January 2009
FY 2008 Operating Results - Issues to be Addressed
A review of Washburn University's Audit and Financial Reports for FY 2007-08 prompted the following observations. Hopefully, the University's Director of Finance isn't asleep on the job. Rather than twittering his time away, he may want to bring some of these concerns forward so that they can be seriously addressed by the entire WU administration.
Why are Operating Deficits Growing? (pdf)
Operating results are reported in the University's annual audit report as part of the Statements of Revenues, Expenses and Changes in Net Assets. Operating revenues are received for providing goods and services, primarily to the students. Operating expenses are those expenses incurred to acquire or produce the goods and services provided in return for the operating revenues. Operating results do not include any tax revenues, gifts, or investment income.
This segment measures how the University is operating its core business, those areas that the administration controls and would expect to be profitable, if it were a private business. Since Washburn University is a public institution, one would not expect to see a profit reported here. However, one might expect there to be a consistency in the loss reported from year to year.
A comparison of the operating results for the past three years (pdf) shows some interesting results. Operating losses, before depreciation, have increased over 10% over the past two years. In that same timeframe, tuition and fees revenues have increased 13.5%.
Analysis of the changes in operating expenses must be approached cautiously, given this administration's tendency to misclassify and move expenses around year to year. For example, Information Systems & Services (ISS) was allocated between Academic and Institutional Support in 2006, but reported 100% in Academic Support in 2007 and 2008. With a $554,477 increase in ISS expenditures from 2007 to 2008, the decrease in real Academic Support from 2007 to 2008 is more significant than the $98,938 decrease that was reported.
One final note - revenues and expenditures decreased significantly from 2006 to 2007 for Memorial Union due to the new outsourcing contract with Chartwell's for dining services.
Who's Paying Tuition?
As tuition rates continue to increase, so do the receivables that remain unpaid by the students. The administration and Board of Regents may want to keep this in mind when setting Fall 2009 tuition rates.
| Year | Student Receivable | Annual $ Change | Annual % Change |
|---|---|---|---|
| 2006 | $2,280,374 | ||
| 2007 | $3,147,642 | $867,268 | 38.0% |
| 2008 | $3,475,676 | $328,034 | 10.4% |
This is a 50% increase in two years.
Where are Funds to Cover Capital Project Deficits?
Capital projects are approved by the WU Board of Regents. The approval process generally includes a project budget. However, accountability for adherence to that budget seems to be lacking. Since many projects are undertaken by the University before sufficient funding has been received, each year the University reports several projects as under funded. The Balance Sheet as of June 30, 2008 in the Building Construction Fund (pdf) reported the following shortfalls.
| Project | Amount Under Funded |
|---|---|
| Falley Field Renovation | $( 13,575) |
| Greek Village | ( 37,057) |
| Lee Arena Athletic Center | (360,950) |
| Living Learning Center | (100,965) |
| Moore Bowl Improvement | ( 51,187) |
| Moore Bowl Track and Turf | (219,463) |
| Carole Chapel | (118,170) |
| White Concert Hall | ( 16,006) |
| School of Business Remodel | ( 20,061) |
| Prior Year Miscellaneous Projects | ( 44,814) |
Where do the funds come from to cover these shortfalls?
Who Benefits from Annual Giving Campaign?
Washburn Endowment Association (WEA) and President Farley provide various results for the Faculty Staff Annual Giving campaign. While Jerry Farley reported that over $296,000 was raised in the 2007-08 campaign, the Winter 2008 edition of Washburn Alumni reported raising just over $100,000 from faculty and staff. So, it appears that $196,000 must be raised from trustees, regents and sponsors.
While the faculty and staff are told that the proceeds from this campaign provide resources for items not anticipated in the regular budget, it appears that a significant proportion of the proceeds ($80,000) are regularly allocated to the executive staff (pdf) for their discretionary spending.
A major beneficiary of the Annual Giving Campaign continues to be the Executive Director of Government Relations. In addition to the $46,000 received from this funding source, this two person operation is funded with a general fund operating budget of $187,928 (that was overspent in FY 08) and has a balance of $17,360 in Other Restricted funds available to spend. While a significant amount of these funds are spent for lobbying activities (a standard monthly payment of $3,500 is paid to Pinegar, Smith & Assoc), there is still plenty of spending for food and beverages.
It seems that full disclosure should be demanded for the sources and uses of these funds.
What Supports Health Insurance Premium Changes?
In November, 2008 health care premiums were increased 10% based upon usage and increasing costs of health care. In November 2007, health care premiums were increased 5%. The comparison of the premium increases with the reported operating results provides an interesting picture.
| Year | Health Expense | Annual $ Change | Annual % Change | Premium Increase |
|---|---|---|---|---|
| 2006 | $3,166,424 | |||
| 2007 | $4,398,728 | $1,232,304 | 38.9% | 5% |
| 2008 | $4,595,160 | $ 196,432 | 4.5% | 10% |