College 2012 tax returns reveal Provost Shennan earned highest salary and benefits: Returns also show account deficit of $6 million

by Eva Freedman '17 Staff Photographer

By HAILEY LEE ’14

Contributing Writer

by Eva Freedman '17  Staff Photographer

by Eva Freedman ’17
Staff Photographer

The 2011 earnings of the highest paid employees were reported in the College’s most recent tax returns, which cover the 2012 fiscal year from July 1, 2011 to June 30, 2012.

The majority of colleges and universities are categorized as federally tax-exempt non-profits because of their educational purposes. This requires them to submit an annual tax return, called the Form 990, to the Internal Revenue Service (IRS).

The returns cover a fiscal year that spans two calendar years, but due to IRS regulations, the employee base pay reported in the return covers the most recently completed calendar year, which is 2011. However, additional, nontaxable compensations, such as insurance, cover the benefits in the July to June fiscal year.

The intricacy of these returns results in a time lag between the period covered by the most recent return and the date the College files and publicly releases the return. The tax returns were filed and released in May 2013.

Wellesley’s 2012 Form 990 shows that President H. Kim Bottomly earned $422,380 in base pay. This accounts for 78 percent of her total compensation of $539,591, including additional compensation like the President’s House by Lake Waban and life, health, dental and disability insurance.

Tax returns from similarly sized private colleges in Massachusetts reveal that President Bottomly earns a comparably fair base compensation package. Carolyn Martin, the president of Amherst earned $181,158; Leonard Schlesinger, the president of Babson, earned $514,810; and Carol Christ, the previous president of Smith, earned $316,560. These figures account for only the calendar 2011 base pay with no additional compensation.

Presidents of university-level private institutions made significantly more in base compensation. Harvard’s president, Drew Faust, received a base pay of $729,000, plus $171,000 for additional compensation, which includes the Elmwood mansion in Cambridge. And MIT’s president at the time, Susan Hockfield, made over $1 million in base pay, plus about $160,000 worth of additional benefits.

None of these presidents received income bonuses, according to the 2012 tax returns from their respective institutions, while President Bottomly earned a bonus of $25,000.

Administrators’ bonuses and salaries are determined by the Compensation Committee, a subcommittee of the Board of Trustees. The Committee reviews officer compensation against benchmarks of peer institutions.

Carolyn Slaboden, interim assistant vice president of Human Resources, added that the College also hires a consultant who analyzes market data on leadership position salaries to help determine compensation amounts.

Slaboden describes bonuses as one-time awards that “recognize extraordinary performance by an employee in a given year, [and] are an important part of the College’s employee retention strategy.” However, no specification was given on what Bottomly’s particular merits were for the bonus awarded.

Despite a widespread assumption on campus that President Bottomly is the highest paid administrator at Wellesley, Provost and Dean of the College Andrew Shennan earned the highest salary on the most recent tax returns. Shennan earned $506,374 plus a bonus of $30,000—amounting to both a higher base pay and higher bonus than the president. Including all additional compensation, Shennan earned a total of $657,798, which is $118,207 more than the president’s total.

Between the 2011 and 2012 tax returns, the Provost’s total compensation increased by 63 percent.

But in the previous Form 990s, that covered the 2011 fiscal year, President Bottomly was highest paid, with $456,034 base pay, no bonuses and a little over $100,000 in extra compensation, totaling about $566,000.

President Bottomly, Shennan and Media Relations declined to comment on the sudden pay inflation as well as their bonuses, citing common personnel policy in which workplaces cannot disclose details of individual salaries.

However, Vice President of Finance and Administration Ben Hammond noted that occasionally, one-time compensations are added to the reported base pay, causing inflation for that particular year.

At Wellesley, tenured faculty members who hold senior administrative positions can receive a one-time payout in exchange for not taking sabbatical. It should be noted that Provost Shennan is a fully tenured Professor of History at Wellesley who has not taken a sabbatical since 1999, when he became a dean. Although the last class he taught was in 1998, Shennan and other former faculty members currently serving administrative roles are able to retain their rights to a sabbatical.

In the past few months, some members of the student body have expressed negative sentiment about College administrators’ compensation.

Last week, the Wellesley News conducted a face-to-face poll, asking 70 students exiting the Lulu Chow Wang Campus Center about their perceptions on administrative salaries. More than 85 percent thought President Bottomly received the highest salary in the College. Of that 85 percent, nearly 60 percent thought she earned $600,000 or more. The majority also did not know what the President did and felt she was not involved enough with the student body.

Sarah Bailin ’16 explains why she and some classmates hold unfavorable sentiments about the President’s salary.

“There are feelings of resentment because we don’t see what she does,” Bailin said. “She’s not known as a president that interacts much with students.”

In fact, when it comes to most administrators, the majority of students from the survey reported knowing only abstractly what they do and why they earn so much. One student expressed envy that MIT’s president was photographed last winter joining the student body at Killian Court for a massive snowball fight.

By comparison, Bailin pointed out that she has had many meaningful interactions with her professors.

“We love our professors,” she said. “We see what they do. But when we calculate how much our teachers are making and see the president and other administrators making tons more, we start to question, ‘What exactly are they doing?’”

In April, the annual survey on professor salaries from the American Association of University Professors identified Wellesley College as having the highest average salary for full professors among all liberal arts colleges. Wellesley has ranked first on this list since 2009.

Annual deficit differs on tax return from College budget report

In addition to reporting the highest salaries, Wellesley College tax returns outline a balance sheet, listing the College’s expenses and revenues. For the 2012 fiscal year, the College accrued a current account deficit of nearly $6 million. In the 2011 fiscal year, the College reported a current account surplus of nearly $14 million. The 2010 fiscal year saw a deficit of about $46 million.

The reason behind a reported deficit may not always be that the spending outweighs the budget. Vice President Hammond cites the IRS’s detailed accounting rules for recording revenues and expenses as the main reason. For instance, the College’s revenue is understated since the IRS does not treat endowment income as revenue; rather, the IRS only asks colleges to report interest, dividends and net gain from investment sales. The IRS also records all gifts to the College as revenue, although gifts to the endowment cannot be spent as short term income.

“What they ask for is different from GAAP, and the College’s own budget reporting,” says Hammond, “Given these accounting differences, it is perhaps not surprising that the revenues, expenses and net income are different between the 990 and the College’s financial reporting.”

GAAP stands for Generally Accepted Accounting Principles, a common set of accounting procedures that are used to compile financial statements.

Hammond identifies two specific accounting reasons that may explain the deficit on the most recent tax return. The first is the negative difference in union employee pension plans. This accounts for the difference between assets, the pension fund used to pay for retiree benefits, and future liabilities, which are the long term benefit obligations not yet paid.

Each year, the College calculates the change in the amount of the liabilities or assets that may cause an increase in expenses, resulting in the reported deficit.

But Hammond emphasizes, “the College does not actually pay this charge, and it could change in future years depending on many factors, including the investment performance of the pension plan.”

The second reason Hammond provided for the cause of the deficit is the College’s recorded loss of roughly $13 million this year from an interest rate swap agreement on one of the College’s bonds, which further contributed to the deficit. Interest rate swaps allow the College to exchange one set of cash flows, such as debt interest payments based on a particular interest rate, for a less expensive option.

Hammond stated that this, too, is an accounting convention. The College did not actually pay anyone for unrealized increases in its liability for this swap and since it expects to hold the swap to maturity, it is unlikely to ever incur this liability. Therefore, the deficit amount for fiscal year 2012 will not actually be paid off in the short term and may very easily change again in following years.

All Form 990 tax returns were obtained from GuideStar, a searchable database that provides copies of nonprofits’ 990 filings with the IRS.

An earlier version of this article incorrectly stated that tenured faculty members can earn a one-time financial payout in exchange for foregoing their rights to take sabbatical. In fact, only tenured faculty members who take senior administrative roles can receive compensation for a sabbatical that they have earned the right to take but cannot take due to their administrative duties. 

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