I first started blogging about fraternities and sororities in 2011 while working for my fraternity headquarters. I see my blog as an attempt to pull back the curtain and explain how fraternities work to their members and the public. It is, if my fraternity were ever to document such a thing, my contribution to the fraternity experience - like it or not!
Faced with pandemic shutdowns, the prospect of another global war, and the all-but-certain economic austerity in our future, I began to imagine that fraternities (and society in general) were facing a crisis bigger than any one hazing incident, something more akin to World War 2. Fraternity life became comatose during the war; many organizations lost chapters or merged with others in the aftermath.
The lack of resources and education
Fraternities are technically little federations, and voting members (particularly, dues-paying students) must understand how things work, how they should work, and how to get involved if things do not work as well as they could or should. Less combatively: it’s good not to be completely ignorant of that which you are part of.
As I looked through fraternity websites to put together an article with free fraternity resources (click here), I found that few fraternities provide any [publicly accessible] materials related to their governing processes. SigEp had a legislation guide, which serves as the base for the attached "legislation and petition guide."
Furthermore, there is a lack of information that would serve to assist those who would love to get involved in something other than teaching and enforcing rules. How would you go about getting an inter/national policy changed in your fraternity or sorority? Do you know where to look to find that information? Is there anyone appointed to assist members in your position within your local or national fraternity leadership?
So much of what fraternities do and how they accomplish it has been delegated away from student members and volunteers. Having gone so long without it, staff-centric fraternities lack the information and resources to rebuild or sustain the functional social fabric of our organizations.
The Fraternity Man Index, or FMX-34
Move over S&P 500, there’s a new economic bellwether in town. For this project, I gathered publicly available tax information for 34 men’s college fraternities. The selected fraternities all had annual revenues at or above $1,000,000 and they account for a significant majority of fraternity members*, revenue, expenses, etc.
My primary goals were to gather and publish useful financial information, to identify short-term trends, and to better understand the role “risk” plays in fraternity finances. I collected basic information like total revenue, total expenses, dues revenue, insurance/risk expenses, and net assets (see the attachments).
This is also an effort to demonstrate the size and scope of fraternity organizations. As a whole, they deal with a considerable amount of money. The college fraternity/sorority economy swells to hundreds of millions of (mostly student) dollars when you add in those organizations not included in this sample (women's organizations, for example), campus-centric Greek Life fees, and the products and services sold to fraternities.
*Specifically members of "Interfraternity Council" fraternities, which are similar in organizational structure and development. An expansion of this project would include a wider variety of fraternity and sorority organizations.
5 Simple Takeaways From the Report
First, the attached "Report" provides a breakdown of the numbers, additional takeaways, disclaimers, general notes, etc. I suggest you give it a read. These are just things I found interesting.
1 - Fraternities did a good job of managing expenses in the face of declining revenue.
To reiterate the size of the fraternity economy: These 34 organizations bring in about $130,000,000 in annual revenue, and almost all of that money comes from student members. Fraternity revenues as a whole declined by $21.3 million (14.8%) between the Fiscal Year 2019 (FY19) tax filings and the Fiscal Year 2021 (FY21) filings.
Still, expenses fell further - So much so that these 34 fraternities went from a combined net loss of $7 million in FY19 to a combined net profit of $7.7 million in FY21.
2 - The drop in revenue might be due to pandemic-related discounts
We cannot determine whether a decline in membership or temporary dues discounts in the face of pandemic shutdowns were the primary driver of the drop in dues revenue. It is certainly some sort of combination. Some fraternity leaders stated that the pandemics effect on membership was not as bad as many anticipated, and I can confirm that at least a handful of fraternities offered discounts.
Due to the steady Risk/Insurance revenue, however, my guess is that the discounts accounted for more of the decline. That is just a guess, but ask your executive director when you get the chance.
3 - Risk and Insurance are a menace
Of the fraternities who bill risk/insurance fees separately, those fees account for an increasing share of total revenue (35.9% in FY21 vs 32.2% in FY19) and Combined Dues Revenue (50.3% in FY21 vs. 44.6% in FY19).
Whereas dues revenue declined on pace with overall revenue declines, the decline in risk/insurance revenue from FY19 to FY21 was by just 0.0005%, and it actually increased in FY20!
Insurance (or "direct risk") expenses, however, declined by 7.5% over the three years. So risk/insurance revenue stayed flat even as expenses decreased. Overall, insurance accounts for about 21.9% of total expenses in FY21 (compared to 18% in FY19).
Aside from the ridiculous percentage of revenue and expenses attributed to risk/insurance, an interesting takeaway is that fraternities seemed to keep fees consistent throughout the pandemic.
4 - Changes in expenses are easier to navigate than revenue
Tax filings offer more options to itemize expenses. With additional time and effort, we could go back through the FMX-34's tax documents to figure out where expenses were most heavily cut.
The easiest expense to cut was related to in-person offices and consultant travel. Many fraternities learned throughout the shutdown years what I once predicted - traveling consultants are a high cost, low reward solution. Some have figured out ways to continue working remotely and to reduce travel costs even after restrictions were lifted (like many workplaces).
5 - Net Assets Increased
Despite all of the drama around revenue and expenses, the FMX-34 fraternities saw a combined increase in their net assets (the value of their savings, investments, property, etc.) over the shutdown years from $168 million to $180 million. This tracks slightly ahead of inflation for the period, too.
New and Lingering Questions
After this project, I want to know more about what fraternity organizations did to cut expenses, and what caused the drop in revenue. This information is essential when trying to determine if there is a serious, long-term issue, or if this is just a temporary slump due to the pandemic and shutdowns.
I would also like to expand the scope of the financial information collected to the early 2010s. This would give us a better idea of how the shutdown years compare to the "boom" of the 2000s (the same could be said for FY22 and beyond).
Most importantly, I wonder what in the world we are doing about insurance and risk. From my field of view, it seems as if we are addressing risk and insurance by spending ever more money on risk and insurance. This is not sustainable. More than 50% of the money students pay to fraternities goes to risk and insurance. Is that necessary? Or, is that a result of an "industry" that's too comfortable and profitable to change?
Did you have a chance to look through the data? What are your takeaways?