Dartblog

A few years ago, consultants Booz, Allen and Hamilton produced a report that labeled the College one of the world’s “most enduring institutions.” No mind that the report itself cited nothing that had occurred at Dartmouth since the 1970’s, leaders of recent Administrations repeated this finding over and over again, as if it were praise for their efforts.

Well, management consultants Bain & Company, where Mitt Romney worked before heading up its Bain Capital spinoff (full disclosure: I was a consultant in Bain’s London office from 1983-85), have reviewed the finances of America’s most important educational institutions and produced a report entitled, The financially sustainable university. Their conclusion: based on figures from the 2006-2010 period, “approximately one-third of American colleges and universities are spending more than they can afford.”

The College ranked in the least favored section among all institutions: the 15% of American colleges and universities that are financially “at risk.” And no, not a word from the Trustees or IP Folt regarding the now-two-month-old report.

To be fair, all of the other Ivies are in the same quadrant; we aren’t alone in managing poorly. However, only Harvard has spent less wisely relative to its income than we did, and only Yale and Harvard have taken on more debt than Dartmouth relative to their total resources.

Bain used two measures to calculate the evolution of an institution’s financial status:

1) The Expense Ratio:

The expense ratio is calculated by dividing an organization’s expenses by its revenues and indicates the financial sustainability of a business. Simply put, an organization’s expense ratio is an indication of its ability to cover the expenses endured by cash inflow.

We’ve written ad infinitum (OK, ad nauseam works, too) about the College’s bloated compensation packages (salaries, benefits, vacations) and the growth of non-faculty staffing. The end result makes us look bad versus all our Ivy competitors except Harvard and Yale — though their endowments are a multiple of ours, so perhaps they can more easily afford such waste.

2) The Asset/Equity ratio:

The asset [equity] ratio is calculated by dividing net assets by total assets and measures the strength of an organization’s balance sheet. Net assets is a term that indicates the remaining assets on an organization’s balance sheet after removing liabilities.

When you take into account the College’s ballooning debt (now at $1.13 billion) and under-performing endowment, we look bad compared to everyone.

The College’s slide continues and you can’t say that it isn’t obvious to everyone (except Carol Folt and the Trustees).