In this episode of the College Financial Health Show, hosts Gary Stocker and Dr. Matt Hendricks examine the financial condition of two private institutions: a school referred to as “Best Year in Washington” and Bastyr University in Washington State. For the first school, they uncover massive operating deficits (15% loss in 2024, 23% loss in 2023), a near‑zero or negative endowment caused by a $1.8‑$1.9 M loan taken against restricted endowment assets, and cash losses of roughly $3 M. The audit lacks a formal going‑concern statement because the board assumes the university can survive another year by selling its Kenmore campus. Turning to Bastyr University, Hendricks highlights unsustainable staffing levels—27 employees per $1 M of revenue (vs. an industry norm of ~17) and more staff than students (11 staff per 10 students). Payroll consumes about 76% of revenue (down from 65% in 2024 but still far above the typical 55%). High‑paid officers and overall compensation are also inflated. Vendor analysis reveals outsized IT contracts ($1.3 M to Cyberstreams and $300 K to Ocean Inc.) and a top‑5 legal contract, both unusually large for a school of this size. Hendricks argues that without aggressive cost reductions—significant staff cuts, renegotiated vendor contracts, and possibly selling campus assets—neither institution can sustain operations. He stresses the importance of benchmarking against peer institutions and tracking trends rather than relying on isolated internal data, positioning this analytical approach as essential for college leaders, students, families, and policymakers.
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It is Tuesday, June 24th, 2025. Welcome back again to yet another episode of the College Financial Health Show with Matt Hendricks and Gary Stocker. For those of you joining us live, go ahead and turn off your speaker, go ahead and turn off your camera, and we'll get the show started. Each week we look at usually about 3 private colleges and we look at their financial health. And their financial viability. Dr. Matt Hendricks out of Tulsa, Oklahoma. What do we have starting off with today?
All right, let's go to Best Year in Washington. All right. So brace yourself, though. This is not a good case. They have— well, let me refresh and just go back to the default pages here. Default graphs. Best Year.
Okay.
So massive deficit in 2023, big deficit 2024. That's a 15% net income loss in '24, 23% net income loss in '23. And to make matters worse, their endowment has basically gone to zero. Actually, actually, I think based on what I was reading in the audit, I think their endowment is actually negative now. They actually owe their endowment money.
Ouch.
So it's no longer like an asset, it's a liability to them. They have to pay back, I believe it is a $1.8 million loan they took from it. So that money's not in the endowment, it's there in paper, but it's not actually there, right?
I'm guessing their draw has not been very good.
Yeah, they took a big draw in, let me see, I think that loan was actually a big draw that they It's not showing up as a draw.
Oh, okay.
But it is in their endowment. I'll just flag a few things that if you're at Vestiaire, you should know some things that are on your audit. Um, one is note 15— 15, if I can type it right. There we go. Okay, so this part of the audit is not normal. This is probably the auditor asking—
zoom in on that a little bit, Matt.
Yeah, they're probably— this is the auditor asking the school to justify or make them confident that they'll actually survive another year. So this is that note from the management basically saying, hey, we're probably going to survive for another year and this is what we're doing. So a few things to note here. They say that we've lost $6 million and $5 million the last 2 years. That's net income losses. Their cash losses are— their cash deficits, I believe, are $3 million. Let me just make sure that that's right.
So is there a going concern note on this audit?
So no going concern. And the reason I think no going concern is this line right here. The board said, okay, we can last at least another year if we sell our campus in Kenmore, right? And they say this is the part that the auditor needed to see. Okay. We'll allow the university to continue through March of 2026. So that'd be 2 years from the end of this audit. Not one year, right? So there's just no going concern that probably the auditor took this as, as evidence that they would last for another year. Okay, so here is, there's a lot of stuff here that, so that's one thing I think. Yeah, let me find their endowment. This is the other part that I was just mentioning in that, okay. Okay. Yes. Okay. So this is the normal change in endowment table. And you can see this started the year with just $15,000 in the unrestricted endowment. And somehow they took— they drew out $1.9 million. So that's a loan to themselves they took out of the restricted endowment. So they actually owe $1.85 million to the endowments. Which would have to come out of surpluses or donations. But really, right now they're hemorrhaging about $3 million in cash. It's just not clear to me how, unless they sell this other campus, that they could pay this back. Maybe that's the plan.
Yeah.
Okay, so, um, so this is really catastrophic with the endowment. And you can see on, on the notes here, Note 11, um, yes, they sold endowment, restricted endowment assets, the So that's this investments designated for the endowment. That's restricted money, uh, $1.8 million to fund operations basically. And then they plan to pay that back.
Look at that last sentence there, management intends. That's, yeah, that's awfully soft.
They have to, so they say that we're going to spend this, pay this back as soon as we get surpluses, which it doesn't appear to be on the horizon at any point. Unless they do some things that I can suggest to them, they have to be very, very aggressive if they want to survive. And aggressive in cost cuts, right? Remember, revenues aren't going to change very quickly. Cost cuts can happen quick.
Yeah.
And they probably don't have much time to get this done. So let me show them some things that they may not be aware of. I know they've done some cost cutting, but it's not nearly as aggressive as they need to do. They probably don't know the extent of their expense issues. So let's start in on the expense side. I'm just going to spend the rest of this on the expense side because I think that's really their best shot at surviving. So I just want to try to help as much as possible. So let's take a look at employee counts. Okay, so raw values of employees, not very helpful. But if we look at relative to their revenue, so here's the— here's a big issue for them. They have just way too many staff for how big they are. Okay. So they have, again, they're spending 20, so they have 27 employees per $1 million in revenue. They should be at about 17. So they have almost, I can't do the math that quick, but a significant number of staff need to be reduced. And then just to bring it home, they actually have more staff than they do students, right? And we've seen that happen a couple times. Yeah, not common, right? Um, ideally you would have about 0.6 staff, right? Less than— obviously less than 1. Less than 1.6 staff per student, or, um, 6 staff per 10 students, all right? And they have— for 10 students, they have 11 staff. Okay, so that's significant. Again, I think that's looking like maybe half of the staff is needing to go to get that to be normal. They also have high employee counts, over 100K compensation. Again, per student, quite high. Per 1 million, quite high. So you have overall staff, you have, you're also high on the top earners. Um, I'll show you compensation for current officers, also extremely high. So the story is emerging here, they just have too many staff, and a lot of those staff are very high-paid staff, right? They're the, the officers and the people making over $100K. Um, and then here's another piece of evidence corroborating what I'm saying. So This actually, this may be the most important metric for them to look at. So this is how much they spend on salary, wages, and benefits relative to their revenue. So for every $1 million in revenue, they pay $760,000 of that. So they're paying 76% of their revenue that comes in, they're paying to salaries and wages. There's no way that that's going to be sustainable unless you have no buildings and No vendor contracts. I mean, a normal setup for a university is to pay 55% or so of their revenue in payroll. And again, just to make sure that this is clear, they should be at 55% or so, and they're at 76%. Okay. Very, very high payroll expenses. And this is after some cuts, I believe. By the way, I don't have 2024 here. I did look at that manually and they're still just way too high. They're at 2024, they spent 65% of their revenue on payroll and that's still a little bit 75th percentile. It's like here.
Yeah.
So way, way, way too high even with the cuts that they've made. So if they think they were done with cuts, I think that my overall opinion is that they haven't really even done half of the cuts that they need probably at this point. So they need to be very, very aggressive on these if they want to survive. And it's really clear what we need to do is ideally bring these metrics back into normal ranges. Okay, a couple other things. The number of contracts actually looks okay. And again, they probably just don't have enough money to pay vendors. They have it all going to payroll. But again, they may actually— may be optimal for them to bring that up, right? right? Um, after they get their staffing back in line, uh, sort of offset some of the lost staff with some cheaper vendor contracts. Um, let me show you a couple things here on the vendor side. Best year. Okay, so we have two huge IT contracts here, $1.3 million to this company Cyberstreams, and then another one, $300K to software services. No, I'm sorry, Ocean Inc. Okay, in 2023. And both of these by themselves are big for IT contracts. Put them together, this is probably the most I've ever seen for a school's size on IT spend. So those definitely need to be looked at and brought back into line. Again, there could be some weird things with this year. Maybe they're trying to roll out online or something like that, but Yeah, I don't know if they have the runway to be paying $1.5 million for IT at this time. But again, I don't have all the context, so I'd look at that. Another one that looks high is this legal. This may be part of what's happening with their financial issues, selling a campus, maybe even looking into what they need to do to shut down. I don't know. It's hard to speculate on what's happening with this legal spend, but They did have it back here in 2021 as well. So I don't know what's happening with all that. Not normal to see legal as a top 5 vendor contract, to be honest. So yeah, look at these IT contracts for sure, and those need to be probably reduced if you can do it in a way that wouldn't sacrifice revenue. Or if these are in fact online programs, do the same thing I just talked about. You need to look at the cost of those online programs versus the revenue. Get rid of anything that's got a higher cost than revenue immediately if you can. All right, I'll pass it back to you, Gary.
So really all I'm going to show for this one is, is, um, the website, because this is a unique college. Bastyr University is not common as most. Here's a list of their majors, and you can see as I slowly scroll through them, they're not common. It is a specialist college, specialty college for sure, but yet the financials still are the financials. It really doesn't matter what the degrees are. And so Dr. Hendricks, you know, Bastyr University.
My screen's still sharing.
Yeah, yeah, we're going to look at your screen. That's fine. So Bastyr, sustainable, unsustainable?
What's your assessment? No, clearly unsustainable, and they need to be very aggressive if they're not already doing that. I mean, I'm looking at— I'm looking back to '24 right now. Hopefully during the fiscal year 2025, they've been very aggressive in doing the things that I've mentioned. But if they haven't, it's hard to see from these numbers how they would actually survive much longer because you can't take another loan on the endowment. That's— there's no money in it, right? Yeah. It's not clear how they're going to make payroll this year, how they did it this year, if they did. I'm assuming they did unless they sold a bunch of assets. I should, I should double-check. What do they have for assets? Maybe they have more assets than just the endowment. That can happen sometimes. Let me double-check. Okay. So net, net assets. Let's do unrestricted net assets.
Oh, nothing.
Oh, they don't have any assets. $10 million. That maybe gets them— remember their net cash was negative $3 million. So that gets them just a few years, maybe if they can sell it, but not all of it's going to be liquid, right? It's probably going to be buildings and stuff like that that they can't really sell.
So we've talked about colleges today. We've talked about your colleges. And as we share at the end of each episode, um, it's the comparisons that matter. It is, it is the trends that matter. If you're at a college, if you're a college leader in any form or fashion, if you're a media member, if you're a student or family, look at these trends. If you're inside that college, looking at your data alone does not get it done. We talked earlier during one of the colleges that we reviewed, if they're just looking at their own internal data, they're missing the big picture. You just can't operate in this day and age of the Moneyball era of higher education. And Matt and I are just two of many folks who look at this data. And if we can look at it and share it, others can as well. And soon enough, we will have these kind of products available for students and their families. And as we continue to work to educate students and their families about the financial health, or lack thereof, or viability, or lack thereof, of these colleges, there'll be more and more pressure on colleges that don't choose to use comparisons to don't choose to use trends, they'll find themselves in even deeper financial trouble than they are today. So for Matt Hendricks, always a pleasure. I'm Gary Stocker. We'll look forward to doing the show again next week on July 1st, 2025. We'll talk then.
