From UB

Orlando, Florida, may be best known for its Magic Kingdom and Island of Adventure, but for three days in June it played host to another "theme park" in the form of the 2006 EduComm conference. The theme, of course, was connecting education with audiovisual and information technology.

Many of the answers to your endowment building questions may be found in tried-and-true investment strategies, but you may need to look farther-all the way to the other side of the globe.

From covering risks to increasing international investments, endowment managers at universities and colleges, as well as investment firms, continue to pay close attention to the economy-in the U.S. and globally-as they look to identify new ways to build endowments.

Short credit is playing a key role in endowment strategy, say managers, because credit spreads are much too narrow and they're likely to widen.

And, as credit spreads widen, they impact equities, fixed income, and most hedge fund strategies.

Credit spread is the spread between Treasury securities and non-Treasury securities that are identical except for quality rating. The term can also refer to an options strategy where a high premium option is sold and a low premium option is bought on the same underlying security.

"Clients for the most part are not rewarded for taking risks in this environment, so we're trying to protect against this," says Dick Anderson, practice leader for higher education at St. Louis-based Hammond Associates Institutional Fund Consultants.

The need for short credit is created by the liquidity in the economy, which raises asset prices. What that means, he says, is that the higher price you pay for an asset, whether it's stocks or bonds, the lower the prospective returns.

"That's the trend," Anderson says. "As people are fooling with that trend and are taking more risks than the prospective rewards, we're trying to counter that by buying protection, and specifically we've been buying credit production, short credit funds."

So while investors are taking more risks, Hammond Associates is working with clients to reduce risks.

"The notion is that everyone is embracing risk," Anderson says. "Our intention is to back away from risk."

A move toward more international investing is another trend that's cited by college and university endowment managers around the country.

"Increasingly we are allocating assets to non-U.S. common stock in both developed and emerging markets," says Jeff Davis, senior vice president for finance at the Kansas University Endowment Association, which has an endowment portfolio for The University of Kansas valued at $950 million.

KU's endowment strategy, Davis says, involves considering allocations that more closely reflect each region's gross domestic product.

"We're increasingly looking more globally rather than just locally in the U.S. for investment opportunities," he says. This includes looking more toward international developed markets and international emerging markets.

"I think the underlying thesis is that if you look at world economies and where growth and opportunities are, it's not just in the United States," Davis adds.

"We're increasingly
looking more
globally rather than
just locally in the
U.S. for investment
opportunities."
-Jeff Davis, Kansas University
Endowment Association

Jeff Margolis, director of Institutional Sales and Marketing at TIAA-CREF, a New York-based financial services organization, has noticed that there is definitely a secular trend toward international exposure.

The trend, he says, is likely to continue "as the world, excluding the United States, grows faster than the United States itself," says Margolis, who serves as head of business development for TIAA-CREF Asset Management.

Davis says KU is also looking to increase its allocation to international bonds. "When you look at where the productivity and economic growth is in the world, it's more globally distributed than it was years ago," he says.

Jonathan Hook, chief investment officer for Baylor University (Texas), reveals that the institution moved its international allocation up last year. It's a tactic that has paid off nicely.

"In terms of strategy we are continuing to diversify further," Hook reports. He says the institution is also using diversification as a "first-line measure against a market downturn." Baylor, with a $750 million endowment, has incorporated short credit into its portfolio, he adds, and a goal is to add some return into its domestic equity portfolio.

In addition, its portfolio now has a sub-asset class within the real assets category of investments (those that are physical or identifiable, such as gold, land, or equipment). "We think it will be a lower-risk asset class with good-not necessarily great-returns and be very uncorrelated to the markets," he says.

Further, Baylor is looking into the possibility of recasting its asset allocation to divide its portfolio between different themes or strategies as opposed to the traditional style boxes. The work is in process now and will not be finished for a few more months, at which time it will reach a formal approval stage, Hook says, adding that "it has gotten good response from those who have seen it so far."

Ron Neville, chairman of the Investment Committee of the Drury University (Mo.) Board of Trustees, says he believes his institution is ahead of the curve compared with its peer group. His evidence: Going back more than 15 years ago, Drury made a 20 percent commitment to international equities, which was unusual at the time. "And still today we have a higher commitment than the rest of our peer group," Neville adds. The university has an estimated $75 million in endowment funds.

Diversification is the motivation for Drury's investment strategies, Neville says, but what's been going on in the last month in the markets is flying in the face of that.

The typical situation used to be that if the U.S. markets declined, foreign markets might go up, Neville explains. "But in the last month, U.S. markets have gone down, international markets have gone down, gold's gone down, oil's gone down-everything."

"Another reason for diversification is that a lot of people are predicting that the dollar versus foreign currencies will continue to be weak, so foreign assets will remain stronger. That's helped Drury in the last few years."

Jud Koss, managing director of Commonfund, which manages approximately $36 billion for more than 1,600 educational institutions and other nonprofits, says he sees more and more IHEs turning to outsourcing.

He's not talking about the kind of outsourcing already in place at most institutions-where they hand over aspects of the investment management process to organizations outside the college or university-but rather when an external provider takes over responsibility of the day-to-day management of a majority of an institution's investment funds.

Koss says one of the reasons that "mega" endowments, such as those at Harvard and Yale, just keep getting bigger is that they each have entire internal management companies dedicated exclusively to their endowment's management.

Successful endowment investment becomes more complex, he says, as diversification becomes more important. The number of asset classes has grown from three to 10 or more, yet many colleges and universities just don't have the luxury of full-time staff.

"We are continuing to
diversify further and
using diversification
as our first-line
measure against a
market downturn."
-Jonathan Hook, Baylor Unversity

Further, over the last five years, there's been a marked shift toward investments in classes of alternative assets, such as real estate, commodities, venture capital, private equity, oil and gas, timber, distressed debt, and hedge funds.

The 2006 Commonfund Benchmarks Study shows that most endowments and foundations are using alternative investments to a greater extent, as well as active asset allocation, diversification, and risk management, to maximize both returns and intergenerational equity.

John S. Griswold, executive director of the Commonfund Institute, Commonfund's research and education arm, says the leaders achieved significantly higher returns by increasing allocations to alternative strategies and reducing allocations to domestic equity in 2005.

"This indicates institutions' greater need for special expertise in due diligence, risk management, and proper diversification of an alternatives portfolio," he says, responding to the study.

The trend has meant sub-categories, each carrying a different risk of loss, impact, return expectation, and higher levels of derivative risk. "These schools don't have the manpower to observe all the investments needed to obtain the diversification," Koss notes.

Another Commonfund study, the 2005 Educational Endowment Report, showed that the 707 institutions participating have an average of 1.2 full-time equivalent staff members. But staff size varies widely, usually in proportion to the size of the endowment, according to additional Commonfund research.

Michael West, treasurer and vice president for finance and administration at Skidmore College (N.Y.), believes it is likely that smaller to mid-size schools like his will follow successful strategies used by the larger schools. The college grew its endowment from $35 million in 1993 to more than $220 million in 2006.

Those strategies, he says, will include moving out of traditional U.S. stocks to low correlative investments such as hedge funds, and using different strategies within that asset class with specialized managers, such as investing in distressed securities.

"This trend will result in many more managers, even for relatively small portfolios," West says. "Also, there is likely to be continued movement to international investing, as returns are attractive, diversification is improved, volatility in returns are minimized, and as the world economy grows at a faster pace than the United States."

Those kinds of changes, West says, will be difficult for smaller to mid-size schools because generally they do not have access to the best managers in these asset classes due to investment minimums, frequent personnel changes, and closed funds. Also, smaller colleges are more limited in the risk profile that they can take on, he says.

"Generally smaller and mid-size colleges do not have the resources-staffing and related time-to manage these complicated, changing, volatile investments," West maintains.

"These schools generally cannot compete with the salaries on the street, nor recruit or retain the highest-quality professionals, and they don't have the economies of scale larger schools can achieve by spreading the costs of investment management over a larger pool of assets."

The Commonfund Benchmarks Study released in January, which covers 729 private college and university endowments, public educational endowments, independent school endowments, and private foundations in support of education, showed 32 percent of the institutions are expecting to increase their alternative strategies allocations. Twenty-four percent said they expect to decrease domestic equity allocations, and 16 percent expect to decrease cash and short-term allocations. Few expect to make any change to fixed income allocations. International equities expectations are split, the study shows, with 14 percent anticipating a decrease, and 10 percent an increase.

West says that although firms are forming or have recently incorporated to contract or outsource investment management, and pooled investment vehicles do exist, generally results are uneven, or untested over different market cycles.

TIAA-CREF's Margolis acknowledges that college and university endowments are outsourcing "a bit more," but he says it is still not pervasive.

According to Commonfund, the outsourcing trend is being fueled by the lack of time university and college trustees, specifically investment committees, can give to endowment strategy.

Calling it a "conundrum faced by the twin trends of growing complexity and static resources," Commonfund CEO Verne Sedlacek, in a commentary published last winter in CFQ, the firm's quarterly booklet, questioned whether the investment committee model is the optimal way to manage a portfolio.

The article poses this question: How can trustees exercise their responsibilities in a manner consistent with that of a fiduciary and how a group of individuals can focus their limited resources in a way that can fully address all of the issues spanning everything from high-level policy to manager selection?

That's what Commonfund's managing director Koss wonders too, saying that some trustees get caught up in what he calls the "downstream stuff"-such as rebalancing portfolios-when they should pay more attention to the upstream, big-brain picture.

"Those are things that these folks shouldn't get mired in," he says of what lies downstream.

However, West gives Skidmore trustees a lot of the credit for the college's significant endowment growth.

"We have a higher
commitment [to international
equities] than
the rest of our peer
group. ... A lot of
people are predicting
that the dollar versus
foreign currencies will
continue to be weak."
-Ron Neville, chairman of the
Investment Committee of the Drury
University Board of Trustees

"As our trustees become more engaged appropriately in investment policy and strategies, and more invested in the college, and choose to spend more time with us, we gain their valuable expertise, and access to their contacts. Frequently they see the difference their contributions and the contributions of others make and they donate more money to the college," West says.

Further, the trustees are able to reflect on deals or managers and consider what's good for Skidmore.

"This engagement, reflection, and judgment is far superior than a paid consultant's advice giving the college historical data on performance of a fund, or the r?sum? of a fund manager," West says. "This is a critical difference, I believe."

He cites Arthur Zankel, former chair of the investment committee and longtime member of the board. According to West, it was Zankel who more than a decade ago led the college to looking at investment classes, including alternative investments, hedge funds, and real estate.

"Skidmore's portfolio structure looked more like a university than a small college," West says. It was Zankel's connections and those of other trustees, along with Zankel's national reputation, that allowed Skidmore to get into funds generally closed to schools of Skidmore's size.

"His and others' direct knowledge of a fund's management team, their investment philosophy, mistakes, lessons learned, and experience trumps a third party or report on these important and critical issues," West points out.

Zankel, whose two sons attended Skidmore, helped recruit other strong investment professionals to the board. Today, Skidmore's investment committee remains strong, and Zankel recently left Skidmore $42 million in his will-"clearly a transformative gift for the college he loved," West says. "Leadership and appropriate engagement makes a difference."

Toni Cardarella, a freelance writer based in Kansas City, Mo., specializes in business and finance topics.

As colleges and universities have put into placE large-scale content management systems (CMS) in recent years to take care of indexing and serving up their vast amounts of files, they have been making use of commercial products new and old to create these systems. Many of them have gone that route despite the availability of open-source alternatives, opting for safety over open-source promises of freedom.

But wasn't open-source technology supposed to be the savior of software budgets and vendor-stressed information technology (IT) departments? Its promise has been to give users the ability to get into the source code and make changes as they see necessary, without having to rely on a large, impersonal software company (or a small software company that may not be in business tomorrow) to make timely updates to the software.

True, open-source technology has been much talked about in recent years, but its uptake has still been slow.

In "The State of Open Source Software," a March 2006 report from the Alliance for Higher Education Competitiveness (A-HEC, a technology research organization serving the university and college market), A-HEC founder Rob Abel wrote that two-thirds of chief information officers at institutions of higher education have considered or are actively considering using open-source technology. Furthermore, about 25 percent of all institutions are engaged in implementing higher ed-specific open-source applications.

But that doesn't mean open source is a tidal wave. In fact, its popularity may be broad, but it's not deep. A significant switchover to open source from commercial software would have to take place for its "also-ran" status to change. "Despite much enthusiasm for open source, there are no signs that a large shift is occurring at this time," Abel writes.

Open source has been widely popular in Europe for years, with Spanish schools, French government agencies, and German municipalities adopting it enthusiastically. Governments there have pushed open source both out of national pride (choosing it over U.S.-based commercial software vendors) and as a way to keep costs down.

I would be
delighted to use open-source technologies anywhere we can. But when you get to
a high-level
application such as content
management,
I haven't yet
seen open source that
fits the criteria we have."-Larry Bouthillier, Harvard Business School

In many cases, they adopted e-government initiatives far earlier than U.S. agencies and municipalities, and they have kept up the momentum. A 2005 survey by the Maastricht Economic Research Institute on Innovation and Technology about open-source use in Europe found, for example, that 98 percent of local Spanish authorities used open-source applications.

Open source is also widely popular in U.S. higher education, but IHE technology professionals are choosy about where they use it. They tend to employ it in smaller bits of programming (or in the tools programmers use to create and modify their programs) rather than in large, complex, mission-critical programs, say tech leaders.

Whatever the current status of open source's adoption, it's unlikely to disappear from the modern campus. "In the university environment, you're never going to outlaw open source," says Jeff Ernst, vice president of marketing at FatWire Software, a maker of a commercial CMS product. "You're always going to have the kids who are going to be enamored with getting into the source and doing whatever they want." Ernst says his customers tell him they have open-source elements throughout their systems, especially on "renegade" sites run by students or small departments, but not on mission-critical websites such as those used for recruitment.

Open-source CMS products do exist, such as PostNuke and Mambo Server, as do communities of users who are supporters of open-source CMS, such as the aptly named OpenSourceCMS website. But users are not necessarily convinced the products can do the job.

"I would be delighted to use open-source technologies anywhere we can," says Larry Bouthillier, director of educational technologies and multimedia development at Harvard Business School. "When you go up to a high[-level], total application such as content management, the thing I haven't yet seen is open source that fits the criteria we have."

When HBS staff needed to catalog their rapidly expanding library of video content, which had outgrown the abilities of earlier solutions, they used ClearStory Active Media, a commercial product. The application indexes the videos and supporting files (such as Microsoft Word documents or PDF files) so they can be served up easily to faculty and students searching for the right files.

HBS's case is a good example of a CMS that has evolved over the years. In late 1995, the institution started streaming video on campus. "We've always had lots of video in the curriculum-interviews with protagonists, documentaries, etc.," says Bouthillier. "But it required scheduled viewing, and students and faculty would all have to go someplace to view it." Over the years, IT staff wrote common gateway interface scripts to help users find videos on the system. They also added capabilities to:

Scan the videos and provide snippets of text and snapshots of video scenes to prospective viewers;

"Support can be a challenge if you run into software problems, depending on who developed the code.
If you purchase a particular software package from a vendor, you get support." -Deb Wells, Bowling Green State University (Ohio)

Automatically detect the bandwidth capacity of viewers to deliver to them the video at the top quality their system is able to handle; and

Include podcasting and RSS feeds for users with the ability to access them.

The system is now about 50 percent commercial product, and 50 percent home-grown, according to Bouthillier. HBS also recently implemented a Wiki solution, to which users across campus can add information.

Open-source options that used the script language PHP (see glossary, p. 66) simply didn't work well with the rest of the business school's system. So officials chose Confluence Wiki software from Atlassian Software Systems. "We looked at all the open-source stuff and at the commercial stuff, and we ended up going with the commercial product because it was the one that would allow us to integrate into the rest of our system," says Bouthillier.

Even open-source advocates such as Virgil Wong, head of web services for Weill Medical College at Cornell University, have shied away from using it on content management systems.

When the college was looking for a CMS solution in 2005, administrators considered both open-source and commercial products before choosing Element115 running on the FatWire Content Server. "As an academic institution, we see open-source technologies as much more of an academic challenge," says Wong. "Our sense was that with open-source technologies, building project plans is extremely difficult, predominantly because of the uncertainty of open-source products. The tools we looked at had very little support. Ultimately, no one is accountable for maintaining the security of your content management system. You're at the mercy of any rescuers who might arrive."

That's not a risk he wanted to run with his system, which has about 184,000 unique visitors each month. In the year-long process of internal meetings and consultations to refine the requirements of the system and evaluate the possible solutions, Wong also wasn't able to find open-source help that would let him assemble a project plan.

Support "can be a challenge if you run into software problems, depending on who developed the code," says Deb Wells, manager of web development at Bowling Green State University (Ohio). "If you purchase a particular software package from a vendor, you get support."

BGSU leaders began looking at CMS in 2002, when the systems were starting to become affordable enough for universities to consider, notes Wells. The goal was to move from having every website looking different and following different style rules to a more unified look and feel that would also simplify content creation by non-technical users.

They selected Rhythmyx content management solution from Percussion Software. Rhythmyx not only provides a way for non-technical users to create web content without having to learn HTML or Adobe's DreamWeaver web-creation software, but it also provides support.

"We don't have enough staff to support [all of the departments], so this product is great," says Toby Singer, executive director of IT at BGSU. Bouthillier is contrarian on open source and support. "For the most part, buying a commercial product because you want support is often disappointing," he says, adding that there are exceptions among the vendors.

The far-reaching nature of CMS is a big part of the reason for caution among campus tech leaders about adopting open source. If an isolated component of a department's website goes bad, or if the student newspaper posts the wrong editorial cartoon one day, the damage or embarrassment isn't too great. But modern CMS setups are typically campuswide, aggregating content from every department and serving it up to faculty, students, administrators, alumni, prospective students, and others.

Venkatesh Korla, former director of software engineering at the Rush University Medical Center in Chicago, had to address two seemingly contradictory needs a couple years ago when looking for a CMS solution for that institution. He was looking for something that was broad like any enterprise-level CMS solution to aggregate information from disparate content creators and provide it to disparate users inside and outside of the hospital; he also needed a solution that was specific to health care organizations, however.

Those requirements led to his team creating the foundation for Element115, a spinoff of RUMC for which Korla now serves as president. Element115, the technology used by Wong at Cornell, incorporated typical requirements of health care organizations that make up, by his estimate, 80 percent of the CMS solution, which is then customized as needed for the remaining 20 percent. Health care institutions have their own taxonomy and semantics that need to be considered when serving up information in different ways, depending on whether the user accessing the information is a doctor at the hospital or a prospective patient researching his or her illness.

"The biggest challenge they have in an academic institution is to come to an agreement of what content they want and how they want it to work together," says Korla. "It is surprising that these academic institutions, which have so much content like a publishing house, don't have the [content management technology] like a publishing house."

This is the second in a two-column series. The first, published in May 2006, was an anonymous letter from a chief marketing officer to a college president.

In preparation for this month's column on best practices for employee and pre-employment drug testing, human resource departments at more than 25 colleges and universities nationwide were contacted. Many responded, stating that their school did not drug test employees beyond the U.S. Department of Transportation mandate. The Omnibus Transportation Employee Testing Act of 1991 requires all employers to drug test transportation workers who perform safety-sensitive functions, such as employees whose jobs require them to have a commercial driver's license or operate motor vehicles that weigh more than 26,001 pounds, transport hazardous materials, or carry 15 passengers or more.

Yet, the same scenario doesn't hold true in the private sector. A March survey conducted by the Society for Human Resource Management found that 84 percent of the 454 employers contacted said they conduct pre-employment drug testing; 39 percent do random drug testing.

So why the discrepancy? Are college campuses considered safer environments than corporate campuses? Or, is drug testing just considered an invasion of privacy?

Some of these schools were asked the same questions, but none really offered any answers. As vice president of Drug Testing Services at Aurico Reports, Wayne Hovland runs into the same problem every time his drug screening company contacts institutions of higher education.

IHE "bury their heads in the sand and don't even entertain the thought of a faculty drug-testing program." -Wayne Hovland, Aurico Reports.

"They bury their heads in the sand and don't even entertain the thought of a faculty drug testing program," says Hovland. "When I bring it up, they will say something like, 'We are not going to talk about that,' or 'We are not interested in doing that.' I have heard it said that faculty would not put up with it."

There are plenty of reasons to drug test. During the last decade, federal and nonprofit organizations have published hundreds of sobering facts about the impact of drugs and alcohol on the job.

According to Drug Free Pennsylvania, the annual cost of substance abuse in the workplace for U.S. employers is $140 billion due to lost productivity, absenteeism, accidents, medical claims, and theft. Pennsylvania workers who are problem drinkers are absent from work four to eight times more often than those without a problem, while drug users miss an average of five days per month. Likewise, 38 percent to 50 percent of all workers' compensation claims relate to substance abuse. Drug users are also three times more likely to use medical benefits compared to other employees, and 80 percent steal from their employer to support their habit.

The Substance Abuse and Mental Health Services Administration revealed more startling statistics with its 2004 National Survey on Drug Use and Health (http://oas.samhsa.gov/trends.htm): Eight million full-time workers, age 26 or older, reported being heavy alcohol users. Another 9.5 million full-time employees, age 18 or older, reported using illicit drugs in the past month. Alcohol is also a contributing factor in 39 percent of all work-related traffic crashes, states the Occupational Safety and Health Administration.

To be fair, let's examine the other side.

If drug testing is conducted in a vacuum, it can be perceived as oppressive and a way to weed out undesirables, leading to a poor work environment, says Elena Carr, director of Working Partners for an Alcohol- and Drug-Free Workplace, a U.S. Department of Labor program. In such situations, she says, drug testing is considered more of a policing function rather than a program that focuses on employee safety or health.

Carr also points to many organizations that function well with a zero-tolerance drug policy that's supported by a strong employee assistance program (EAP).

"A policy can stand alone, but I'm not sure it replaces drug testing as a tool of detection and deterrence," says Carr, adding that the five components of a drug-free workplace are a policy, supervisory training, employee education, drug testing, and an EAP. "But it does set the expectation."

No one disputes the danger of alcohol or drugs in the workplace. How would officials at a school that decides to expand drug testing to other employee populations in the future proceed?

There are currently four different types of drug tests, explains Jeffrey Ellins, president at Datco Services Corp., a third-party administrator for drug and alcohol testing and compliance. He says the most stable is urine, because there are established or accepted industry standards and it's very difficult for people to cheat the sensitive testing technology.

An alternative is blood testing, which Ellins says is not reliable because the federal government has not yet set any standards. For example, someone's blood test may turn up positive for amphetamines. That could mean several different things. The employee could be abusing illegal drugs or under a doctor's care, taking a prescription drug. In the latter case, there may only be a trace amount in the person's system. But since there is no standard, no one really knows what is an acceptable amount.

Hair follicle testing is yet another method. It reveals a person's 90-day history with drugs/alcohol, so some employers prefer to use it as a prehiring tool. But it can't test for current usage.

The last test-on oral fluids or saliva samples-was introduced three years ago. Ellins says this test is becoming more stable and doesn't require a sealed bathroom like with urine testing. A person's mouth is simply swabbed and the results are instant. However, there is a downside: The test is subjective. It is conducted with a reagent that chemically reacts with the cotton swab. If it's positive, there's no reaction. If negative, a line will appear. What if the line is faint? It then becomes a judgment call by the test administrator.

For those using instant kits, Ellins recommends urine kits, partially because of their expense-less than $10. Oral fluid kits are available for under $20. Blood and hair tests are the most expensive, since they must be conducted by a lab, and can run from $35 on up per employee.

Any drug-testing program, he adds, must include two essentials-a policy that explains the consequences of a positive test and a training component that communicates information to employees about the signs and symptoms of drug or alcohol misuse. His company publishes a handbook that explains the U.S. Drug-Free Workplace Act of 1988, the physical effects of drug and alcohol abuse, and a list of resources where people can seek help.

When the DOT began testing, Ellins says the positive rate was 10 percent. That number has dropped and stabilized at four percent. "Four percent sounds small, but it could be over hundreds of thousands of employees," he says.

Ball State University (Ind.) drug tests approximately 83 of its 3,500 employees due to the DOT mandate. In the last 10 years, only a handful have tested positive, says Marta Stephens, coordinator of the school's work/life programs.

"Initially, we jumped right on the [DOT testing]," she says. "The workers know we're going to be right on top of this and not let anything slip. The supervisors are really great about making sure licenses and physicals are updated. It takes a lot of people to make this work."

While the DOT decreased the number of employees who had to be tested for alcohol from 25 percent to 10 percent, Stephens says the school stuck with 25 percent as a safety precaution. Still, BSU has no plans to expand its drug-testing program. "There's no need to extend this to new hires in general," she says. "There just doesn't seem to be any reason to."

Besides understanding the DOT's drug-testing rules and procedures, one of the most difficult challenges for Pepperdine University (Calif.) was finding a reliable vendor for its testing process, says Chip Moore, chief HR officer. Nearly 10 years ago, the school began sending a sample of its workforce-about 10 employees out of its 1,400-member workforce-to an external lab for drug testing annually.

Moore's staff scoured the local market for a vendor before finding one that not only understood the federal guidelines and was precise with testing, but also who would manage the entire process, from training employees to random testing.

What's more, he says, the vendor had to show respect for employees. That can sometimes be overlooked by schools.

So far, drug testing has been a continuous learning process, Moore notes. But he does believe there is a good argument to be made for testing more employees.

"The basic premise is you want to protect your people from either themselves or the impact of drugs," says Moore. "We will probably in the long run increase the number of people involved in that. We've just chosen not to do so at this point. We haven't gotten to the discussion part."

So what about your school? Are you ready for that discussion?

Carol Patton, a Las Vegas-based freelance writer,specializes in covering human resources issues.

There was a time and place in American higher education when our urban universities sat at the pinnacle of power, prestige, and influence.

It's not uncommon for a capital campaign or annual fund drive to focus on scholarships or need-based grants. Here's how financial aid officers can help advancement staff make their fundraising case-and avoid pitfalls in establishing endowed scholarship programs.

In North Carolina, two-year colleges have taken in a vast number of laid-off workers in the last decade. The number of unemployed students in North Carolina's 58 community colleges rose from 40,000 in 1999 to 109,917 in 2004-nearly 175 percent.

Anyone who is following technology trends is hearing more about the marvels of RFID. Prognosticators envision a not-too-distant future in which there will be no lines in supermarkets and no need to pay cash at the gas pump. RFID will act like a "smart" system, tracking items as they are pulled off the shelf and deducting payments automatically from bank accounts.

These pundits are obviously putting a lot of faith in RFID, a technology that is simple in theory, but-like all new technology-expensive to implement. Still, retailers and security services are finding more mainstream uses for RFID. Can it be too long before RFID comes to campus?

Truth is, some universities are already using RFID technology, although use is limited.

"RFID technology allows us to run a better library."
-Bruce Miller, University of California, Merced.

It may be a while before RFID technology is in place at campus bookstores, dining halls, and rec centers, but if current buzz is any gauge, RFID is going to become a common technology on campus and everywhere.

The letters RFID stand for "radio frequency identification." An RFID tag, which can be embedded in a security card or placed on a packaging label, gives off a radio signal that is picked up by antennae in the reading devices.

If programmed into the system, a person's identification information and other data are easily verified-sometimes at great distances-without the need for the user to swipe a card or stand in close proximity to the technology.

Some RFID tags are made to be "read only" for one-way communication-these types of tags are the ones most commonly used by libraries, or in highway speed-pass systems.

Other tags are in "read and write" format, allowing for more control. Data can not only be read by the system, but can be changed on the fly. The data stored in an RFID tag can be updated-a retail price can be marked down, for example.

RFID technology has been around for a while, but uses have been mostly applied to agriculture and industrial sectors. For example, ranchers are already tracking large herds of cattle with RFID signals; transportation managers use it to monitor railroad cars.

If RFID technology is being used at all on campus, it's most likely in the library to track research materials and sign out books. The library system at the University of California, Merced started using RFID technology this year. "RFID technology allows us to run a better library," says R. Bruce Miller, the university librarian.

The UC, Merced library uses RFID technology in two ways: to check out books and to monitor the use of research publications and other materials that do not leave the building. The system reads data programmed to the RFID tags that have been placed on cards inside the library's books and publications. Each book is identified by a string of numbers that can be matched to publication name within the system.

A database records that ID when a book is checked out, or even if it is moved off a shelf for a period of time. Staff can monitor who has taken out a book, but the RFID tag inside the publication does not contain any personal information about who is reading what, nor does it include the book's title. The system was set up this way to quell fears of privacy violations, says Miller.

"Even if some other RFID system breaks the encryption, all someone would see is a string of numbers. There is no personal content on the card," explains Miller.

The RFID system, though, will be relied upon to do more than track materials. After all, libraries already have bar code systems and related readers that can help do that.

The real use for RFID will come when the library culls through the research material that does not leave the facility. Librarians at research facilities routinely have to decide which materials should be kept and which ones should be removed, says Miller.

Until RFID systems, this required poring through written requests for research material and also relying on memory. "We would have to take a highly paid librarian and walk through asking about what has been used. That cost is horrendous," he says. "You literally have to touch every book in the system."

RFID will automatically track usage. "Down the road, when I have to take 15 percent of the books out of the library, I will be able to see what hasn't been used." RFID will allow the staff to rely less on manual labor and more on analytics.

Considering the efficiency, why aren't RFID systems used on more campuses and in more general retail locations? High cost is the reason. An RFID reader can run $1,000. Comparatively, the cost for the standard reader used for mag-stripe technology might be several hundred dollars.

Miller compares the RFID costs to other library tracking systems. Inserting and tracking a book with a bar code system might cost 10 cents per publication, whereas inserting an RFID tag costs 85 cents. "When you are dealing with 100 books, that's no big deal. When you are talking about millions of books, that's an interesting number," he posits.

UC, Merced is in the enviable position of being a start-up facility. It is the newest campus in the UC system, having opened just last year. The library, which opened this year, has only 40,000 books. Investment in RFID is possible because there are fewer books to deal with and no older volumes to retrofit with the new technology. The institution's inventory is quite manageable when compared to other libraries in the UC system. UC, Berkeley, for example, has at least 10 million books in its library, Miller notes.

That's not to say that other higher ed library systems haven't implemented RFID. The library at the National University of Singapore is known for its RFID system, says Miller. Still, it will be awhile before the technology is more the norm than the exception at campus library systems.

And while RFID holds the promise of potential labor cost savings and more accurate data, Miller has obviously not realized them yet.

But there are reasons other than cost that explain why RFID is not more commonly in use on campus.

A concern:
Hackers can exploit imperfections in RFID just as they have with software and networks.

There is not yet a universal RFID technology standard, notes Jim Zaorski, CEO of Sequoia Retail Systems and a recent speaker on RFID at the 2006 CAMEX conference sponsored by the National Association of College Stores.

Researchers at the Massachusetts Institute of Technology developed an RFID technology, but the rest of the industry has been hesitant to recognize that format as the RFID protocol.

"People said, 'This is great, but we shouldn't have one lab in Cambridge making the standards.' By this point everyone thought we would have a set of RFID standards, but we don't," says Zaorski. Until there's a universal standard, there will be hesitancy to select a commercial system that may not work on a wider or global scale.

The other concern is security. Hackers can exploit imperfections in RFID technology just as they have with software and networks. The media has already covered the instance of a graduate student at UC, Berkeley who checked out books from the Oakland Public Library and overwrote the data on the RFID tags with a commercial system to prove that libraries should employ tighter RFID security.

Another report, released this spring from researchers at the Vrije University in Amsterdam, warned that RFID codes can be infected with computer viruses that can be spread from point to point. The report, titled "Does Your Cat (or Passport) Have a Computer Virus?", is meant to dispel the widely believed assumption that RFID tags cannot become infected with such viruses because of their limited memory.

"The tags apparently are more vulnerable than first thought," the researchers write, while recounting their own successful efforts to place viruses into RFID tags. They also warn that small, infected tags can do a huge amount of damage. An entire database can become corrupted if a virus is not detected in time. They offer tight security measures and routine system checking as the main antidotes.

Despite some of these new findings, momentum is growing for RFID use.

This spring card vendor HID announced a partnership with MIT to create a website that will not only be a primer about RFID technology, but also address concerns about privacy and vulnerabilities.

It may be a while before every student is carrying a card with an RFID tag, but given the interest and the potential, it may not be too long before the technology is part of higher education.

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