At the Board of Trustees (BOT) audit committee meeting last month, we learned Oakland University’s net position increased $71.6 million in fiscal year 2021 (FY21). What we don’t know is exactly how that money benefits OU students.
The former Vice President for Finance and Administration John Beaghan said at the meeting: “The university’s net position increased by $71.6 million in FY21 primarily due to investment income of $50 million; gifts of nearly $8 million; additions to permanent endowments, $9 million; capital gifts and grants. $4 million; and an increase in state appropriations, which was a direct offset to a prior year appropriation decrease of $6 million.”
“These increases in net position were reduced primarily by a decrease in tuition revenue of $7 million. A decline in auxiliary activities revenue, $9 million — primarily due to the pandemic — was largely offset by a reduction in auxiliary operating expenses.”
According to page 12 of the Draft Financial Statements from FY21, the net position increase “is primarily attributed to nonoperating activities…”
Nonoperating revenues include state appropriations, gifts, net investment income, interest expense, pell grants and federal grants. Operating revenues include net tuition, grants and contracts, departmental activities and net auxiliary activities.
Interim Vice President for Finance and Administration Jim Hargett broke down the increase in net position further: $50 million from investment income, $7.6 million from gifts, $9.0 million from additions to permanent endowments, $4.0 million from capital gifts and grants and $6 million from an increase in state appropriations which was a direct offset to a prior year appropriation decrease.
However, the increase was offset by a “$5.9 million decrease in state appropriations, $5.3 million decrease in auxiliary activity primarily due to student housing COVID-19 refunds, and a $3.2 million increase in scholarship allowances, and a $1.9 million increase in depreciation,” according to the Draft Financial Statements, totalling $16.3 million.
Along with university housing, auxiliary activities also include Meadow Brook Estate, the Golf & Learning Center and the Oakland Center. According to the Draft Financial Statements, auxiliary activity expenses decreased from $346,830 in 2020 to $338,061 in 2021 primarily due to COVID-19.
In regard to the benefits of the increase in net position, Karen Miller, Ph.D, associate professor of history and president of OU’s chapter of the American Association of University Professors (OU AAUP) said: “This is something that we [faculty] have been asking for greater clarification ourselves…there’s absolutely no doubt that the university gained significantly from their investments.”
Hargett shared what the increase in net position means for OU students:
Many of the gifts to OU from donors go toward student scholarships.
Permanent endowments also go toward student scholarships.
Capital gifts and grants benefit students through research opportunities and potential lab jobs that help them continue their studies.
Positive investment returns can sometimes be used in our building projects to enhance facilities on campus, giving our students advantages in the learning environment.
Additional point — over $30 million of our investment income was in the endowment fund which increases the amount of scholarships that can be provided to students in perpetuity.
The scholarships Hargett mentioned could offset cuts made to incoming student scholarships since 2019. For example, the Gold Presidential Scholar annual award — $10,000 in 2019 — is $9,000 in 2021; the Distinguished Scholar annual award — $6,000 in 2019 — is now $5,500; the OU Talented Scholar annual award — $4,000 in 2019 — is $3,500; and the Academic Achievement annual award — $3,000 in 2019 — is $2,500.
While this seems possible, it’s still unclear specifically what the funds will be used for.