Albion College (MI) & Olivet Nazarene University (IL): Financial Health & Viability Review

Live, it's the College Financial Health Show with Matt Hendricks and Gary Stocker, where each week we look at the financial health and even viability of private colleges throughout the country. And if you've got a college you're interested in, drop us a note. We've had over 27,000 views on our YouTube channel in the last 12 months, and now we have college requests into December. Of 2025. But if you've got a college you want us to take a look at, for better or for worse, drop me a note to Gary at College Viability. That's Gary at College Viability— one really long word— gary@collegeviability.com. And Dr. Matt Hendricks, all the way out in Tulsa, Oklahoma, who are we looking at today?

All right, today we have Albion College in Michigan and Olivet Nazarene in Illinois. I'll start with the Advanced Compass and just get everything set up here. Here's— I'm going to do Albion first, so they'll be in blue, and Olivet Nazarene right here in Illinois. All right. Make sure we're zoomed in. Okay. So the first thing I'm going to focus on here is the— if you really just want to pick one number to check how a school is doing, just check their unrestricted net assets. That's probably the best indicator of how school's doing and their trend over time. And you want to check a couple of things. You want to check raw values and the trends. The trend is probably more important, but the raw value gives you a sense of how big the runway is. Unrestricted net assets are really assets that the school can use to pay payroll and all of that without having to get special permission from the government or a judge or ask donors, which is really tricky. So you want to look at the level, and you can see all of that Nazarene has is in green. They have over $100 million in unrestricted net assets. That's great. It gives them a really long runway potentially if their budget is much smaller. And looks fairly stable, which actually is going to be a problem. You can see the 75th percentile, serious growth, median serious growth. So this is going to be something you're going to see in a second when we look at trends. Is problematic for Olivet and Nazarene. Big problems at Albion. Starting in 2016, they had $57 million in unrestricted net assets. They now have about half of that. They're at $29 million at last read. So they've eaten up half of their net assets, unrestricted net assets in 9 years. You can see where that's headed, right? If that continues, they'll be at zero in not very much time, given the history of the institution. So the school is in serious trouble in terms of how it's been managed and eating up its own net assets. And you can see it actually really accelerated here in like 2021-ish, 2020-ish, actually right before COVID So they haven't recovered from the pandemic, have they? No, it looks— I mean, it looks like It's hard to say what caused this. Uh, we're going to dig into that more here on the show, but, um, certainly something happened in 2020, um, which could be COVID-related, but it also could be not COVID-related, right? Most schools are navigating COVID, the COVID world, just fine. Actually did much better during COVID You can see this big jump here in the median unrestricted net assets. How did that happen, Gary?

The federal government money.

Yeah, they got tons of money from the government, and for some reason, neither of these schools really saw a bump that you can see, which means had they not gotten the money, it would have been much worse. I'm assuming they got money, right? Everybody got money. Okay, so here's the trend. Yeah, like I said, half, half of the unrestricted net assets have been eaten up at Albion, which is nearly catastrophic. You can see schools that have closed had similar trend down about half on their net assets. But it's not great at all of that. All of that as well. They're down a little bit. You might say having a flat unrestricted net assets is okay. It's not okay at all. This is nominal dollars. So we've experienced double-digit inflation over this time. So in real terms, their unrestricted net assets are way low. You need your unrestricted net assets to grow and not only grow, they have to grow faster than inflation. All right, which neither of these schools clearly have done, right? Both of them are decreased in nominal terms. In real terms, they're probably down 20% plus, or, you know, 80% plus maybe in Albion's case. Pretty catastrophic, especially for Albion. Okay, so how does this happen? How do we get these downward trends in unrestricted net assets? It all goes back to how the budget's managed. It really just means the budget's not balanced. All right, is really the— I mean, probably hasn't been balanced for a long time at either school. So I'll show you that here in net income margins. I'm expecting to see a lot of negative values here, and indeed that's the case. So in blue is Albion, all right? They've had massive deficits, uh, the last 5 years. They had a 12% loss, 12-13% loss, and a 34% loss. This is change in unrestricted net assets from operating activities or operations. So really just, just the budget's not balanced, not even close, and hasn't been balanced probably since who knows when, maybe 2019. And same thing for all of that. We have a lot of negative years, although there's— their deficits are much, much smaller, but they're consistent, right? -5, -3, -7, slight positive, -4, and -5. You just can't do that, right? The typical school, the median school, keeps this hovering around +1% every year, right? The best managed schools keep that above zero, of course, and, and slightly above that to track with inflation and so on. So you have +1% typically is what's done there. For unrestricted operating net income. Okay, so why are these schools running deficits? And what's happening? I'll just scroll down to this next graph to give you a hint on what's happening at Albion. It's pretty catastrophic. As I mentioned, they have massive deficits, and you can also see that their endowment is shrinking. All right, so they were at $178 million in 2016. They're at $161 million here, and I just checked before the show, they're now at $140 million. So they're like right here.

Whoa.

So their endowment is shrinking very fast. In fact, I'm going to show you this because it's very— the endowment. So a couple of things. The endowment looks very large, right? It's still $140 million. You might say, Matt, that's fine, right? They got plenty of money. It's not necessarily fine because some of the endowment is restricted and some of it's unrestricted. And I'm going to show you this because it's very, very important that the stakeholders understand this.

So are all the financial statements attached to the Advanced Compass app?

Yes. Yeah. You saw how I quickly clicked that. You can check all the data that I have in the Advanced Compass. You can cross-check it against the audit that's all populated from the audit. And of course, I don't have the links for the 990s yet, but you can see. All right. So like I said, they're down to $140 million in their endowment assets now. So what did I say? They went from like $170 to $140. But that's not alarming me quite yet. What's alarming me is this number. You see that, Gary? That's only $1 million left in unrestricted endowment assets. Now, they've been relying— you can see how much they've been drawing down their unrestricted net assets. Well, this, this is interesting. This $9 million unrestricted. Okay, so there's lots of questions here. I can't get through it all on the show on the spot here, but this needs a really deep dive from— and everybody needs to understand what's happening to this endowment. There's a couple of things very, very wrong. So they drew $14, $15 million from this endowment, right? They took this. This is their draw. And then it looks like another special draw right here. And then I think the previous year they did the same thing, $19 million draw. And then we have a positive transfer. So I guess those kind of cancel out. But if you just focus on this $19 million draw, um, and the $13 million draw, those are just way too big. Way too big. Remember, a normal draw is 4.5%, right, on the beginning of year. And the spending policy is a little bit different. It's usually like 5% of the previous 3 years, which would give you normally about 4.5% on the beginning of year endowment value. You can see this is close to— if you added these together, it's close to 10%. So nearly double the endowment draw that should be happening.

And you show that in the app, right? You show the endowment.

Yeah, let me show you that in the app. You'll see it when I switch this to appropriations as a percent of the beginning of year values.

Oh my.

Yeah. So they've been just pillaging this endowment for— since 2018, actually, really going back. All of these are too big. So at least 9 straight years of just too big of endowment draws. And for some reason, my AI was not able to parse 2024 correctly. There's lots of reasons that could happen. I think it has to do with the fact that they rescaled their endowment, which is another question in itself. Why all of a sudden is the endowment value being restated?

I don't know.

That seems to indicate, although I'm just guessing, it seems to indicate that perhaps the endowment wasn't valued correctly and now it's being revalued lower, quite a bit lower. All these are kind of red flags to me, but maybe okay. It's not very common. Okay. Um, okay, so I just showed you that this draw was like 10% here as well. Um, it all comes from this section on the endowment. Okay, so a couple things. The endowment draws are way, way too big. And also, this is now only $1 million in unrestricted endowment net assets. That is very close to catastrophe because what's going to have to happen now in order to release this much— the amount of money they're releasing from the the restricted money on the endowments may raise some red flags with donors. I don't think this is hitting the edge of like legality yet, but there are laws that restrict how much you can draw on the endowment, and there could actually be gift agreements that say what's the max you can draw from this restricted scholarship fund, for example. They're probably butting up against those, those restrictions now. So coming up with the cash strip to, to pay for operating activities from the endowment may get more complicated as time goes on. And I think they're actually starting to hint at that, and everybody at the school should be reading this page. So here's a fairly honest, I think, assessment of what's happening and what I'm seeing just on the data. There's like, what, 7 paragraphs here of the college acknowledging that they have serious financial problems and how they're going to deal with it. Talking about liquidity issues, which is probably happening because now they can't pull money out of the endowment like they used to. They're selling assets, they're firing people, and so on. That's all in here. Make sure you read this if you're at this school.

Hey, Matt, I have a question.

Yeah.

Did you check the financial statement for going concern references?

Yeah, I did. They don't have a going concern, but the auditor probably made them write this section, which means the auditor is not happy with what they're seeing. So said, hey, we're auditing your school and this does not look good. All right. And so they asked them to write this section and you can see the whole explanation of how they're, they're planning to fix it, which helps them avoid the going concern clause. All right. They also are in trouble with the Department of Ed. They failed the financial responsibility metrics. So they're going to need to get a letter of credit. They probably did that at this point already. This is the end of fiscal year '24, and we just wrapped up a couple of months ago the end of fiscal year '25. So I'm a bit behind what's happening. Once I see the '25 audit, it'll be clear what's going on here. But none of this is good. And I want to help this school out a lot. They have assets but are eating them up very fast. They need to fix it immediately. I don't want to neglect Olivet Nazarene, they also have deficits as well. So let's take a look at that. Although we have a very different story on their endowment management. These draws are pretty big, but I think their endowment was growing when I— when we showed it earlier. Right. Endowment, end of year endowment value. And it's like, yeah, their endowment is growing like crazy. That's great. So they are in good shape on the endowment side. They do have deficits, but they're quite a bit smaller. They may not need to draw cash, right? Because there's— they may be neglecting their physical plants. So let's take a look at the CapEx. Actually, both of these look pretty good. This is the CapEx to depreciation ratio. You want that to hover right around 1 over the long term or a bit above 1 to grow your capital stock. And both of these seem to be doing that just fine on aggregate. That looks fine. All right, so I think I'm at this point, it's pretty clear we have serious deficits, financial problems at both Albion, much worse than all of that. But let's take a look at revenues and expenses and get a sense of what's happening. And remember, deficits can be caused by things on the revenue side, things on the cost side, or both. All right, and let's take a look at the trends All right, so both of them have issues on the revenue side. Olivet's revenue is down 12.3% since 2016, and Albion is down 8%. Interesting, right? Like, the revenue has been much more problematic at Olivet than it has been at Albion, yet the deficits are much worse at Albion. All right, that means to me, just looking at this, probably means Albion is much, uh, not as good at managing the budget as Olivet is. And let's take a look at what I mean by that. They should be managing their expenses to fit within their revenues, and Olivet must be doing a better job of that. Certainly looks like that's the case, uh, although, uh, let's take a look at the trend here. Yes, Olivet's reduced their expenses by almost 13%. So they're trying to keep their expenses in line with revenues, and that's really a good indicator for me that the board and the administration is working properly, right? Making sure that they're passing a balanced budget every year, reviewing the budget, making sure that despite the fact that revenues are going down, they're still balancing the budget and they're doing a decent job at that. On the other hand, Albion, I had— this is hard to look at because expenses are up 16% and I just showed you the revenues were down a ton. Right. So that can't happen. And that's why they're getting big deficits now.

So they're drawing down their endowment.

Yeah. The endowment's dying. Their net assets are halved. Right. You can't have that. You can't. And again, the blame for— ultimately the blame for this happening is on the board. It's the board's job to approve the budget and double-check that the budget is accurate and that you get results that are, um, um, sustainable, right? That's their ultimate responsibility, and clearly that's not happening for whatever reason at Albion. Um, all right, so how can they fix it? Let's take a look at, uh, some revenue side stuff. And I was pretty shocked when I looked at this a little bit ago, so I hope you are interested in this as well. Let's take a look at net tuition revenue.

Keyboard's still not working today, Matt.

Yeah, yeah, I try to go really super fast when I'm talking to you guys, but, uh, net tuition revenue— let's look at the trends. Both of them struggling. Again, all of that is worse, right? All of that is worse than Albion, but they're both really bad. 31% down on net tuition revenue, 25% down on net tuition revenue. But keep in mind That hasn't— this doesn't mean enrollment's causing that necessarily. So let's take a look at enrollment. And so it's really important that you understand why your net tuition revenue is dropping. I mean, students. They're very different mechanisms, right? It's either enrollment or price or both, right? Those are totally different mechanisms, really. And so let's take a look at the trend here and take a look. Olivet Nazarene's enrollment's down 32%. So that completely explains their 31% drop in net tuition, right? Right? But the one that is not explained is Albion. Albion's enrollment's actually higher than it was in 2016, and their net tuition revenue is down— what did I say? 25%.

Yeah.

What's the problem? I'll show you.

I know what it is.

Yeah, go back to that.

I've watched the show before, Matt.

Yeah, you watched the show before. All right, I'm gonna get rid of this 75th percentile just because I want to get this scale, even the median. Actually, let's keep the median there. Albion used to charge about $15,000 on average per student, which was near the median in 2016. Now their average net tuition revenue per student is only $11,500. That is way below the 25th percentile now. And in fact, I probably, I would, I would be willing to bet that that's just too low. To have any kind of sustainable operation unless you're like an Ivy League school where you have a massive endowment and can, you know, basically be free. There is actually— there's a, there's a school that's like that. It's Berea. Check them out. They have a massive endowment for how big they are. They are free. Certainly not the case for Albion, though. Their $140 million endowment is not going to come anywhere close to making the school free. Um, so this is a huge, huge problem. It's— it doesn't appear to be, um— I mean, they might have demand problems, but the, the way that this has happened, the way that they've adjusted their price lower, it appears here, is, uh, what's killing them, right? They cannot do that. They need to bring this price back up to at least close to the median, which would be close to $17,000, $16,000 per student, or at least get it close to what Olivet Nazarine is charging, which is $14,000. I mean, think about that. To go to Olivet, you're gonna pay like $5,000 more to go to Olivet compared to Albion. Um, and that's— this is crazy how this price dropped off. And it used to be the complete opposite, right? In 2016, it was $13,000 at Olivet, and now it's— and it was $15,500 at Albion. Now it's completely reversed. So, and this has been going on for a long time, which in my experience is part of the problem, right? Schools don't look back far enough to understand what happened to create their problems. This school would need to look back to about 2016 to see this really clearly. And I can see it clear as day. And you can watch the show right now that this is serious.

Matt, I have a question or follow-up on this. We had a college last week that showed this same trend. And I remember you saying that this college is probably patting themselves on their back because their enrollment is up. Yeah, and yet the net tuition revenue is down, the revenue is down, the expenses are up, the same kind of pattern. And we see this not every week, but almost every week.

Yeah, this is, uh, this is, this is again, that's on the board to sift through this. So if they're sitting in a meeting, in a board meeting and saying, hey, our enrollment's up, and you even see it in the, in the highlight of this page, right? They start one of these paragraphs saying, uh, we just welcomed 385 new students. There's a lot of questions there, like 385 new students may not be enough to sustain— how many did you graduate?

That's a good question. 13,000, yeah, right. We'll see that in a minute.

Did you graduate more than 385? If you did, that's a completely awful number, right? You're going to shrink. So there's a lot of questions to ask that may not be asked here, right? How many freshmen did you have the previous year? How many freshmen did we have back in 2016? There's a lot of stuff to look at. Don't focus just on enrollment. And so I guess the answer to your question is, I mean, you need to look at price and enrollment, both, right? And this price is completely off the rails from $15,000 to $11,000. I should be clear, I'm not looking exactly at price. I'm looking at a proxy of price, which is net tuition revenue per student. There are ways that this can decrease that don't involve a change in price, but it's pretty uncommon for that to happen, uh, especially.

And Matt, let's do a commercial advertisement here. Talk about how the strategic compass that you've developed could help the good folks at Albion College.

Yeah, I mean, well, the first thing I would do with this school immediately would be to submit all of those 385— actually, not these 385— all of the kids that applied to Albion but did not enroll. We need to know where those kids went, all of them. All right. So we, we find where those kids went. Of that set of schools where those kids went, we find schools that Albion can compete with. And we— I call that the peer competitor set or the cross-app set on my dashboard. And we look at the price difference. All right. And that's one thing. If a lot of school— a lot of these students are saying no to Albion and going to more expensive schools than Albion, which is probably the case. Raises a lot of alarm bells, like what's happening? Why are they willing to pay more at a different school than at our school? That is huge. And understanding that is a really tricky question to understand that. But you may, you may just start doing surveys and understanding why they picked a different school. They might have got a bad vibe. Campus might be falling apart. Like those are the kinds of things they need to figure out immediately. Maybe they just do a very bad job of selling the school, the value proposition, or there's a lot of, a lot of things, right?

In my mind, you've automated what you just talked about. You've automated all of those processes, right? Yeah.

All I need is to help them submit to the National Student Clearinghouse to get the cross apps and we double check. You know, there could be a lot of stuff going on. You know, this school's been running deficits for a long time, so that tends to cause issues with morale. I think in their narrative they already talked about cutting retirement plan benefits and all of that. Your staff is probably not super enthusiastic about working at Albion anymore and certainly wouldn't probably do a very good job of selling it to some kid, right, coming off the street. So all of that is linked and it could create this sort of feedback loop where you've got deficits Creating lower morale, which creates issues with recruiting and turnover and all sorts of stuff. But yeah, the short answer is this needs a lot of work to understand what's happening and at least start experimenting with a higher price and see if you can get your net tuition revenue back up. Yeah, you might sacrifice some enrollment, but let's not worry about that right now. The school has enrollment, but they're not going to be— they're not sustainable. At the moment.

And if you want to see from Albion or Nazarene or any college and you're watching this show, we'll do a private demo for you of what the Strategic Compass can do. Drop me a note. Again, it's gary@collegeviability.com and we'll set up a demo for either Matt and/or myself to show you what it can do for you.

Yeah, here's, here's what else I would do. And so I'm going to move to the expense side. And what I think needs to happen at Albion is an immediate balancing of the budget just to get everything back to level, restore retirement benefits, do all of this. You can do that once you have a balanced budget. And so the expense side is the only way to do that quickly. As we've said many times on the show, even if they do everything right, right, say they get a freshman class of 500 this year, they got to do that 5 years in a row really to get back to where they need to be. And in 5 years' time, who knows, they're— they might be in a lot of trouble with their bondholders and everybody else. I don't know if they have a bond, actually, but there's a lot of stuff that can go wrong. So they need to get their expenses right-sized. So let's take a look at the big pain point for almost every school that has issues like Albion and all of that. First one is just number of employees is not right. In fact, it's getting worse at Albion. So the 75th percentile right here, so what you're looking at is the number of employees. This is number of W-2 employees counted divided by $1 million in operating revenue at the school, right? Average school has 18 employees per $1 million in revenue. Albion has 26 employees.

Goodness gracious.

Okay, I hope that makes sense. So they're nearly double what is normal for a number of employees per revenue, per $1 million in revenue.

For all private colleges in the country in this data set.

In fact, it's gotten quite a bit worse since 2019. So There's your red flag. That's not going to be sustainable. And there's lots of consequences of having too many people that I'm about to highlight for you. But the same thing's happening at Olivet. Although they're getting it more under control, they're still too high and they may not know that. And again, what I can do with the strategic compass is point to small groups of folks that don't look right, right? Like individual departments, individual occupation groupings. That are odd. All right. And we can find lots of savings there, efficiency gains.

And comparing that to a variety of peer groups, right?

Yeah.

Yeah.

We look at it for the pure competitor group, the, you know, peers, peer peers that you don't necessarily compete against but look a lot alike in terms of revenue and expenses and so on. And another red flag, I mean, they're having financial problems and somehow they went from 14 employees that get paid over $100K to 28. All right, that shouldn't happen. You shouldn't be doubling the number of employees that you're paying over $100K while you're running massive deficits in one year.

Yeah.

Uh, compensation of officers, too high. Again, probably too many officers at Albion, although Nazarene looks great. It's quite low.

All right.

Um, but, uh, it's still too high. Too many officers at the institution. Uh, non-officer wages, all these I think are going to be high. That's just completely out of this realm, right? Yeah. They're paying $24 million in non-officer salaries. That's what— that's way above the median, way above the 75th percentile for how much revenue they have. And again, remember, the revenue is fake, right? The revenue is not right. You have— that's another thing they have to do. They have to adjust that. That endowment draw needs to be like halved. Right. So they're really— their revenue is much lower than I'm showing here. So that would even make this even more odd. Non-officer retirement contributions. I thought they said in that narrative that they dropped their retirement contributions.

They're probably going to because of what that chart shows.

Yeah. I mean, this is way too high. They need to look at what their plan is. The plan may be fine. All right. Again, this is— this could be just totally purely driven by too many people. Um, so yeah, double-check that.

If—

but I've seen schools that are running massive deficits and they, they pay 11% retirement contribution. That's pretty high, right? Um, I've had clients that didn't know that was high, right? So you need to check it. Um, there's also, uh, other benefits. I'm kind of neglecting all of it, Nazarian. I feel bad, but Albion is in much worse shape Frankly, and again, here's, here's other benefits— health, dental, life, uh, other kinds of benefits— way too high. Again, again, this is the 75th percentile right here. They're probably in the top, you know, 5 or 6% in the country.

It's a bad thing, not a good thing.

It's a bad thing. Yeah, I mean, it's a good thing if you, um, have a balanced budget and you're trying to recruit faculty or staff, right? But Um, again, payroll taxes way higher than normal. Again, because they have so many— uh, just having too many people. All right, let's go through— I don't want to neglect all of that completely, but again, they have a staffing issue that it's not nearly as bad as Albion's, but they need to look at that. Let's take a look at the second biggest pain point, which is number of contractors. It looks like this administration may be fixing that. Uh, they went from 33 contractors to 10. That's great. They needed to do that, probably were forced to do that in the previous budget cycle. Um, that's good. But, uh, all of that's still too high. It looks high. I don't want to say too high, but it, it looks higher. It's higher than normal, the number of contractors they have for their revenue. Um, but here's an interesting thing. We can break it out in the total fees for services. This is kind of a decent measure of, um, how much you're spending on vendors. And somehow, even though they reduced the number of vendors so much, they're still way high on the actual total spend on fees for services at Albion. So they have the two biggest pain points are just completely off the rails, both of them, employees and contractors, right? And I would love to help the school, um, find all of these actually fairly easy, and I'll find some here in a second. Um, and you can probably guess what's going to happen. Some of these big contracts are just way too big. Um, but there's lots of other stuff in here that they need to look at. Some reason their insurance policy went up by $700,000, $600,000. I'm a— math's a little bit off— $500,000.

Oh, that's really high on this one.

Yeah, and all of that Yeah, both of them need to look at their insurance policies. I don't know what's going on there. Why? And why the sharp increase? That doesn't look right. Occupancy costs, if I remember right, these are both too high. All of that is completely— I don't know what was going on here, but they're still both very high there. That's utilities, maintenance, utilities, mostly utilities, right? And rents. If they're renting buildings, that would be in their office expenses. Again, way, way out of the norm. This is like paper printing, mail. All this stuff adds up. This is not a trivial amount of money. It's $5.5 million at Olivet and nearly $3 million at Albion. What's the printing budget for each department? What are we buying supplies in bulk or not? All right, we're just letting individual departments have credit cards and go out and buy stuff whenever they want. That's a big no-no. Fundraising expenses, very high at both. That's, I mean, here's 75th percentile again. Fundraising expense is catastrophically high at I'll be on, but again, you got to match that up against revenues. I'm kind of running out of time here, but if they're not getting excellent returns on that, I mean, if you're going to spend near the top 10% per your revenue on fundraising, you better expect to get near the top 10% in returns as well. Otherwise, it's probably a bad idea.

But again, that's a pattern that we see colleges with, with above normal expenses for fundraising and not getting a return on those gifts. Yeah.

And here's the school again. The Department of Ed just told them, hey, you guys have a problem. You're going to have to write us, you know, you might lose Title IV funding, which would be kill the school. Right. And yet here's the travel budget just going off on its own. It doesn't make sense. $1.2 million to almost $2 million in one year. That shouldn't happen. Like, this is one of the first things you cut. Right? Just not doing the sort of normal stuff. That's a pretty small expense item, but conferences and meetings, that could be related to the travel spend. All right, so here's one I'm going to highlight right now, and these are some really big items right now I'm going to show you. So both of these schools' food service contracts are too high. Again, you're getting a letter from the Department of Ed makes a lot of sense to just right-size your food service contracts. And I'm going to show you that right now. You got a lot of leverage in these negotiations, right? There's a ton of vendors. And I got to go down to Albion, do the vendor table.

So you're about to show us that you can, you can track from the IRS 990 the top 5 contractors, top 5 vendors for every private college in the country.

Yes, yes. So, and I'm giving the color codes here comparing to other, like, what's the norm for that type of contract at other schools, both on a per-student basis, that's this one, and both on per-$1 million in revenue basis, that's this one. And so you don't want color. You don't want color. Color indicates overspend. And this is an incredibly high food service contract, $33,400 per student. Remember, about $1,500 per student is a decent, like, normal-sized contract. So this is 2x. All right, so this contract, in theory, they go back to this vendor or get a different vendor, they could have this. You could save at least $2 million here just by getting a normal food service contract that has normal hours of service, normal food, and so on.

And doesn't include, does not include capital equipment because we've seen that before.

Right. And you can see their issue. They've for a long time had— I don't know about this Metz group, but it looks like they had— let me see. I saw Bon Appétit. Yeah, this is a really high-end food service vendor and they may have morphed into Metz. I don't know what's going on because the contract looks about the same. Yeah, I'm actually— maybe they're different. But anyway, that's way— that's a lot to spend on food service. Of the school. Again, in the context of a school having, you know, Ivy League schools use, use these high-end food service providers, it's fine. They don't have budget problems. This school has a serious budget problem. They probably can't have this food service vendor, and I wouldn't advise that. Probably get this down to $1,500 per student. Uh, this is another red flag for me. If you're spending $400,000 on legal, that is something I would want to know what, what was happening at this school if I was working there. That's a lot to spend on legal. It's not very common to see legal showing up in the top 5 vendor contracts.

That's true. Yeah, good point.

Custodial, that again, that's really high. Go around, get more bids for custodial services. That's again one of the first things you go after when you're having budget problems. Yeah, then construction. This probably some deferred maintenance, maybe they're fixing here. That would be fine. But yeah, definitely look into that food service and custodial contract and understand what's going on on the legal side. Did they just have a lawsuit or are they looking to merge or what? What was the other school?

Olivet. Olivet, yeah.

Olivet.

Olivet's out there.

Nazarene.

There you go.

All right, here we go again. Another food service contract that's pretty high. Not nearly as bad as the Albion one, but $2,300 per student is on the high end, which is odd because that's Sodexo. I wonder if they're— Sodexo tends to be less expensive compared to Bon Appetit, but it all depends, right? I've had clients that their food service contract was just high because they had more than one cafeteria. Just consolidate down to one, save millions, right? You might do that. Okay, what else we have here? Marketing. Wow, $1.7 million for marketing is very high. I would double-check that contract and see what ROI you're getting from that. Health insurance. Interesting. I just flagged that their insurance spend was really high. This may be one of the issues. All right. So I would double-check that, go back through and check what is this contract all about and is it saving them money compared to the alternative, whatever the best alternative is. Okay. I think that's it. Marketing contract, food service contract, check this insurance contract. But there's a lot of other contracts to check, right? Check all of them. It should, it should be done regularly anyway.

These are just the top 5. There are others out there as well.

It's a, it's a good practice to go through your entire staff right, every year or two. And same thing with all your vendors. Make sure those all make sense.

And then one of the—

actually, vendors that get forgotten, right? Like, they'll have some kind of vendor service that people just forget about, but they continue paying for it. It's like, uh, yeah, don't do that.

So, you know, one of the many interesting things we had on Albion was their CapEx expenses. So for a college in serious financial trouble, we normally see that CapEx depreciation ratio below 1, but we saw that above 1 quite a bit for Albion. That's, that's not necessarily a good thing, is it?

Well, I mean, yeah, it could be related to just this lack of urgency because you usually see they stop repairing stuff, right, when you have financial issues the way they do. But they're obviously making an effort to keep the buildings up. I mean, it looks like at a high level, but that may not be true. Maybe they're just building new stuff. To try to attract new students.

Build it and maybe they will come.

Yeah. Yeah. So there is a decent chance there's deferred maintenance at both of these schools that have not been addressed. But I can't see that necessarily just by looking at the overall numbers. And you kind of break it out on what, what this is actually being spent on.

Well, spend just a couple of minutes looking at the college viability apps. And of course, we always start with graduation rates. And, you know, here's a trend that we've seen. Albion is in serious financial trouble. All sorts of issues. Matt, you just talked about those. Yet they still graduated decent— not a great, but a decent percent of their students. And of course, our threshold here at College Viability is 50%. And Olivet Nazarene, same thing. Again, both these colleges to varying degrees have financial challenges, but to their credit, they're graduating students. And you've heard me rant and rave and jump up and down on the shows before about how many colleges that we review that don't. That graduate 30-40% of their students in 4 years. And, and I talk about that on this show and other shows that I do. It's not good, but these two do all right. Let's see how much of the— how much of the tuition discount they're using, because we talked about the tuition net, tuition revenue. Look at this, Matt. I was stunned when I saw this last night. Albion used to have unfunded institutional grants, and of course, you know, you and I know this was merit aid, and most scholarships went from $54 million in 2016 to $120 million, up $65 million in the period of the last 8 reported years. Matt, they're giving away the store.

Yeah, you saw that on their net tuition revenue.

Oh yeah, absolutely. And again, they're giving away the store to get students in the door. And this is as clear a demonstration— that's a massive number. We see that number grow on regular occasion, but not this big a percentage. That's more than 100% growth. In, in essentially discounts for merit aid. And, and what they're not recognizing is that they may get students in the door, but they're, they're obviously, as you shared many times in your part of the show, they're not generating enough revenue to pay the bills for lots of reasons. And then let's take a look, because we always want to make sure Matt is telling the truth here. Tuition and fees for both down. And again, you talked about that. We tease about this all the time, but you know, the analogy that I draw is if you, you and I had a coffee shop instead of our business this on college financial health, and we lost money over the course of 8 consecutive years. That's not a good thing. And you can see the red indicators on this show a loss from the previous year. So look at all of that losses in the last 1, 2, 3, 6 consecutive years, and Albion tuition and fee losses in 5 of the last 8 years. That's just no way to run a college. And Matt, very briefly, let's take a look at internal market shares. And let's start at Albion. And this is the internal market share for 64 common majors that we track across associate, bachelor's, and master's degree programs. First thing we always look at is really high percentages here, something above 30%. That would indicate a college is too reliant on a particular major. That's not the case really for either, and we rarely see that. But what we're going to see, like we see everywhere, is Albion College, like too many, almost all colleges, still try and be everything. Dr. Hendricks, to everybody, look at all these low enrollment majors across the period of 2020 through 2023. The 2024 data is out now, and I'll have that in the 2026 version of the College Majors Completion app. You've got 6, 8, 9 people have graduated your chemistry program in the last 4 years. Yeah, I, I just— I, I've said this so many times, Matt, it just stuns me that colleges think they can be everything to everybody. And Albion, among many others, is a perfect example of that. You cannot. The expenses associated with that are not generating the revenue needed. And again, Nazarene, same thing. We look for overdependence. They really don't have any. And really, to the— from my perspective, to the same extent as Albion, they have a lot of low-enrollment majors. Of course, they make whatever business decisions they want, but if you and I can see the data and 27,000-plus other folks have seen this kind of data as well. The world is changing. We know that. That's kind of trite, I understand. But you cannot continue to be everything to everybody and expect to be a financially viable organization. And Dr. Hendricks, we see the same patterns, not with every college for sure, but we see that way more than not, that colleges are financially challenged and they don't have they appear to not have the management and leadership capacity to make changes on the expense side, which they can control, and it impacts the revenue side as well. I don't know what makes that change, Matt.

I think, uh, like I said, I think last show— and you, you now have a course for, uh, board members, right? I think it's really the only way this changes at a given school is if the board decides they're going to uphold their responsibility and make sure the budget is balanced no matter what. I think there's just too much, too much, too many incentives for the administration to not balance the budget, right? It sounds weird, but think about it. If you're president, right, it's really tempting to start a new program. It's really tempting to build a new building. All of these things leave your legacy, so to speak, but may not be good for your school. It's up to the board to say, hey, that's not good for our school. We're not going to approve that, right? We need the budget balanced right now. Right, like, um, so you have a, you have a course, right? And this show is certainly providing the tools, but that boards can use to, uh, be informed about what, what shouldn't, shouldn't be approved and what should. And, um, they should check it out.

Yeah, we have a course that we released on November 1st called Navigating the Numbers, and it's a primer, essentially a primer for College Board members to— and it uses your app, it uses the Advanced Compass to show how you can compare your college to others. And it kind of provides definitions and terms across not all the reports you have, Matt, but many of them as well. And that'll be available for both institutions and for individual purchasers, individual board members on November 1st, which I believe is this coming Saturday. So Dr. Hendricks, always a pleasure to do this show. It's not always a pleasure to see colleges in such distress when they clearly can manage their way out of it and have chosen not to for whatever reason. But I say we come back together next Tuesday. We do two more colleges. And for Dr. Matt Hendricks, I'm Gary Stonker. Thanks for making time for the live College Financial Health Show with Matt Hendricks and Gary Stonker. We'll be back next Tuesday.