Thursday, January 20, 2011

More reaction on Kaiser University to Nonprofit Status

The Nonprofit Quarterly chimes in today on Keiser University's conversion to nonprofit, 501(c)(3) status in a mildly skeptical opinion piece:

Why the switch? There's the nice spin for public consumption that the 57-year-old CEO wanted to ensure that the school would "remain a legacy of the Keiser family," which might not happen somehow if it stayed for-profit. But there is the more pragmatic economic explanation that is equally if not more compelling. Nonprofit status exempts the university from property taxes. It becomes eligible for donations and for tax-exempt bonds.

But also Keiser was among the leaders of the for-profit colleges' campaign against the U.S. Department of Education's proposed "gainful employment" regulation which would deprive for-profit colleges of federal money if too high a proportion of their students couldn't pay their federal student loans; apparently. As a nonprofit, Keiser University would be exempt from this regulation. The conversion would mean more subsidies for Keiser students, who would be eligible for a $2,425 annual grant to students attending nonprofit colleges compared to $945 for attending for-profit schools.

Making this more confusing is that Arthur and Belinda Keiser bought Everglades in 1998 (when it was American Flyers College), converted that 1,200-student school to nonprofit status, and structured it so that it purchased many of its administrative functions from the for-profit Keiser University.

Keiser says that this is all on the up and up, with no ulterior motives, but the executive director of the American Association of Collegiate Registrars and Admissions Officers queried, "Until now, the very purpose of this entity was to be a profit-maximizing firm. Now we're being told it has suddenly done a 180 degree turn and become a charity?" Is it all so easy simply to say, “Today we are a nonprofit?”—

I am not so sure it was property tax exemption that motivated the switch.  Previous reports have indicted that Keiser doesn't own its own property.  The real issues, obviously, will be in whether the Keiser family can make the transition from private owners to public fiduciaries of a public trust.  In my experience, its often the founders who, years into a successful nonprofit venture, simply can't stop acting like owners entitled to reap the financial advantages resulting from the commercial success of their charitable dream.  In this case, Mr. Keiser not only represented buyer and seller but continues to serve as chief insider for new, tax exempt Keiser.  I'd say this is a case that requires careful and close monitoring by the advisors. 

dkj

http://lawprofessors.typepad.com/nonprofit/2011/01/more-reaction-on-kaiser-university-to-nonprofit-status.html

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Comments

The federal goverment needs to investigate this supposed sale! How can someone sell his buisness to himself? many people will lose and get hurt by this scam

Posted by: johhny | Jan 27, 2011 5:48:45 AM

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