Endowments of small LACs

Parents Forum
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<p>^^heavens, I sure read those charts wrongly, seeing Amherst at 1.3 million rather than 1.3 billion. And I misunderstood the intent of your question. I always have financial aid and grant money front-and-center on my brain.</p>

<p>Good thing I majored in Art History. Yeesh. Terrible to have no sense of feeling for whether an endowment figure should be in the millions or billiions. Well, I’m good at what I do and terrible at what I don’t do.</p>

<p>You don’t have to worry; I serve on no committees that concern finance…anywhere, ever…</p>

<p>Good luck, NEMom.</p>

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<p>paying3tuitions, LOL. I cannot relate to what 60 million vs. 220 million, or 1.3 billion does for a school. I also have grants and loans on the brain too! It is very much on the front burner in my college search. I just don’t want to put my kid into an Antioch situation.</p>

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<p>^^yes, Antioch shook us all up. Thanks for your post.</p>

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<p>JHS, I sent a PM to you.</p>

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<p>Not only do they have bond ratings–it’s news in the Chronicle of Higher Education when the rating changes, because Moody’s (or other rating agencies) will often tell why they’ve changed the rating. </p>

<p>Here’s just one quick example:</p>

<p>[College X upgraded] by Moody’s Investors Service, from Aa3 to Aa2. Applies to $59-million in new and outstanding bonds. Reasons cited include the institution’s “exceptionally strong student demand,” resulting in the acceptance of less than 25 percent of applicants; financial reserves that would cover almost 4.7 years of operations; and limited plans to borrow more money.</p>

<p><a href=“http://chronicle.com/weekly/v47/i40/40a02701.htm[/url]”>http://chronicle.com/weekly/v47/i40/40a02701.htm&lt;/a&gt;&lt;/p&gt;

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<p>Thanks for the PM, northeastmom. I stand corrected – obviously, a number of private colleges have current bond ratings. Many smaller ones don’t, but it is much more common than I would have guessed. You should probably post a link to the S&P article on this thread – it is a great resource, not only for the ratings themselves, but also for explaining what factors S&P is looking at in rating the schools.</p>

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<p>I am not sure if this allowed, so I did not post it.</p>

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<p>MarathonMan, I have now sent a PM to you. Thanks.</p>

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<p>Here’s an article from the Boston Business Journal on bond ratings for local colleges:</p>

<p><a href=“http://www.bizjournals.com/boston/stories/2006/09/04/story1.html?page=1[/url]”>http://www.bizjournals.com/boston/stories/2006/09/04/story1.html?page=1&lt;/a&gt;&lt;/p&gt;

<p>Surprisingly, Northeastern University chose not to be rated.</p>

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<p>I found a few LAC financial statements to show how endowment investment income fits into supporting annual budgets.</p>

<p>Mills College (Ca) is a good example. Most finacial statements are structured the same as this one.
<a href=“Home - Northeastern University Oakland”>Home - Northeastern University Oakland;

<p>The first in a series of statements starting on page 4 is what’s called “Statements of Financial Position” commonly called the Balance Sheet, measuring the value of certain assets and liabilities at the end of the measured period (fiscal year 2006 in this case.) Under “Assets” you’ll see an “investments” line item, totalling $239 Million. This line contains the colleges endowment. In Mills’ case, total investments includes the endowment plus other misc investments…if you page down to note 5 on page 12, you’ll see an investment breakdown, with $198M as the total under endowment…this is the figure for Mills’ fiscal year 2006 end endowment value reported elsewhere. So, out of the $239M reported on the Balance Sheet, most of it is endowment. Some schools report just the endowment value under the Balance Sheet investment item…one has to check the footnotes every case.</p>

<p>The second statement on page 5 in this document is entitled “Statement of Activities”… the for-profit equivalent of this particular financial statement is called an “Income Statement” or “Profit & Loss Statement” measure the revenues and expenses over the period measured. The two top main sections of this statement report money in…that is, revenues, and money out, that is expenses. Revenues includes a line item for investment income…that’s the one we are interested in…it should be predominantly income brought in from endowment interest or the like, usable for their annual operations. Under the 2006 total column, Mills took in $8.6M in investment income. [Assuming a 10% average return from the endowment, Mills used less than 50% of their annual return for current operations, presumably re-investing the remainder.] Note the total expenses line…$47.7M…hence, Mills paid for 18% of their annual operating expenses with income from their endowment.</p>

<p>So, following the Mills model, a college with substantially less endowment would have substantial less investment income to subsidize their everyday operations…everything from teacher pay to latte bars. A college with $40M endowment using 50% of a 10% return would have added revenue of only $2M for the year. To me, that’s a big difference and undoubtedly the spending per student at a poorly endowed institution would likely be significantly less that a moderately endowed school like Mills.</p>

<p>Back to the financial statements, there’s one line in the revenue section which I don’t fully understand…“net assets released from restrictions for operations”…I suspect this may be gifts, not endowment, released during the period. At some colleges like Williams, this line item is substantial.</p>

<p>Here’s a few more LAC financial statements to peruse. Look especially at Berea where income from endowment constitutes about 50% of the colleges expenses for the year.</p>

<p>Davidson: <a href=“http://www2.davidson.edu/administration/vpbf/vpbf_assets/annualreport05.pdf[/url]”>http://www2.davidson.edu/administration/vpbf/vpbf_assets/annualreport05.pdf&lt;/a&gt;
Berea: <a href=“http://www.berea.edu/vpf/finance/documents/2006FinancialStatements.pdf[/url]”>http://www.berea.edu/vpf/finance/documents/2006FinancialStatements.pdf&lt;/a&gt;
Williams: <a href=“http://www.williams.edu/admin/controller/statements/williams_financial_statement_2006.pdf[/url]”>Williams College;
Hamilton: <a href="http://my.hamilton.edu/college/business_office/accounting/Hamilton%20College%20’04ye.pdf[/url]"&gt;http://my.hamilton.edu/college/business_office/accounting/Hamilton%20College%20’04ye.pdf&lt;/a&gt;
Whitman: <a href=“http://www.whitman.edu/content/business_office/financial-statements[/url]”>www.whitman.edu/content/business_office/financial-statements</a>
Amherst: <a href=“http://www.amherst.edu/~treasurer/Treasurer%20Rpt%202006.pdf[/url]”>http://www.amherst.edu/~treasurer/Treasurer%20Rpt%202006.pdf&lt;/a&gt;&lt;/p&gt;

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<p>a few more LAC financial statements:</p>

<p>Bowdoin: <a href=“Finance | Bowdoin College”>Finance | Bowdoin College;
Bucknell: <a href=“http://www.bucknell.edu/Documents/FinanceOffice/Bucknell%206-30-06%20audited%20financial%20statements.pdf[/url]”>http://www.bucknell.edu/Documents/FinanceOffice/Bucknell%206-30-06%20audited%20financial%20statements.pdf&lt;/a&gt;
Claremont McKenna: <a href=“Web Email Access | Claremont McKenna College”>Web Email Access | Claremont McKenna College;
Colgate: <a href=“http://portaldata.colgate.edu/imagegallerywww/3200/ImageGallery/2006%20Financial%20Statements.pdf[/url]”>http://portaldata.colgate.edu/imagegallerywww/3200/ImageGallery/2006%20Financial%20Statements.pdf&lt;/a&gt;
Colorado: <a href=“http://www.coloradocollege.edu/Bulletin/AnnualReport/financial.asp[/url]”>http://www.coloradocollege.edu/Bulletin/AnnualReport/financial.asp&lt;/a&gt;
Denison: <a href=“http://www.denison.edu/finance/afs2006.pdf[/url]”>http://www.denison.edu/finance/afs2006.pdf&lt;/a&gt;
Dickinson: <a href=“http://www.dickinson.edu/departments/finops/financialstatements/financialstatement0506.pdf[/url]”>http://www.dickinson.edu/departments/finops/financialstatements/financialstatement0506.pdf&lt;/a&gt;
Gettysburg: <a href=“http://www.gettysburg.edu/about/offices/fa/financial_services/forms/GBCFINALFS.pdf[/url]”>http://www.gettysburg.edu/about/offices/fa/financial_services/forms/GBCFINALFS.pdf&lt;/a&gt;
Grinnell: <a href=“http://www.grinnell.edu/offices/accounting/zauditedfinancialstatements/includes/final%20fs%20wo%20supps.pdf[/url]”>http://www.grinnell.edu/offices/accounting/zauditedfinancialstatements/includes/final%20fs%20wo%20supps.pdf&lt;/a&gt;
Haverford: <a href=“http://www.haverford.edu/business/forms/finance2006.pdf[/url]”>http://www.haverford.edu/business/forms/finance2006.pdf&lt;/a&gt;
Oberlin: <a href=“http://www.oberlin.edu/control/Report06/Financial%20Stmt%20-%20FY06.pdf[/url]”>http://www.oberlin.edu/control/Report06/Financial%20Stmt%20-%20FY06.pdf&lt;/a&gt;
Occidental: <a href=“http://departments.oxy.edu/vpbus/Occidental_College_FINAL_FY06.pdf[/url]”>http://departments.oxy.edu/vpbus/Occidental_College_FINAL_FY06.pdf&lt;/a&gt;
Pitzer: <a href=“http://www.pitzer.edu/offices/treasurer/annual_report/PIT_05-06_Financials_Final.pdf[/url]”>http://www.pitzer.edu/offices/treasurer/annual_report/PIT_05-06_Financials_Final.pdf&lt;/a&gt;
Pomona: <a href=“http://www.pomona.edu/welcome/CollegeFinancialStatements.pdf[/url]”>http://www.pomona.edu/welcome/CollegeFinancialStatements.pdf&lt;/a&gt;
Richmond: <a href=“http://controller.richmond.edu/about/FinPosn06.pdf[/url]”>http://controller.richmond.edu/about/FinPosn06.pdf&lt;/a&gt;
Smith: <a href=“http://www.smith.edu/controller/Financial0506.pdf[/url]”>http://www.smith.edu/controller/Financial0506.pdf&lt;/a&gt;
Swarthmore: <a href=“http://www.swarthmore.edu/Admin/investment_office/FinancialRpt_05-06.pdf[/url]”>http://www.swarthmore.edu/Admin/investment_office/FinancialRpt_05-06.pdf&lt;/a&gt;
Union: <a href=“http://www.union.edu/finance/fs_06.pdf[/url]”>http://www.union.edu/finance/fs_06.pdf&lt;/a&gt;
Washington & Lee: <a href=“Office of the Treasurer : Washington and Lee University”>Office of the Treasurer : Washington and Lee University;

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<p>What are the search words that are pulling these up? This is helpful to those that want to wade through.</p>

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<p>For the target college, I google: “____ college” “financial statement”</p>

<p>I usually have to wade through some financial aid hits, which are not what we want.</p>

<p>If I don’t get a direct connect from that, then I go to the college’s web site and search on “financial statement”, and if that doesn’t work, I then search for the responsible administrative department and peruse their pages. Departments can be called Finance, budgeting, bursar, controller, and other financial lingo. I have struck out on many colleges that do not appear to post the audited financials. Perhaps its the same secretive bunch as those that don’t post their Common Data Sets?</p>

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<p>I would be concerned. One thing I would check immediately would be percentage of full-time faculty vs. part-time faculty. A school in financial straits will often economize bt hiring adjuncts. A large adjunct faculty definitely does impact academic quality. </p>

<p>I do not mean to offend adjuncts. I teach full-time at one college and adjunct at another, and while I don’t think I offer a different classroom experience when I adjunct, a largely full-time faculty ensures more curriculum review, more continuity of classes and better mentoring for students.</p>

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<p>Mythmom, thanks for that tip. I guess cutting a fair number sport teams might be a tip off, but I might be wrong.</p>

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<p>Maybe yes, maybe no. Sometimes decisions such as this are financial, but sometimes they’re related to a new direction. Questions of this nature can often be answered by reading a school’s strategic plan, but like financial data, the strategic plans aren’t always readily found on a school’s website. They’re definitely worth asking for though.</p>

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<p>I would check the book, The Hidden Ivies by Greene, published in 2000. It reviews ‘30 colleges of excellence’ mostly well known LACs such as Grinnell, Mt. Holyoke… it includes total endowment information for each school as well as per capita in regards to the student body. The info is dated but could serve as a baseline for how they are doing 7 years later.</p>

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<p>Be careful when looking at percent increases…Tufts almost doubled their endowment between 05 and 06 due to a major push and one amazing donor (guy who founded ebay, I think), but they are still near #50 and don’t have the $ to give merit aid.</p>

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<p>now this article with college listing is very interesting…
<a href=“Home | S&P Global Ratings”>Home | S&P Global Ratings;
doesn’t cover every private colllege, though.</p>

<p>here’s a listing exceprt…there’s much more</p>

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<p>Great data Papa Chicken. Thanks for sorting it by rating and posting it.</p>