In this episode of the College Financial Health Show, host Gary Stocker and analyst Dr. Matt Hendricks evaluate Morehouse College’s financial condition and long‑term viability. They begin by noting irregularities in the college’s audit presentation—operating and non‑operating revenues are not clearly separated—yet they observe a strong $17 million operating cash surplus and robust endowment growth since 2020. Capital expenditures are healthy, and net tuition revenue has risen sharply, driven primarily by higher net price rather than enrollment growth; enrollment has remained flat around 2,100‑2,200 students. The discussion turns to expense structure: a lean overall payroll contrasted with unusually high compensation for directors and officers, and elevated spending on insurance, travel, and fundraising that may warrant ROI analysis. Vendor contracts are highlighted, especially a recurring $12‑13 million maintenance contract that appears outsized for the school’s size, along with high food‑service and financial‑services fees. Academic outcomes are examined: 4‑year graduation rates hover near 40 % (well below the 50 % benchmark), while the 8‑year rate is similar, suggesting a gap between financial health and student success. Major‑completion data reveal a heavy concentration in Business Administration/Management (≈37 % of graduates) and many low‑enrollment programs that could be vulnerable if state‑level thresholds for program viability are adopted. The hosts recommend follow‑up actions: a compensation study, vendor rebidding, ROI checks on fundraising, program rationalization, and monitoring of graduation outcomes. Contact information for personalized demos of the Advanced Compass, Strategic Compass, and other viability apps is offered at the end.
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It's another episode of the College Financial Health Show with Matt Hendricks and Gary Stocker. Thanks for making time to watch. It's probably the only show that looks at the financial health and viability of private colleges across the country. Today we're looking at a college, Morehouse College. Dr. Matt Hendricks, what do you have for us?
Same thing. So this school actually looks pretty positive. So Although I will give them some things they might look at because nobody's perfect, right? So we're looking at Morehouse College in Georgia. I'll pull them up on the Advanced Compass here. And right away it looks weird, right? You got this big— look at that income. And then all of a sudden it's down. And any time I see that, I'm like, I wonder if they split out operating revenues And they didn't. All right, so 2 weeks in a row, Garrett, we picked a school that has kind of a weird audit. Would say not ideal, right? So they don't have, so again, there should be another section here that's non-operating revenues like investment gains, losses, restricted contributions for endowment, stuff like that. But they don't have that. So this is really not super useful because of that. What's more useful, what I usually do is flip over then into the cash flow statement. And bam, we have a $17 million surplus for cash from operations, which appears to be excellent. But let's take a look at it on a ratio basis. And so I saw that when I was prepping a bit ago, I was like, wow, I think this school is doing fine. So net cash from operating activities, and here's what it looks like. They've had these massive surpluses last since 2020. Sure, all that COVID money was here, right? And they're still doing it. So we have— looks, looks like some really big surpluses, but relative to their revenues— or sorry, relative— yeah, relative to their revenue, which is still not technically— I guess that's still kind of flawed because it's not just operating revenues. But anyhow, it's still big. It's sort of rescale it to everybody else. It's above the 75th percentile. So yeah. Looks really good. Um, and as I suspected, usually when you have these big surplus for cash like this, either that money is going into the endowment or going into other investments that are outside of the endowment, which is less common, or in the buildings or whatever else. But you can see where the money is going, right? A lot of money going into the endowment here. The endowment is sort of surging, and that's excellent. Um, and Yeah, they're not strapped for cash, of course. So I'm doing the wrong thing. I want to show you guys CapEx, and I'm not expecting to see anything problematic here because they have the cash, right? Usually when CapEx is the problem, they defer maintenance and all that when they just don't have the money and they've got the money. And certainly CapEx looks excellent. It's been above 1 for a long time since 2019. Yeah, and so that looks good. Revenue, again, not great to look at, but we can look at net tuition revenue and see what's happening. Their net tuition revenue is growing like crazy. So here's the school. Unlike the previous school we looked at, although these videos are not super linked, right, I guess, but you can see they got hit pretty hard during COVID but it recovered immediately, right? And that's the normal response. Right. I don't see a lot of the— you can see from the median and 75th percentile, 25th percentile that the trends really don't change all that much. But yeah, they're doing great on a net.
What's the first student look like on that? What's that first student look like on that one?
Yeah. So all of that revenue growth, this is a really interesting case. All of this revenue growth is coming from a higher price. It looks like their net price Must be much higher because the average price the student's paying used to be $13,000 and now it's $22,000 almost in just a few years.
Explain the drop in 2023.
Yeah, I don't know. Uh, that'd be interesting to go back and look at what happened here. They may have reset tuition or, um, offered more scholarships or something, but nevertheless, their price is still much higher than it used to be. Right.
I wonder what their enrollment looked like in 2023, if it plummeted.
Yeah.
To give away the store to get more students.
Actually went up. So that's good. Maybe because they dropped the price that year and like got a bunch more students or something. But I'm just guessing. I have to look at the freshman classes and see what happened. But, but yeah, like, here's the thing. This school has net tuition revenue that is growing substantially, but the enrollment is not. Enrollment, 2,100, 2,200 students in 2016, 2,200 students in 2024. So all of the growth is from a higher price. So keep that in mind, right? You got the enrollment cliff coming here probably this year will be the first year, next year will be, I can't remember exactly when it hits, but it's not catastrophic if your price, if the students pay more, right? Like that can offset all of the demographic cliff. But you have to offer something that they're willing to pay for. That's, that's the tricky part. Okay, so let's— revenue looks great from what I can tell. Net tuition revenue is growing, enrollment's flat. A lot of schools actually prefer flat enrollment, but if they want to grow, there's probably some stuff we could find for them. I'm sure there would be stuff we can— strategies we could find for them on a strategic compass. Let's take a look at the expense side though. Starting with employees, remember, this school has big surplus, and part of it, I think, is just they're getting a lot. They're getting it done with a very low staff size. Again, if this is ideal, I think, to run with a lean staff and pay them well, right? The benefit is that you're not going to have a high payroll cost, and you should, in theory, have happy faculty, happy employees, because they're just getting paid a lot more than what they would make somewhere else. And that's how, you know, ideally I would set it up if I were in charge of HR or something. But you can see they just have a really lean payroll, which probably explains some of the huge surplus. But you got to worry, like, are they getting paid well and stuff like that? That's the part they need to check. You don't want to have low morale and then on top of it see that, oh, we have a really low payroll cost. And this is another thing that could hit morale. And so it's not all roses here, potentially. But if you look at directors and officers, this is, yeah, I just showed you that the overall compensation staffing was low, but they're paying a lot to their officers and directors. I would check this again, potentially top-heavy kind of administration.
Some of the top numbers in the country. Look how far that is above the 75th percentile. Yep.
So, so again, this is from the 990 and probably was completed by their auditor. Need to dig through these numbers and figure out what in the world is going on. This is a lot to spend on directors. And at the same time, you know, this is what you're spending on pay for your other employees, which is way low. So either there's something wrong with the reporting Or there's something wrong with the sort of makeup of the staff at this school, or both, right? So I would check that. So a compensation study would be warranted, checking the layers, how many administrators you have, what everybody does, that kind of stuff. We can benchmark all, we can do a lot of that benchmarking in Strategic Compass actually. So could get some insights into that. Here's another school also with other stuff going on with like insurance. I don't know what, what's going on with insurance here, but again, that looks really high. Office expenses. So while they have a really lean staff, it's kind of funky how it's set up, right? May not be optimal. Then they have high expenses elsewhere. So they may be leaving some stuff on the table here to kind of run this place really, really efficiently. And while fundraising expenses are really, really high, that may be okay if they're getting a big return, but they need to check the ROI. Like, this is a significant increase here in spending on fundraising, just looking at them compared to themselves. Is it actually, like, panning out, producing more? And does it make sense, right? Like, what's the—
you gotta wonder if they didn't hire a lot of folks in 2024.
Travel expenses, same thing. Check all your travel budgets for each department. You know, I was at a school as a faculty member when, you know, the first things they did was cut maintenance. They cut grounds crew and cut travel spend, right? And of course, benefits was another thing. So there's a lot— there's some of the things that are early in the chopping block. The school doesn't have financial problems that I can tell, but, uh, certainly don't want to be off the charts on some of this stuff. Uh, and then fees for services, again, think this looks odd.
My, yeah.
So it looks like they have been working to bring the vendor spend back down, or they did some construction perhaps, and now that's sort of ending. But again, it's worth a look. This is several years now in a row where they just are spending a lot on fees for services, which could indicate too many contractors or bad contracts. Let's dig into that a little bit more. So they do have a lot of contracts. And it's always been high. This is probably not construction unless they're just constantly doing construction. So let's take a look at what, what some of these contracts might be. More houses.
And the table that Matt's going to bring up is the vendor table. It is part of the Advanced Compass where you can actually compare your college's expenses across all sorts of vendors with the, with those same expenses for some 1,300 other private colleges in the country.
Yeah, so we see one right away, this really dark color. That's like a standard deviation and a half higher than normal for the revenue. And what is it? It's maintenance. So this needs to be looked at very closely. This is a $13 million contract for maintenance. And I'll just say, I know right away this is very high. There's no disputing that. It's very high for how big the school is in terms of FTE. It's also incredibly high for how big the school's revenue is. So it's not ideal to be spending a ton on this, right? Unless you're just attracting students that like flowers or something, right? Like being sarcastic, but you got to put this stuff in perspective, right? I would look at that. Or if they're just doing renovation with extra cash. So there's some things that could explain this, but I think it's harder to explain when you see that it's here like every year. $13 million, right? $12 million. $12 million. $12 million. That can't be construction, right?
No, it's got to be—
Flowermark does construction. So it's, uh, I would look very closely at that and get— I mean, at a minimum, just look at the cost. The cost of getting another bid is like zero. Just call another vendor and ask for a bid. And compare it to this $13 million. Super simple thing you can do. Same with food service, a little bit high for how big the school is. Might look into that. Again, that's a significant contract. There is some construction here, and it's not, it's not Aramark, separate. Yeah. Okay, Bank of America Financial Services. I just studied a school where there there was a weird contract here. I don't want to reveal too much, but I would look at this. What is this? Is this like interest or like fees? This, this is a little bit interesting, and I would look at that as well. It's also really big contract or payments. Not sure what's happening there. Um, but anyway, I think it's worth— we already showed they have another con— a lot of high Numbers of contracts, just go through them all, double-check. So it seems like they have maybe a high number of administrators. So I mean, somebody could probably take that task on, right?
Yeah. Let's take a look then at the 2025 College Viability App to kind of dig into some of the other areas for Morehouse College. Let's take a look at the 4-year graduation rate. And the 4-year graduation rates from 2016 to 2023, the last available data, again, not impressive, Matt. You'd like to see the 4-year graduation rate somewhere at least close to 50%, and we're seeing a 4— an 8-year average hovering around 40%. And again, colleges are paid to graduate students, and Morehouse College is not getting it done. They appear to be financially successful. Obviously they are, based on what you just shared. You'd like to see maybe some additional resources dedicated to getting students through the graduation period and not just in the door as, as students. Let's take a look to see if they're having— what are they doing with discount rates? I'm looking at unfunded institutional grants for Morehouse College, and that's somewhat impressive. They kept that number pretty flat for the last, for the last 8 years. And what that tells me is they probably got a pretty good student base who wants to come to Morehouse no matter what. Because, like, unlike other colleges that we look at, um, who have to, who have to give away the store to get students to go to those colleges, that appears not to be the case at Morehouse. And again, we probably saw that, we did see that with the net tuition revenue was strong over those last 8 years. Overall, over those last 8 years, let's just take a look at is just kind of what you had tuition and fee revenue at Morehouse College. Impressive, you know, up $14 million over the last 8 years. We don't see that very often in what we have going. Let's take a second to take a look then at the 2025 College Majors Completion App. And what I have here is I brought up all of the majors at Morehouse College, the bachelor's degrees. And this is the internal market share. And what we're looking at for Morehouse College is the number of graduates in these disciplines. Business management in the year 2020 had 106. And what's the percent internal market share of the 64-some-odd— of the 64 majors we have in the database? You can see the two dozen or so that Morehouse College has. Of those two dozen, 37% of those were in business administration management in 2020. And that same logic applies to all of them. It appears that, you know, for sake of example, that the business administration management major is taking, is increasingly large internal market share percentage. And you've heard me talk about this before, Matt, when you get that number above 30%, you have to wonder if you're not becoming, if a college is not becoming too reliant on a given major. And then at the other end of the spectrum, look at all of these low enrollment majors across the board. All these low enrollment majors were next to none. And I'm going to add a story to that. In the first of November, the state of Indiana gave us a number, Matt, and all the public colleges in the state of Indiana whose majors and bachelor level majors, I'm sorry, 50 graduates in a given year were required to drop that major.
Wow.
All right, so now we have a number, right? It's going to be a different number, but Indiana says 15. So if we apply that number to Morehouse, we can see 3, 6, about 10 or 11 of their majors don't meet that 15 major threshold. And the reason I bring that up for Morehouse, and they're not unique, many colleges have a lot of low-enrollment majors, is now all of a sudden there is a standard, a threshold, if you will, that's official in one state. And what happens now if another state for public colleges does the same thing? What happens if 2 or 3 or 4 or 5 more states ask their public colleges to cut majors below whatever number, 10, 15, 20, whatever it is. When does that go to private colleges? When do private colleges all of a sudden realize if they're having fine studio arts and they have 3 majors graduating a year, they can't afford to keep that major? And so now all of a sudden, with all the cutbacks and layoffs that we're talking about, and I have those every Monday on This Week in College Viability, cutbacks are gonna, are gonna continue because now all of a sudden there's a number that we can compare that to. And Matt, when we talk about Morehouse College, strong financial college, financially healthy, better than many that we take a look at. But you saw some areas, especially when Dr. Hendrix was talking about that, his areas, and when I was talking about the majors. If you're looking for some data, some guidance, I'll have some contact information in the show notes. Reach out, um, we can set up some private personalized demos for either the Advanced Compass that Matt showed the Strategic Compass that he referenced, or any of the college— series of college viability apps, uh, and the Majors Completion app as well. So for Dr. Matt Hendricks and Gary Stocker, thanks for making time. We'll be back soon with more colleges on the College Financial Health Show.
