Revenue streams without strings

February 6, 1998

Private money is important to universities - and has been getting more so in recent years. Paradoxically, its significance has grown as more public money has gone into higher education. As universities have grown so has their cost to the taxpayer, even if it has not increased proportionately. With increased public spending has come increased control, exercised through rationing of places, demands for "accountability" and attempts to tell universities how to teach and what to offer. Private money is not just vital extra revenue, it is also an escape route from control.

Private money comes in different ways. Some is begged in donations large and small. More is earned through research contracts, consultancy, tailor-made short courses or fees. Raising it is neither cost-free nor without complications.

Many academics dislike paying court to donors. Many distrust the motives of those who give or sponsor. The salaries commanded by the rare people who are good at fund-raising, some now well into the table of top earners, are resented, as are the views of donors. Most dislike the increased management that handling private funds requires. There are certainly real causes for concern about the controls funders seek, as next week's debate at the American Association for the Advancement of Science will show (page 21).

There are those, largely orchestrated by the Campaign for Academic Freedom and Standards, who dislike any private funding and who lose no opportunity to raise questions of propriety. Their agenda may be largely political and their favoured solution to underfunding - more taxpayers' money - unrealistic. But their vigilance serves to keep managements careful and the ethical issues associated with private funding to the fore. It is less useful in helping universities develop robust arrangements to allow them to raise and manage private revenue with integrity.

Disputes about whether money for good causes should be accepted from tainted sources are certainly as old as organised religion and have dogged universities throughout their history. The postwar decades of virtually full public funding were unusual in the long history of universities and even then fund-raising continued in attenuated form. Warwick, for example, built its arts centre thanks to an "anonymous benefactor" only identified after her death as Helen Martin, whose family owned Smirnoff vodka.

This period ended in the harsh 1980s. Necessity is now driving universities to invention and, with the growth of knowledge and research-based industries, the opportunities are there to be exploited.

In this climate, fund-raisers will always be tempted to offer would-be donors and sponsors incentives to clinch a deal. These may be unexceptionable - naming a building or a scholarship scheme. Some may mesh well with the university's plans. But some donors may have an agenda that conflicts with the university's. They may want control of intellectual property resulting from sponsored research. They may, like Lee Bass whose $20 million gift to Yale to support courses in western civilisation was eventually returned, want to approve appointments. They may want to secure a place for a child. They may, as in UMIST's current case (page 2), use the university's name to bolster their public image. Charitable organisations too have their own agendas. They may have guidelines for research funding that seem admirable but whose application cuts across universities' autonomy and their ability to set their own criteria for acceptability.

There is plenty of experience both from the United States, where they are much more accustomed to handling private funding, and from this country, accumulated over 20 difficult years, to guide universities in establishing robust and open arrangements.

For example, if fund-raising is handled centrally through a separate foundation or endowment fund, the fund-raisers can, in all honesty, tell donors they cannot make commitments on academic matters on behalf of the university. They can also make the background inquiries that prevent later embarrassment.

If contract research or spin-out development is handled through separate, university-owned, companies or, for example, through the MRC's new venture (page 2), contracts covering costs and matters such as intellectual property rights can be negotiated in a businesslike way. Profits can then be channelled back to the university, providing it with that most precious of things - a revenue stream without strings.

Such devices can, however, go only so far. Someone willing to endow a chair or support a research programme will not always be willing to write a cheque and leave well alone. This is where it becomes of vital importance that the university is rich and secure enough to negotiate a deal with which it is comfortable, taking the risk that the donor goes elsewhere. To be able to choose universities need not to be beggars.

These days in universities freedom means having many friends and building reserves so that if one sponsor is offended and withdraws support, staff and students are not left in the lurch and important work lost. It is vital that universities are able to protect academic staff when the going gets rough.

Integrity demands that agreements and contracts be honestly negotiated so that all sides are clear at the outset what the rules are. It is then a matter for each donor and sponsor to decide where to put their money and for each university to decide what it will and will not accept. Negotiating guidelines is, as the university development officers know all too well (page 2), a non-trivial business - but then vice-chancellors need something to do to justify their salaries.

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