University officials will have to answer to the federal government this month.
GW was one of 56 universities with endowments worth more than $1 billion who must respond to a letter from Congress detailing how they spend their endowment. The letter follows a proposal from a Republican lawmaker last month arguing that schools with endowments that total more than $1 billion must put a quarter of their annual endowment payout toward financial aid.
Lawmakers said the universities’ responses will help them identify solutions to make college more affordable. The letter is in line with a bill proposed by Rep. Tom Reed, R-N.Y., last month, and asks schools questions about what assets they hold and how endowment funds contribute to the schools’ charitable efforts. If a bill like the one proposed by Reed becomes law and the schools do not comply, they risk losing their tax-exempt status, a spokesperson for Reed’s office said.
GW’s endowment, which is used to fund scholarships, professorships and student scholarships, is more than $1.6 billion and doubled between fiscal years 2010 and 2015.
About 15 to 20 percent of GW’s total endowment, about $270 million, are donor-restricted funds to support financial aid, University spokeswoman Candace Smith said.
Smith said the University is reviewing the letter and will comply with the request, which asks schools for their responses by April 1.
GW’s endowment grew by 3 percent last fiscal year, far lower than the year before but still on pace with other institutions. Twelve of GW’s 14 peer schools also have endowments of more than $1 billion.
Universities typically rely on endowments for about 10 percent of their operating funds, according to a study released earlier this month from the National Association of College and University Business Officers.
But faculty and experts said the legislative proposal could hurt universities because it ignores the desires of donors, who may choose to put their donations toward a specific area. The proposal could also ignore other areas that schools must fund, they said.
About 4 percent of GW’s overall endowment was used to fund University operations last fiscal year.
Donald Parsons, an economics professor, said the federal government’s ability to adequately regulate University spending is “highly improbable” and “ludicrous.”
“If there’s one thing worse than the Board of Trustees deciding how money should be used, I would say the government is it,” Parsons said. “How much does the federal government know about what George Washington needs?”
Emily Schillinger, a spokeswoman for the House Ways and Means Committee, said constituents have been concerned about the rising costs of college education. Schillinger said the letter was sent to institutions so that lawmakers can gain a better understanding of what colleges are currently doing to help families.
“The more we learn about college endowments, the better situated we will be to make sound policy decisions that may impact colleges,” Schillinger said in an email.
Jeff Wilklow, the vice president of fundraising firm Campbell & Company, said universities should face some federal oversight because they are granted tax exemptions. Still, he said officials must balance the needs of a donor as part of their fundraising efforts.
“I don’t like the idea of a broad mandate with a specific number that’s mandated by the government,” Wilklow said. “I think that overly simplifies what universities are trying to do and what challenges they have.”