Suppose you ran an enterprise for aliens whose sales had dropped from close to $73 million a year to about half a million.
What would happen to your salary, if you were able to hold onto your job at all?
In the real world, you would be long gone.
But in the odd (apparently IRS-approved) world of a once-troubled California university that specializes in foreign students, your salary would have increased from $350,154 in 2016 to something a bit over $430,000 in 2019; the entity’s report to IRS gives two different figures for the salary.
In this strange but real world, this institution (which has only about 48 students) increased its net worth from $180 million in 2016 to more than $239 million in 2019, despite the more than 99 percent reduction in program revenue (i.e., tuition). And this despite a clean record as far as gifts are concerned: none for year after year.
Welcome to the bizarre finances of Northwestern Polytechnic University (NPU) of Fremont, Calif., which, according to one fiscal measure, is better off financially than Harvard University (more on that later).
NPU is of interest to the immigration community because it once had a student body of 6,000 or more foreign students (mostly from India), virtually all of whom had F-1 visas, and thus work permits. It also had trouble being accredited, and was the subject of a BuzzFeed expose headlined “Inside The College That Abolished The F And Raked In The Cash: How one California university faked students' scores, skated by immigration authorities, and made a fortune in the process”.
The article detailed the maneuvers used by the university to secure accreditation from the Accrediting Council of Independent Colleges and Schools, an organization that the Obama administration tried to put out of business for its lax standards, a process being renewed by the Biden administration.
But back to NPU’s remarkable finances. How has it been able to put together a nearly quarter of a billion endowment despite losing more than 99 percent of its students? (Our estimate of about 48 students is based on NPU’s website reporting that the charges for an on-time completion of a bachelor’s degree would be about $43,600 in tuition in fees; this divided by four equals about $11,000 a year per student; with a “program services” income of $528,883 that suggests that there are about 48 students.)
The answer to the question about NPU’s remarkable fiscal success is that in the barely regulated field of higher education for aliens, NPU once ran a hugely profitable operation for foreign students, involving 6,000 or more at one time, spent little on teaching them, saved its profits, and plowed them back into the stock market, all while a helpless IRS — and a careless government in Sacramento — regarded it as a charitable entity. Then, when student enrollment fell, NPU remained more than solvent.
In the meantime, the sleepiest part of the Department of Homeland Security, ICE’s Student and Exchange Visitor Program (SEVP), presided over the issuance of work permits for NPU’s thousands of students, and government-subsidized jobs in the Optional Practical Training (OPT) program for its graduates.
The president of the university is Peter Hsieh; contrary to the general American academic tradition (barring Virginia’s Liberty University), he inherited the title from his father, as one would in a family-owned business.
One of the wonders is that the university’s president held his salary and benefits down to below $500,000. His total take of $436,657 is reported in one part of the standard annual report to IRS, in Part VII, Section A, and $430,687 in another place (Schedule J, Part II).
We get all of this financial information from published Forms 990, the ones that IRS requires of non-profit entities and that can be seen here.
A further reading of the 990s reveals the following:
- This is an institution with net assets of nearly a quarter of a billion dollars. According to Schedule D, Part XIII, it awarded $18,200 in scholarships in 2019, or less than 0.01 percent of its net worth.
- We noted that 8.03 percent of NPU’s expenses in 2018 were for insurance; we checked a dozen other university 990s and could find none that spent more than 1.02 percent on insurance. For instance, Harvard spent 0.22 percent. In 2019, the NPU insurance bill dropped to 3.1 percent of expenses, but that is still remarkably high.
- Despite conflict of interest reporting requirements for the 990, one cannot tell from it that the executive vice president of the University, Paul Choi, is the brother-in-law of the president and is the second-highest-paid person on campus. Nor can one learn that Choi, Hsieh, and other family members live in university-owned homes; that information comes from the BuzzFeed report.
And, as to that reference to NPU’s being wealthier than Harvard on one particular measure, it is based on the relationship between the total assets, on one hand, and the amount of program expenses, on the other. How long could an institution continue to operate (at current levels) if there was no income arriving of any kind: no grants, no contracts, no gifts, no use of investment income, and no tuition? NPU’s expenses in 2019 totaled $7,129,023.
As we noted last year, Harvard, presumably the best endowed of America’s traditional universities, could fund itself under those conditions for 9.2 years. NPU, according to the most recent 990 (for the year ending December 2019) could last for more than 33 years. So by this (admittedly unusual measure) NPU is more than three times richer than Harvard.
But despite the oddly lush finances, the de facto family-owned aspects of the operation, the total lack of gifts to the entity, and the near-total lack of scholarships from it, IRS still regards it as a genuine, 501(c)(3) entity.