Fiscal 2009 In Review
I am pleased to report that Bentley University remains in excellent financial condition. We ended the year with a modest operating surplus and a strong cash position, despite the financial turmoil endured over the last year.
Fiscal 2009 felt like the eye of the storm. The financial crisis brought complications that included contractual relationships with Lehman Brothers, insurance with AIG, cash-access problems, interest-rate spikes, and a substantial endowment decline. Each of these challenges was managed and resolved, and the endowment has begun to recover.
The university was able to avoid the draconian budget cuts experienced by some other higher education institutions, and enrollment remained strong and on target in both the spring and fall 2009 semesters.
Our history of conservative financial management paid dividends during this time. Bentley continued to enjoy the ability to borrow funds, if needed; to obtain and increase lines of credit at favorable terms; and generally to have full access to financial institutions eager to add the school to their client list.
The FY 2010 budget, which started on July 1, 2009, included a wage freeze, postponement of capital projects, expense reductions, and a decline in the rate of tuition increase. The new fiscal year has begun on a positive note, though Bentley will continue to be financially cautious in navigating the waters ahead.
Running the Numbers
Bentley ended FY 2009 with yet another positive performance, reporting an operating surplus of $2.1 million – a number that continues to support the A3 “positive” bond rating. Operating highlights include a 4.4 percent ($6.4 million) increase in net tuition, room, board, and fees over 2008. This total includes student financial aid, which grew $4.5 million, or 9.5 percent, as a result of recruiting a higher quality student class and an increased cost of attendance. Tuition rates rose 5 percent for undergraduates and 6.5 percent for graduate students. Undergraduate enrollment was 4,073, up from 4,009 in 2008; graduate registrations decreased to 7,022 from 7,416.
Total operating expenses increased 4.7 percent ($7.7 million) to $172.1 million, as compared to $164.5 million in 2008. Increase salaries, benefits, and interest expenses account for much of the change. Interest increased by $930,000.
The endowment market value declined from $225 million to $158.4 million, with a net return of (-25.9) percent in 2009. Cash ended the year at $7.2 million – a substantial improvement from the previous year. Net property, plant and equipment decreased by $3.3 million on $16 million of capital purchases, offset by a higher depreciation charge as completion of campus building projects resulted in lower capital expenditures. The “mark to market” net value of interest rate swaps increased from $9.7 million to $17.4 million.
Although FY 2009 was another positive year, many factors are converging to raise concerns for the future. Reductions in the endowment and, consequently, its distributions for operations are accompanied by a demographic decline in the number of high school graduates and a continued rise in health care costs. We have a limited ability to increase tuition, while health care, financial aid, utilities, and many other expenses steadily increase. The generosity of Bentley alumni, parents and friends is needed more than ever, so we can finance a new strategic plan while maintaining its positive trajectory.