  In October 2008, the IRS sent questionnaires to 400 colleges and universities asking how they manage taxable operations as well as how they “invest and use endowment funds,” according to a description of the so-called compliance project on the federal agency’s Web site. The IRS is probing whether the institutions’ tax-exempt status should apply to income from activities not related to their educational mission.  The questionnaire also sought to “determine types and amounts of executive compensation,” according to the IRS Web site. Bruce Friedland, an agency spokesman, declined to comment.  Harvard received and responded to the IRS questionnaire and then learned it was one of 40 colleges and universities subject to a subsequent audit this year, the school said in its bond offering documents. Harvard “has no reason to believe that the examination will have an adverse effect on the tax-exempt status of the university or any other aspect of the university’s operations,” the school said in the documents. John Longbrake, a Harvard spokesman, declined to comment. Harvard is the world’s richest college with an endowment of $26 billion as of June 30, down from a peak of $36.9 billion in 2008. An alumni group criticized pay at the school’s endowment, known as Harvard Management Co., in 2003 after the top six in- house managers earned a combined $107.5 million the prior year. Jack Meyer, who ran the endowment for 15 years, left in 2005. Jane Mendillo took over Harvard Management in 2008.  Senator Charles Grassley, an Iowa Republican, has been examining finances at universities, including how much funding rich schools give to student financial aid, and drug company payments to university researchers. Grassley called the IRS probe “long overdue” when it began in 2008.

  If you ask me, this is just a waste of time and money.  As my last post suggested, almost anything goes in the nonprofit tax exempt world these days.  I may not agree with Colombo on PILOTS but lets face it, colleges and universities can do no wrong.  They get in trouble only when their administrators are way beyond stupid.  The Service would be better off devoting their scarce resources to something that will lead to concrete results, not spending money so that their agents can go back to their old frat and sorority houses.  Blame Colombo for my cynicism on this one, by the way.  The auditing project was preceded by a lengthy questionnaire that he IRS sent out to nearly 400 colleges and universities.  The Association of Governing Boards of Universities and Colleges and the National Association of College and University Business Officers commissioned a joint statement on and analysis of the questionnaire and the Service's enforcement efforts against College and Universities in general. 



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1.What is P&l Adjustment A/c?

2.how many areas does cut off procedure include?

3.can their be any item/errors which cannot be located through audit of BRS?

4.can a wasting asset be current asset?
why only revenue exp. are considered as pre-production exp?

5.can reserve capital be called during the lifetime of the co.

6.what is the difference b/w shareholders records and share register.

Posted by: dineshbatra | Feb 8, 2010 7:00:56 AM

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