PSU Board of Trustees Teleconference: Propaganda wrt Donations to the University. AKA: “How to Fabricate a $263 Million Lie”

How does Penn State claim “record-setting” donations of $362.9 Million
when they actually raised $99 Million?

Here is but one of the recent Penn State PR pieces proclaiming last year’s “record-setting” donations:

https://news.psu.edu/story/527911/2018/07/17/giving/penn-state-raises-record-setting-3629-million-during-2017-18-fiscal

From the PSU Press Release:
“Between July 1, 2017, and June 30, 2018, Penn State alumni, friends,
parents, students, grateful patients and other supporters
committed $362.9 million to Penn State’s five-year
fundraising effort, “A Greater Penn State for 21st Century Excellence.”

 

Here is the Truth:
Penn State raised just about 27% of the amount that their Press Releases claim they raised.

The following Audio Link is from the Penn State
Board of Trustee’s Audit Committee Teleconference.

There is much discussed there, but the information relevant to Donations
starts at the 19:35 mark of the clip, and runs to the 23:50 mark.

The exchange is between Walt Rakowich – Penn State Trustee and Chair of the Audit Committee – and Joe Doncsecz – Penn State Associate Vice President for Finance:

(A transcript – with some clarifying information – is posted below the Audio link)

 

 

 

TRANSCRIPT:

Walt Rakowich:
A couple of questions for you. 
The first one is, you know, you mentioned an increase in the investment amount of $354 Million in your, you know, in your write-up. 
First of all I would assume that it includes – and I’m just looking at the non-operating activities that you refer to on page 10, Gifts and Pledges of $99 Million in that investment amount.
But, you know, we’ve been talking about the fact that we’ve been having record fundraising years of, you know, in order of magnitude $350 Million in the
last couple years for sure, and so and I know some of that is shown in other
areas of the income statement and some of it as Gifts-in-Kind. [INSERT: For those unfamiliar with the term, “Gifts-in-Kind” are non-monetary gifts – such as allowing the University to hold an event at your place of business, and not charging them a rental fee.  They are unlikely to find their way to a Financial Statement.].
So can you sort of take us through maybe the geography is to where the rest of
the $350 Million comes in. 
And if you don’t know perhaps, you know, if you don’t have it right at your fingertips perhaps you could you know provide us with some sort of reconciliation to all that.

Joe Donscesz:
Yeah.  Well, Walt, another $177 Million was what I just mentioned.
It was kind of the endowment growth.  [INSERT:  It wasn’t “kind of” the Endowment Growth.  It WAS the Endowment Growth – being reported as donations… which it is not]
So that if you take the $99 Million and the $177 Million that gets just about $276 Million, okay.
Your $354 Million, and then I’ll be honest with you if I can take you up on your offer I wouldn’t mind answering, closing, the rest of the $75 Million dollars kind of offline if that’s okay [INSERT: Translation, “I am kind of uncomfortable talking about this in a forum were someone might hear it – and pay attention”].

Rakowich:
But let me back up, I’m not talking about endowment growth. 
I’m talking about new contributions to the university that – I think I’ve got the right number – is it, I think, we’ve been raising or maybe it’s been $300 Million or a little less than $300 Million a year, the last couple years. [INSERT: Apparently, Rakowich, the Chairman of the Audit Committee, was as fooled as anyone by the phony PSU Press Releases.  That is rather troubling in its own right]
But I’m talking about new money.

Doncsecz:
So are you’re talking on, are you talking about the development report numbers you’re
referring to?

Rakowich:
Yeah.

Doncsesz:
Okay.  Yeah so some of the things that are different for financial reporting purposes from the development count, on a development side, some of the sponsored grants are captured in that number.  It’s actually captured in a different category on the financial
statement revenue side.  Another thing that’s captured in the development reporting is revocable bequests, which are not counted here if they’re revocable bequests to the University.  They can’t capture them as revenue, and as you mentioned gifts-in-kind.
So if you tunnel up those three categories there’s something like a $160 Million in those three categories that would be reported on the development side that wouldn’t necessarily make their way to investments or gift reporting in the financial statements.
Does that make sense?  Is that what we’re looking for?

Rakowich:
It does.  And I get the fact that you can’t book a revocable bequest for accounting purposes even though our development people probably feel like it’s money in the bank.
It’s not, and I get that, and certain gifts in kind.
I would assume the gifts in kind would
increase some balance sheet number somewhere.  I would think, probably albeit at a smaller number than the person who’s gifting the Money thought it would be.
But it would be interesting to sort of understand the geography on our balance sheet and how that relates to what we’ve been talking about.
About how much money we’ve
been raising on an annual basis.

Doncsesz:
I think what I’d like to do, while I think I’ve sketched out kind of a high-level reconciliation, but I’d really…. I would to be more certain I’d like to spend some time with Rich Bundy’s folks [INSERT: Rich Bundy is the head of PSU Development.  The Fund-Raising folks] and make sure I can close that gap a little bit more neatly for you than I could do right now, today.

Rakowich:
That’s fine.  I wasn’t expecting, I know I kind of hit you cold with this, so my apologies but I think it’d be great for us on the committee to see that.

Doncsesz:
Let me commit to get that back to you under separate cover.

Let’s summarize:

  1. Penn State Leadership claimed that:
    “In the 2017/2018 Fiscal Year, Penn State alumni, friends, parents, students, grateful patients and other supporters committed $362.9 Million to Penn State’s five-year fundraising effort”
  2. Penn State actually raised $99 Million
  3. Penn State’s PR Departments added in $170 Million from the investment growth of the Endowment (A level of investment performance which, once again, fell well short of Market expectations.  But that is an issue we’ve discussed in separate Blogs.).
    Those dollars are in no way, shape, or form, “Donations”.
    But pure fabrication is the most reliable form of propaganda.
  4. Penn State also has begun to Double-Count pledged gifts (Gifts that a donor has told PSU they plan to give, but have not as yet donated.  These are, often, situations where a potential donor tells PSU “I am going to leave some $$$ to the University in my will”.  Things like that.)  Penn State counts that same dollar twice – once when the donor informs them of their intent to donate, and again when/if the funds are actually received (which, often times, they are not).
    If only they could actually spend that same dollar twice, that would be a nice trick.

 

And that, Ladies and Gentlemen, is how
Penn State Administration turns $99 Million
of actual donations, into a Press Release touting “record-setting” donations of $362.9 Million.

If only it were that easy.

Unfortunately, only the $99 Million is
new money for the University.

 

Why does the University tell such bald-faced lies?

And repeat them as frequently as possible?

 

Because they know that:

Donations are viewed as a sign of how wonderfully received their leadership has been – or how poorly received their leadership has been.

And of how pleased – or displeased – Alumni are with their actions.

So, when the Alumni are not pleased with your leadership? 
When donors are closing their pocketbooks?

Simple:
Just fabricate numbers that suit your purposes…. and, in accordance with that time-worn strategy, repeat those lies as often, and as loudly, as possible.

 

 

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