Departures, Budget Woes Roil NASSP
An alarming pension-fund shortfall at the National Association of Secondary School Principals and the dismissal of its top executive have left the 82-year-old organization scrambling to dig out of the crisis.
Revelations that the employee pension fund was $1.1 million in the hole, the firing of Executive Director Timothy J. Dyer, the departure of two other top executives, and the threat of legal action from four former employees, including Mr. Dyer, have rocked the NASSP. The upheaval has depleted morale at the group's headquarters in Reston, Va., and left some principals wondering about the future of their 45,000-member organization.
Douglas A. Fagan, principal,
Rocky River (Ohio) High School
Thomas F. Koemer
45,000 principals, assistant principals, and other administrators
"I just think the financial picture is one of the darkest we've had since I've been a member, which is over 30 years," said Robert C. Howe, a past president of the NASSP and the director of the Missouri secondary principals' group from 1987 to 1995.
For the group's board of directors, the events have produced at least one other dramatic change. Its 22 members--principals and assistant principals appointed or elected by region--are normally a hands-off group. But since last summer, when board members first got wind of money trouble, they have been plunged elbow-deep into the day-to-day affairs of the association.
By the time the board met in November, some members were increasingly worried about the financial picture. They requested a more detailed audit report than in the past, and they asked to meet with outside auditors without staff members present, a request that had not been made before.
Board members learned that the NASSP pension fund was seriously behind in meeting financial obligations imposed by a 1994 federal law. The law shortened the time companies have to sock away the money they will need to pay out pensions to retired employees, thus raising the amount that must be paid regularly into the funds.
Only half the NASSP's $1.6 million payment for 1997 had been made, putting the organization behind schedule for contributing the $3.5 million needed eventually to bring the fund to $12.4 million. That's the amount that projections say will meet the future retirement needs of about 140 current and former employees.
"It was a bombshell," said Douglas Fagan, who was then the president-elect of the nonprofit group's board and is now its president. The NASSP has since obtained a loan to pay the $1.1 million pension-fund bill that comes due this month.
Following that November meeting, Mr. Dyer fired Ronald Baird, the NASSP's chief financial officer and associate deputy executive director. The board formed a "commission of inquiry," with board members themselves examining financial records in Reston.
In January, the board met in emergency session and put Mr. Dyer on leave with pay. Then, on the eve of the annual convention in early February, with thousands of school leaders gathering in San Diego, the board fired its executive director of eight years.
The move was announced at an open business meeting the next day, Feb. 6, but many conventioneers went home unaware of the change. Lawyers for the group have clamped down on details of the dismissal, citing the fact that Mr. Dyer has hired a lawyer.
Interviews with past and former officials of the organization in recent weeks, however, revealed two general areas of dissatisfaction with Mr. Dyer: his oversight of the pension plan and his relations with board members, staff, and NASSP members outside the Washington area. Mr. Fagan described those relations as "autocratic."
"Since this major fiasco occurred under his watch," Mr. Fagan said, referring to the pension-fund shortfall, "we held him responsible."
Mr. Fagan added that board members were upset by apparent contradictions in Mr. Dyer's account of the mishap. They also questioned in hindsight an early-retirement plan that Mr. Dyer had requested and the board approved in 1995.
The plan unexpectedly lured 19 people into retirement, "substantially" raising the pension fund's projected liability, according to a letter from employee-benefit consultants hired by the board.
Both sides agree the handling of the pension plan was central to the board's decision, but Mr. Dyer disputes the board's notion of who should have been held responsible.
"It's all in the eye of the beholder," the 60-year-old former schools superintendent and middle school principal said in a telephone interview earlier this month. He laid much of the blame for the pension-fund troubles on Mr. Baird, the chief financial officer. "The CEO is not the CFO," Mr. Dyer said. "I trusted the CFO."
Mr. Dyer contended that no one, not even the auditors, understood the requirement for additional payments on the liability until last November. But, he said, "the board felt [that] if I didn't know, I should have known."
Mr. Dyer has hired a lawyer and is contesting his firing.
In interviews over the past few weeks, board members indicated that their financial concerns extended beyond the pension fund.
Mr. Dyer said he learned of "serious cash-flow problems" from the auditors last June. The NASSP's accounting to the Internal Revenue Service for the fiscal year ending then shows that the organization had on hand about $4 million and owed about $3.8 million, a slim margin for an organization with a $25 million budget.
A rule of thumb for nonprofit organizations is to have on hand enough funds for six months' to a year's operation.
Seth Fink, who was the NASSP's senior accountant for a year and a half ending in the fall of 1996, said those problems were evident the previous year. "There was around one month of operating funds in the bank when I left," he said.
"It's years of nobody minding the store," claimed Mr. Fink, who said he left the NASSP over unhappiness with its top management.
As an example of matters that should have been attended to, Mr. Fagan, the board president, cited a "significant deficit" for three years running in the NASSP's international-programs office.
In a telephone interview last week, Mr. Baird, the financial officer who was fired by Mr. Dyer, said he left the association's finances in good shape and noted that the official administrator of the pension fund was Mr. Dyer. He declined to elaborate.
Some of the association's troubles are now legal. Four former employees have hired lawyers, and at least three of them are contesting their dismissals: Mr. Dyer; Debra Roth, a former associate director of public relations whose job was eliminated last June; and Marisa Ostinet Sherard, a former director of the international-partnerships division who was fired in December.
Board members and a lawyer for the association, Merrell Renaud, declined to comment on the dismissals.
At the recent NASSP convention in San Diego, Ms. Renaud released a statement to members warning that potential lawsuits may represent a drain on the group's finances, "both in terms of the attorney's fees NASSP will incur to defend against them and the costs to NASSP of any potential judgments." However, her statement continued, "it is my opinion that NASSP's conduct with respect to the four employees would withstand the scrutiny of any court of law."
In recent interviews, officials said the group has put the turmoil behind it. "The organization is as strong as ever," contended board member K.C. Albright, the principal of Moscow Senior High School in Moscow, Idaho.
"We're in a good place and moving in a positive direction," said board member James A. Aseltine, the principal of Irving A. Robbins Middle School in Farmington, Conn. But, he conceded, "right now we are at somewhat of a crossroads in terms of leadership."
By virtually all accounts, the man who led the group for the past eight years heightened the NASSP's profile in the school reform movement and among corporate givers.
Mr. Dyer, a former superintendent of the Phoenix Union High School District in Arizona, spearheaded a groundbreaking report on restructuring high schools, "Breaking Ranks," in 1996 and paved the way for the formation of both high school and middle school groups within the association dedicated to school reform.
Mr. Dyer, who was paid $174,000 last year, won millions of dollars in services and programs for the NASSP from such corporate giants as the Metropolitan Life Insurance Co., McDonald's Corp., and USA Today. About a third of the group's $25 million annual budget comes from corporate sponsorships, grants, and revenue from meetings and institutes. Sales of publications and other materials make up another third, and the final chunk comes from membership dues.
Echoing an adjective used by Mr. Dyer himself, both his admirers and detractors often describe him as "entrepreneurial." Some say that in his zeal to put the NASSP in the national limelight, Mr. Dyer neglected the support of principals and state-level directors, and risked the organization's integrity by courting corporate support.
Mr. Fagan, the board president and the principal of Rocky River High School in Rocky River, Ohio, agreed that state leaders were not in the loop. "They need to feel a part of NASSP and that their voices are being heard."
Mr. Howe, the former board president from Missouri, said the issue went even further. "I think that those of my vintage had interest and pride in NASSP, and I think that has been eroded over time to some degree," said the retired Jefferson City, Mo., principal. "We are quite concerned that steps be taken that confidence and pride be restored."
But others argue that Mr. Dyer brought new energy to the secondary principals' group at a time when swift-moving educational currents would have left a more conservative group behind.
James M. Aseltine, a board member and the principal of Irving A. Robbins Middle School in Farmington, Conn., said the board's recent actions do not represent dissatisfaction with the association's direction. "I don't think the issue was so much with what NASSP has been able to deliver as the persona of the organization," he said.
The board, which is launching a national search for a new leader, hopes to have named a head by the end of the summer, said Thomas F. Koerner, the NASSP's acting executive director.
Mr. Koerner, a 27-year veteran of the organization, said earlier this month that he hoped to hire a finance chief soon, and that outside auditors were evaluating several candidates.
The organization's 110-member staff may have to tighten its belt to make up the shortfall, Mr. Koerner said, but he foresees no layoffs, reductions in service to members, or dues increases as a result.
Meanwhile, the board is doing some soul-searching about its ability to oversee the financial affairs of the organization. In line with a recommendation from the auditors, it is establishing a finance committee "so the board will have more insight into the budgetary process," according to Jerry D. Winkle, a board member and the principal of Altus High School in Altus, Okla.
The organization's finance committee is also likely to consider a more aggressive investment policy.
"We probably deserve some constructive criticism" for not pushing harder to find out about the association's finances, Mr. Fagan said. "We have been kept in a gray area about this for years."