If you call a tail a leg, how many legs does a dog have?
Abraham Lincoln once posed this question to make a point, and scored nicely with the following answer:
Four. Calling a tail a leg doesn’t
make it a leg.
I recalled this bit of
wisdom while reflecting on PASSHE’s ongoing attempts over the years to muddy
the water regarding its “fund balances,” in effect by trying to sell a
five-legged-dog story.
As cited in previous blog posts, PASSHE appears to be trying to justify the size of its current fund balances by bringing up the size of its future liabilities. So in keeping with Lincoln’s impeccable logic:
Calling future liabilities current liabilities doesn’t make them current
liabilities.
PASSHE’s Fund Balance (a.k.a., “Unrestricted Net Assets, or “Net Position”) is the sum of the fund balances of the fourteen PASSHE universities, plus a fifteenth entity—the combination of Office of the Chancellor plus the Board of Governors (OOC+BOG)—commonly known as “PASSHE’s Central Office in Harrisburg.”
The 14 PASSHE universities include Bloomsburg, California, Cheyney, Clarion, East Stroudsburg, Edinboro, Indiana, Kutztown, Lock Haven, Mansfield, Millersville, Shippensburg, Slippery Rock and West Chester.
Recall from Document #2¹ that PASSHE’s Total Fund balance at the close of FY 2011 was more than $500 million ($511,028,132). The same document reveals that the fund balance for OOC+BOG that year was $39,487,059, or 7.7% of PASSHE’s total fund balance. Note also that if one divides a whole pie (100%) into fifteen slices, each slice amounts to 6.7% of the total.
That is, the OOC+BOG’s fund balance is larger than one-fifteenth of PASSHE’s total fund balance, meaning that OOC+BOG’s fund balance is larger than an average slice of individual PASSHE university fund balance.
To verify this, it is helpful to compare individual university fund balances with the OOC+BOG fund balance and, at the same time, look at how many students rely on individual PASSHE universities to serve them.
In order to make such a comparison we must use FY 2011 data because that was the last year for which PASSHE published a public FactBook containing the student enrollments at the fourteen universities.²
That year, e.g., OOC+BOG’s $39,487,059 fund balance was slightly larger than Bloomsburg University’s fund balance ($39,329,278). Bloomsburg is PASSHE’s fourth largest university and serves 9,587 students.
OOC+BOG’s fund balance was larger than that of Edinboro University ($30,896,556) with 7,836 students.
Finally, OOC+BOG’s fund balance was slightly lower than the combined fund balances ($41,103,640) of three other PASSHE universities (California, Clarion and East Stroudsburg) serving 22,826 students!
These comparisons suggest that OOC+BOG’s fund balance is obscenely large when one remembers the thousands of PASSHE students who have been shortchanged every year since 2002 when it comes to the failure of PASSHE’s central office to deliver the Pennsylvania Promise contained in Act 188: High quality education at the lowest possible cost to the students. Instead, the PASSHE Board of Governors has been providing lower and lower quality education at higher and higher costs to the students.
OOC+BOG Has Access to “Secret” Sources of Revenue
In addition to being obscenely large as compared with the fund balances of PASSHE universities serving many thousands of students, PASSHE’s OOC+BOG fund balance is also inexplicably large when compared with the ½ of one percent limitation on its annual revenue as mandated by Act 188.
This is most troubling for many reasons including these:
1) The OOC+BOG is hoarding
dollars for the benefit of PASSHE officials that should instead be benefiting
the PASSHE students for whom those funds were clearly intended by Act 188;
2) Based on four years of OOC+BOG
Operating Margins greater than 100% (1998, 2003, 2004, 2005) that resulted in
$54.9 million in deposits to fund balance, plus one withdrawal of $35.1 million
(2006), it is clear that OOC+BOG has access to large and secret sources of
money not specifically authorized by Act 188;
3) The OOC+BOG has deposited
large sums from its secret sources into its fund balance, and withdrawn large
sums from its fund balance, treating them in both cases as “unrestricted net
assets,” when in fact the funds from those secret sources may have been previously
designated as “restricted.”
Act 188 placed a strict (½ of one percent) limit on the maximum revenue that OOC+BOG could take out of PASSHE’s total annual revenue. In FY 2013, that maximum revenue figure was $9,197,567. And yet, OOC+BOG’s fund balance that year was equal to 429% of its maximum allowed annual revenue. And as shown³ in Document #3, that feat required four annual Operating Margins greater than 100%, which is of course impossible without bringing in funds from sources other than the one designated in the definition of “fund balance”—i.e., the money accruing from a series of random budget surpluses and budget deficits.
This can only mean that OOC+BOG has had access to secret sources of money—that is, sources other than the only one provided to OOC+BOG by Act 188—and that OOC+BOG has often used that access over the years to transfer large sums of money into and out of its fund balance from those secret sources by means of financial transactions often involving multiples as large as two to four times its total annual revenue!
OOC+BOG’s Secret Sources of Money
The problem with these suspicious financial transactions centers on the origin of these secret sources of money. Recall that “fund balances” house “unrestricted net assets,” that is, money that can be spent at the discretion of the officials involved—the university presidents in the case of individual university fund balances, and the OOC+BOG in the case of its own fund balance.
But “restricted” funds are an entirely different matter. Question: Is OOC+BOG transferring restricted funds into its fund balance in an effort to allow them to spend those restricted funds without oversight?
To be continued.
² https://www.keepandshare.com/doc/7804270/table-b2-headcount-enrollment-by-passhe-university-spring-2010-and-spring-2011-pdf-114k.
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