What is a nonprofit university?

In essence, a nonprofit university has no individual owner (no shareholders and no dividends paid to individuals or organizations). The university operates with high transparency and must regularly report to society, typically by publicly disclosing and reporting financial activities annually to the public and relevant authorities.
The university has no individual owner but is owned by the university organization according to the law. The Board of Trustees (BOT) is the body with the highest authority and responsibility within the university organization, deciding on policies and approving the university’s major operations. The BOT hires the president to run and manage the university, and delegates tasks and responsibilities to specialized committees.
Some universities also have a Board of Trustees to raise funds, oversee, and supervise the finances and assets of the university organization. They work regularly with the BOT but do not interfere in the university’s decisions, policies, or management, except for matters related to the university’s assets.
Most nonprofit universities in the United States and some other countries have been around for at least 50 years, so their BOTs have a legacy-oriented nature rather than a founding one. The individuals or groups that founded the university are often the first BOT, and they then pass on the responsibility through many generations.
The BOT is self-responsible for the operational rules and regulations for both themselves and the university’s activities in general. Each university may have slightly different operational regulations. Violations of internal rules can be considered legal violations. For example, if a BOT consists of 20 members with a four-year term, electing five members each year ensures a high level of continuity and legacy.
Individuals with high prestige in the educational, political, and social communities may self-nominate or be nominated to the BOT. Aside from the BOT chairperson, members typically only receive a stipend for their service, not a salary. The university organization’s internal regulations prohibit conflicts of interest with the university’s activities. The more prestigious the university, the more difficult and stringent the selection process for BOT candidates, as they contribute significantly to the university’s reputation, expertise, and community connections.

How to establish a nonprofit university following this model?

First, there must be laws governing the nonprofit university model, synchronized with other laws such as Tax Law, Investment Law, etc. In practice, establishing a university organization following the nonprofit model is not difficult. The university’s operating funds can come from various societal contributions and credit sources. The key is for the university organization to have an effective operational plan that meets needs and builds long-term trust among students.
The university’s main revenue sources include tuition fees, societal contributions (including alumni), government and business contracts, and income from investment activities. The more renowned the university, the easier it is to raise funds and secure contracts. The university balances its income and expenses independently. Assets may be mortgaged like a business, but this does not involve the personal liability of BOT members unless there is a legal violation.
According to the nonprofit university model in the U.S. and other developed countries, these institutions are tax-exempt by law. Accordingly, (1) The university does not pay corporate taxes or other taxes (due to its societal role, with no shareholders or dividend payouts); however, if the university engages in business activities outside of its educational purposes, the profit may be taxable, even though the revenue will be reinvested into the university’s operations. (2) Contributions from organizations, individuals, and businesses to the university are tax-deductible.
Typically, successful alumni contribute significantly. (3) Prominent universities often secure large government and corporate contracts from research, consulting, and project activities, enhancing the university’s value and societal engagement. (4) Tuition fees at nonprofit universities are higher than at public and for-profit universities due to higher operational and investment costs. Society often perceives this type of university as being of higher quality and prestige. Nonprofit universities are also able to offer more scholarships to poor, academically talented students to increase competitiveness among students.

Applying the nonprofit university model in Vietnam

The nonprofit university model described above has been successfully operating and developing in many countries but remains unfamiliar in Vietnam. It is worth recalling that the concept of private and semi-private universities also sparked much debate when it first appeared in our country over 25 years ago. Proposing the nonprofit university model at this time is likely to encounter differing opinions as well.

Five or seven years ago, when I first discussed the nonprofit university model, there were many dissenting and even pessimistic views. Many believed that given the country’s undeveloped state and strong sense of ownership, it would be difficult to implement this model.
The key issue here is not the country’s condition or the sense of ownership, but the problem of ownership and (legal) structure of the nonprofit university model. No individual or organization wants to contribute financially, materially, or laboriously to a university organization knowing it belongs to another group or individual. Although the initial intention may be to serve education, long-term ownership of the university still belongs to an individual.
I propose incorporating the nonprofit model for all educational levels, not just universities, into the Education Law this time to open up a new model of schools that society will be interested in investing in in the future. A few years from now, when this type of school appears in Vietnam, if we are still grappling with building mechanisms and legal frameworks, it may be too late and we could miss a good opportunity for the education sector.
TRẦN ĐỨC CẢNH

Source: DNSG Weekend