The following is a part of a series on the intersections of accreditation, finance, and enrollment at historically black colleges and universities. Part I can be found here.
Part II – Where Does the Money Go?
Following the failed appeal to maintain its accreditation with the Southern Association of Colleges and Schools’ Commission on Colleges (SACSCOC), Bennett College Student Government Association President Alexis Branch launched an online petition calling for the withdrawal of the college’s Business and Finance Vice President, LeRoy Summers Jr.
Threatening mass withdrawal from the school without his removal, Branch’s petition claims that Summers has mismanaged funds and misinformed Bennett’s Board of Trustees for years about the institution’s financial health.
He has been with the college for a number of years, in which time he has been under investigation, and reportedly removed, Bennett College has failed to progress under his finical guidance. He has continued to fail to keep the board properly informed which insight, has gotten us to this place of accreditation status. His nonchalant attitude, towards the students for which he works for, can no longer be silenced, tolerated, or ignored.
A few things are interesting about this particular petition, and others like it which have surfaced over the years in the HBCU sector. For an ex officio student member of the board to have insight on years of alleged mismanagement of finances is rare. Typically, this kind of declaration and detail may be delivered through the student but is the messaging of a school administrator or a longer-serving member of the board.
How can we draw such a conclusion? Because it is rare for students to go after a vice-president, and not the president who has firing and hiring privilege over an allegedly problematic cabinet member.
But the bigger story is in Branch’s assessment of the mishandling of finances, which ultimately led to Bennett losing its accreditation with SACSCOC. In Part I of this series, we analyzed how enrollment plays a role in HBCUs’ financial struggles and how this impacts accreditation review.
The solution to solving HBCU money woes is simple – enroll more students. But the layers within enrollment and finance are far more complex than the average HBCU stakeholder may realize.
A REAL LOOK AT REVENUE
In 2017, Bennett spent approximately $33,341 per student on instruction, services, academic support and institutional operations.
But for each of the 493 enrolled students during the fiscal year, the college reported average revenue of $32,299. This equals an average deficit of $1,042 per student, and total losses of $513,706 for the year.
In previous years:
FY 2016: -$4,027 – 474 students = $1.9 million in losses
FY 2015: -$2,664 – 583 students = $1.5 million in losses
FY 2014: -$579 – 633 students = $366,507 in losses
FY 2013: -$987 – 680 students = $671,160 in losses
FY 2012: -$1,943 – 707 students = $1.3 million in losses
FY 2011: $2,774 – 736 students = $2 million surplus
FY 2010: -$2,780 – 780 students = $2.1 million in losses
In the last seven years, while enrollment dropped by nearly more than 40 percent, Bennett College lost more than $5.8 million in revenue.
So how does this happen? There are a few theories.
Last year, the National Association of College and University Business Officers released its annual report on tuition discounting, that is, the percentage of total tuition revenues which institutions offer back to students in the form of grants or aid to entice them to enroll and to complement federal aid and other forms of aid which pay the majority of a tuition bill for a semester.
While most colleges do not report their rates of tuition discounting, many private institutions use the practice to boost enrollment in particularly lean financial years. From Inside Higher Ed:
In 2016-17, the average discount rate for first-time, full-time freshmen reached 48.2 percent, and it is expected to have reached 49.9 percent in 2017-18, the highest level recorded since the tuition discounting study began. The discount rate for all undergraduates in 2017-18 rose to an estimated 44.8 percent, also an all-time high.
“It’s a story with two conclusions,” said Ken Redd, senior director of research and policy analysis at NACUBO. “First from the standpoint of the students, many more undergraduates are benefiting from more grants that are getting larger and covering a greater share of tuition costs. That’s good news for students and financial aid generally.
“But from the standpoint of tuition being used to pay for the grants, the colleges are getting more constrained and this has led to a strain in tuition revenue for many private colleges and universities,” he said.
Tuition Conundrum – Inside Higher Ed (Marjorie Valbrun)
BUDGET AND MANAGEMENT
Another theory behind the financial struggles of Bennett and other HBCUs is that the schools do not adjust their teaching and service resources to meet real enrollment numbers. In FY 2017, Bennett spent $4.6 million on instruction, versus $5.2 million in 2010 when it enrolled 287 more students.
The salaries, benefits and other expenses associated with teaching personnel alone are the finances that raid institutional endowments and paralyze tuition revenues even before checks clear; and that is in the best of scenarios when every student actually pays their full tuition balance for the year.
Students not paying full balances but receiving room and board and instruction, and administrators failing to cut budgets or to build revenues are the kinds of practices which can land HBCUs on federal watchlists for heightened cash monitoring or financial composite responsibility lapses, which can ultimately lead to accreditation inquiries and sanctions.
Stillman College’s interim president is seeking assistance from alumni to cover debt service, payroll and operating expenses through the summer, warning that without help the private institution could potentially run out of money by April 15.The college’s immediate need is $275,000 to pay the April debt service payment on a $40 million federal loan, said Interim President Cynthia Warrick, who has led Stillman since January.
Bennett, along with several other private HBCUs in dire financial straits is on both lists. And if we move beyond the politics of who should be petitioned or removed from their office, or how many students it takes to make an institution financially solvent, there is still one more looming layer that stands to kill dozens of private HBCUs in less than a decade.
Part III – Death By Debt