$5 Million 'not a boo-boo'

By Diane Chiddister

Attempts to clarify a $5 million budget disparity identified recently by an Antioch University board member as contributing to the Antioch College closing led to more confusion this week, as university officials either would not comment or offered new and conflicting explanations.

At issue are statements made in the July 11 Dayton Daily News, in which Antioch University Board Vice Chair Dan Fallon was quoted as stating that Antioch Chief Financial Officer Tom Faecke found a “five million dollar hole” in the college’s budget soon after he was hired last fall, and that the unexpected budget shortfall, communicated to the trustees, contributed to the trustees’ decision to close down the college. The article referred to the budget problem as “accounting irregularities.”

Fallon had allegedly discussed the budget shortfall at a meeting last week of New York City Antioch alumni, and one alumnus who attended the meeting e-mailed his notes to other alumni and college supporters shortly afterwards.
However, last Friday, Faecke issued a correction statement. In it, he stated that Fallon never meant to imply that the budget shortfall was an “irregularity” but was rather a “cash flow concern.”

Fallon was out of the country and unavailable for comment. However, in a statement published on the Chronicle of Higher Education Web site, Fallon wrote that the $5 million “was not a boo-boo,” as described in the meeting notes. Rather it was an additional restricted fund amount that would come due on top of other debts if the college faced bankruptcy.

According to Faecke’s statement, the issue involves the pooling of restricted funds (cash received from grants and temporarily restricted gifts) with other funds for “cash management purposes.” The practice, he stated, is not an accounting irregularity but rather an accepted accounting practice in higher education.

“As of May 16, 2007, the University had restricted fund obligations of approximately $10 million,” according to Faecke’s statement. “Of this, $4.9 million has been set aside in investment accounts. The remaining $5.1 million will be covered from pooled cash. Since not all restricted funds come due in any year, the university believes that cash balances will be sufficient to meet all future restricted fund obligations as they mature in the normal course of conducting business.”

Faecke did not return phone calls seeking comment this week, and his assistant stated that all press contacts were to be handled by Antioch University Vice-Chancellor Mary Lou LaPierre.

At issue was how the $5 million disparity was presented to the trustees, and how much it affected their decision to close the college. According to several who attended a closed meeting between the board and faculty members during the June alumni reunion, Antioch University Board President Arthur Zucker identified a “$10 million dollar error” as a factor which influenced the trustees in choosing to close the college.

However, LaPierre said this week, university administrators did not present the $5 million disparity to trustees as an error but only as a concern, nor was it a significant factor in their making the decision to close the college. Rather, she said, the $5 million disparity was presented as part of the larger financial picture.
Regarding the difference between the $5 million amount and the $10 million Zucker discussed at the alumni meeting, LaPierre said Zucker was referring to something else rather than the restricted fund amount.

“That was different,” she said. Asked how it was different, LaPierre said she would call back later to clarify, but did not do so. Zucker did not return a phone call asking for clarification.

The confusion around the issue is itself a problem, according to Antioch College Professor Bob Devine this week, since it indicates that there was lack of clarity among the trustees about the state of college finances.

“If the chair of the board says there’s a $10 million dollar error, and the vice-chair thinks there is a hole in the budget, obviously there’s a problem with communication,” he said. “Did they make the decision based on the wrong perception, and what does that say about the trustees executing their fiduciary responsibility?”

The Dayton Daily News article was inaccurate, LaPierre said, because the reporter didn’t understand the financial complexities.

“It’s hard to understand,” she said. “Higher education money comes from many sources. It’s not like selling widgets.”

Contact: dchiddister@ysnews.com