In March 2015, Virginia’s Sweet Briar College shocked students, staff and alumnae by abruptly announcing its upcoming closure. The announcement stated that the women’s liberal arts college would close “as a result of insurmountable financial challenges,” despite the school’s reported $85 million endowment. Even as more details emerge about the closure, however, there are more questions than answers.
One year earlier, the College introduced an initiative that would explore ways to combat challenges like a declining number of qualified students and female students’ willingness to attend a single-sex school. While Sweet Briar’s plight is not dissimilar from that faced by many small liberal arts schools, many are questioning whether or not the College and its administration have worked hard enough to come up with a viable solution to their financial woes, particularly when one considers Sweet Briar’s sizeable endowment.
The Commonwealth of Virginia, at the behest of Amherst County Attorney Ellen Bowyer, recently filed a lawsuit against the College, as well as Paul G. Rice and James F. Jones, Jr., Sweet Briar’s Board Chair and President, respectively. The lawsuit charges that the Board failed to consider courses of action other than closure, such as a capital campaign, more aggressive fundraising efforts, enhanced recruiting efforts, or a reduction of tuition rates to attract more students.
The lawsuit also hints at a more troubling allegation by a now-dismissed Board member that the College engaged in untenable financial practices, secretive governance, and a lack of experience and accountability by the administration.
In Bowyer’s lawsuit, she claims that the College’s annual financial statements show that operating deficits were more than offset by the endowment’s investment gains, grants, gifts, and alumnae donations, resulting in an increase of the College’s net assets. Forensic accountant Steve Spitzer backs up these assertions, writing:
“Assuming the College’s finances are handled in a prudent and responsible way going forward, it would still remain financially viable. Our preliminary conclusion upon a review of the publicly-available data is that, as of approximately eight months before the closure announcement, the College was financially viable, and there was not an urgent financial reason to close.”
Additionally, the Commonwealth asserts that Sweet Briar continued to raise funds to “support the College’s ongoing educational mission, while simultaneously acting to close the college.” President Jones commented that the school intends to use the endowment to offer severances to faculty members, pay back creditors and cover the costs of shutting down the college.
Even as the College moves forward with closure actions and efforts to help students find new institutions for the fall semester, there is a grassroots effort underway to save the school. A nonprofit group formed to save Sweet Briar College, which has raised nearly $1 million in donations in recent weeks, celebrated a decision by Bedford County Circuit Court Judge James W. Updike Jr. that gives the Bowyer the authorization to speak for the Commonwealth when charitable funds are being misused.
Staff, donors and alumnae are largely dissatisfied with the way Sweet Briar’s administration has handled the situation and they are beginning to ask tough questions. In a public letter published by the Washington Post, Virginia State Senator Chap Peterson (D-Fairfax) asks the following of Virginia Attorney General Mark Herring:
“As I understand, the College has a ninety four million dollar endowment and has been soliciting and collecting donations right up until a few weeks before the announced closing. I also understand that it owns a 3,200 acre campus with fixed assets, which is specially designated for the maintenance of a women’s college,” as stipulated by the original landowner who founded the college. So, he asked:
- What are the rights of the donors who made gifts to the institution in the past year, i.e. after the plans for closing had apparently been decided but not disclosed? Do they have a right to seek a refund if the school continues with its plan for closing?
- What is the obligation of the school to its existing students, particularly those students who are within a year of achieving their degree?
- What will happen to the property if it is no longer operating as a women’s college? Does it not revert to the donating party?
- What is the role of the Board of Visitors in this process? Does the Board have a fiduciary duty to protect the interests of donors and students, as well as the mission of the College?”
Yesterday, Judge Updike issued a temporary injunction that prevents Sweet Briar College officials from using solicited funds to advance their plans to close the school. We expect that, as the lawsuit moves forward, we will learn more about how this happened, including details on governance and internal controls within the institution. We will update you as new information becomes available.
For more information on how Aronson’s Nonprofit & Association Industry Services Group can help private institutions safeguard their legacy for years to come, please contact Craig Stevens at 301.231.6200.