What we’ll cover today: Legislative Issues Tax and nonprofit orgs Budget and HEA Reauthorization

1. Current Issues in Business & Administrative Operations2005 WACUBO Annual MeetingJames E. Morley, Jr., President & CEONational Association of College and University Business Officers (NACUBO)

2. What we’ll cover today: • Legislative Issues • Tax and nonprofit orgs • Budget and HEA Reauthorization • Sarbanes-Oxley • Regulatory Issues

3. NACUBO Advocacy Priorities • Special focus this year on three areas: • Proactive approach to possible application of Sarbanes-Oxley Act provisions to nonprofits • Provide leadership on nonprofit governance and accountability issues in Congress • Develop resources for and information sharing between institutions confronted with requests for payments in lieu of taxes (PILOTs).

4. Legislative Issues:Oversight of Charities • Several committees are actively looking at issues impacting tax-exempt organizations: • Senate Finance Committee: engaged in systematic review of charities • White paper with numerous proposals June 2004 • Joint Committee on Taxation: looking at options for improving tax compliance and increasing revenue • released a report in January 2005 • House Ways and Means Committee: recent hearings on reform of tax-exempt organizations

5. Proposals of most interest or concern: • Eliminate tuition reduction undersection 117(d) for employees of colleges and universities • Limit student FICA exception to codify the recently finalized regulations and restrict applicability for students whose earnings exceed an annual dollar limit • Require public disclosure of 990-T (UBIT) and certificationby an independent auditor of income and expense allocations to UBIT • Limit charitable contributions of property to lesser of donor’s basis or fair market valuefor all in-kind property, including capital property • Extend Medicare payroll tax to all state government employees …(cont.)

6. Legislative Issues:Oversight of Charities • Eliminate advance refunding of government and 501(c)(3) bonds • Combine education tax credits and above-the-line deduction into a single credit that would apply on a per-student basis to qualified undergraduate and graduate education expenses • And, a couple that we like: • Permit tax-free IRA rollovers to charities after reaching a certain age (65 in President’s budget proposal) • Eliminate $150 million cap on 501(c)(3) tax-exempt bonds

7. Legislative Issues:Oversight of Charities • NACUBO has joined with ACE to lead the higher education community’s advocacy efforts related to these tax proposals. Our objectives: • Bring together associations + institutions interested in building consensus on key issues • Facilitate discussions and tax advocacy work on targeted issues • Form a central point for information delivery, discussions, development of talking points

8. Legislative Issues:FY06 Budget FY06 Budget and Appropriations • President’s budget, released in early February, serves as the administration’s roadmap for appropriations and reauthorization of the Higher Education Act • Deficit and need to rein in costs colors everything • Many of the President’s proposals would require changes to the HEA • Education slated for more program eliminations than any other functional area

9. Legislative Issues:FY06 Budget President’s Budget Proposal (continued): • Proposed eliminations: • Perkins Loan program, including recall of existing federal Perkins revolving funds • LEAP • GEAR UP • Byrd Honors and various other scholarship programs • Funding cuts: • TRIO • FIPSE

10. Legislative Issues:FY06 Budget President’s Budget Proposal (continued): Major new proposals include: • Increasing maximum Pell by $100/year for next 5 years • Increasing subsidized loan limits to $3,500 for first-year students, $4,500 for second-year, and $12,000 annually for graduate students. • Replacing fixed-rate student loan consolidation with variable rate loans. • A number of changes to the loan programs intended to save federal $$ • Making Pell Grants available year-round for students at eligible institutions. • Eliminating of the tuition sensitivity rule for Pell, allowing the neediest students to receive the maximum benefits at low-cost institutions.

11. Legislative Issues:FY06 Budget Next steps: Differing Senate and House budget resolutions need to be reconciled Approps committees need to work within framework set by budget resolution Authorizing committees need to consider changes to HEA…

12. Legislative Issues:Higher Education Act • Congress is in the process of renewing the Higher Education Act of 1965 • Legislation originally introduced last year by House committee leadership has now been reintroduced with minor revisions (HR 609), and formally launched reauthorization process • Senate committee plans to take up HEA in June Senate GOP bill and ED legislative proposals not yet released. Bill will move slowly through Congress in 2005, and may not be resolved until 2006

13. Legislative Issues:Higher Education Act • Central themes of reauthorization include: • Access and choice for students • College cost and price • Institutional accountability • Administrative efficiency

14. College Access: Is Government Part of the Solution or Part of the Problem? • Provocative title of hearing held by House Ed & Workforce Committee on April 19 with only two witnesses: • Richard Vedder, an economist who believes that federal student aid artificially increases demand and drives up prices • Donald Heller, tried to debunk the notion that increases in student aid lead to increases in tuition and cited level of state appropriations and investment performance as two tuition drivers

15. Accountability:Sarbanes - Oxley Act • Not directed at higher education—but trustees will ask • Major issues: • Financial statement certification • Audit committee • Auditor independence • Only limited consulting allowed • Partner rotation • NACUBO on-demand web conference available via NACUBO website • NACUBO Advisory Report 2003-3

16. Accountability:Sarbanes - Oxley Act Key Points for Higher Education • Not required • Improved communications needed • Increasing expectations concerning accountability • Reassess internal controls

17. NACUBO Advisory Report 2003-3 Why Developed • Higher Education has many stakeholders • Trustees share concerns of corporate boards • Some states are considering variations for not-for-profit organizations • Institutions must already adjust to revised GAO independence standards (January 2003) • Underwriting and pricing organizations consider the act relevant to the tax exempt bond market

18. Accountability:Sarbanes - Oxley Act NACUBO Activities • Survey to members on practices in December 2004, see article in May BOM for results • 360 institutions responded; 73% have read the Advisory Report • SOX Summit with presidents and CFOs coming up June 1

19. Regulatory Issues in 2005 • Department of Education • New policy guidance on using stored value cards instead of checks to pay Title IV aid to students • Internal Revenue Service • Student FICA rules finalized, took effect in April (web cast available on demand) • Department of Labor • New overtime rules took effect last summer • Department of Homeland Security • Providing executive level emergency preparedness training at a preconference before NACUBO annual meeting • Tailored for higher education top executives, using FEMA experience training state and local gov’t officials

20. Regulatory Issues:Environmental Protection Agency • EPA Sector Initiative – NACUBO and five associations working with EPA HQ and regions • Environmental Management Systems (EMS) • Performance Measurement • Regulatory Change (making great progress! with proposed rule on hazardous waste for academic labs only expected this year) • Funding for a compliance assistance center for colleges and universities in EPA FY05 budget

21. Environmental Health & Safety • Asbestos Class Action Settlement • Over $55M in settlements to be distributed • Claims process will be governed by guidelines to be approved by court • Six-month window to file claims likely, possibly starting in 2005 • What should institutions do? • Start gathering information • Complete pending asbestos abatement projects • Rebate coupons available for W. R. Grace & Co. products (see our web site)

22. Open source, KUALI Project now using the new term “community source” Received funding from Mellon Technology:2005 Technology Issues

23. 2005 NACUBO Annual Meeting BUILDING ORGANIZATIONAL CAPACITY BALTIMORE, MARYLAND July 9-12, 2005

24. Thank You!