Not-for-Profit Universities: An Unknown Concept in Greece

NOV-DEC 2015|BY ALEXIS PHYLACTOPOULOS, PRESIDENT, DIKEMES (INTERNATIONAL CENTER FOR HELLENIC AND MEDITERRANEAN STUDIES)
The recent application of VAT on private education has brought to the surface a number of misconceptions about private academic institutions.

There was a time, some ten years ago, when a breakthrough in the field of higher education seemed imminent and as a consequence some of the misconceptions would have been eliminated. There was then a public discourse about the need to rescind Article 16 of the Constitution, which establishes severe limitation on the development of private higher education institutions. Private not-for-profit universities would have been allowed as equals to state universities.

The efforts to abolish the anachronistic Article 16 of the Constitution foundered when PASOK, under George Papandreou, failed to live up to its promise to support the revision. Similarly, the discussion to differentiate private universities  that are for-profit from those that are not-for-profit did not lead anywhere. Nowadays, almost a decade later, we are even worse off. The last straw was the gradual demolition of the educational reform of former Minister of Education, Anna Diamantopoulou, a reform supported by a huge bipartisan majority in Parliament, and reversed by her successors in the Ministry. The ultimate blow has been served by the decisions of the SYRIZA Ministers of Education, Baltas and Filis.

It remains a mystery why the not-for-profit status of private higher education schools is a concept not acceptable by the educational establishment and the tax authorities in our country. But it is exactly this concept that has allowed colleges and universities in the western world to develop and to offer enviable education to their students.

The not-for-profit status does not mean, as the common Greek tax officer believes, that an organization should have no income other than donations and that it should be involved in philanthropic activity.  As the concept is understood in other legal systems, it has few but specific characteristics:

  • The institution does not distribute profits or other financial benefits because it does not have owners and shareholders. This is the cornerstone of its financial structure.
  • The institution is governed by a board of trustees, which is always serving on a volunteer basis. This does not mean that the organization does not have paid employees. The board of trustees determines the strategy, approves the budget and the annual financial report among its other duties, but it is the employees of the institution who operate it.
  • The institution is not meant to be running annual deficits to justify its status as a not-for-profit. It can have deficits from time to time but it is not advisable that it does. It should at least be breaking even. If there are “profits” they are considered surpluses which get transferred to the next fiscal year in order to support the educational and research mission of the university, its system of financial aid, and the improvement of the infrastructure of the school.
  • Scholarships to needy students are an important feature of not-for-profit universities.
  • The institution operates under close scrutiny of the tax authorities, and its books are audited annually by certified auditors.
  • Donations to the not-for-profit institution should be tax-exempt, which is to say that the amount contributed must be exempt from the income tax of the donor.

The current political environment does not create the right conditions to contemplate the advancement and the full recognition of the not-for-profit concept in Greece and it is sad to think that we have regressed on these issues from where we were 10 years ago. It does not hurt, however, to remember that it was through the recognition of the not-for-profit principle that the great universities of the U.S. became what they are today.

No Responses to «Not-for-Profit Universities: An Unknown Concept in Greece»