Update

This report is an update of our last report on the finances of University of Delaware covering the period through FY92 furnished in March of 1993. Since May 1990, when we furnished our first full report on the financial situation of the college, we have prepared four updates including this one. For a better understanding of college finances it is recommended that all be reviewed, especially our original report.

In examining the following material, the reader is cautioned that there are some major differences in accounting procedures and terminology used by universities as compared to those used in business accounting. In the present report, drawing the fine distinctions necessary to be academically accurate would distract drastically from our aim at informing those not familiar with university accounting practices. At the same time, while endeavoring to make the actual state of finances of the university clear for the non-accountant, we will try to remain true to the spirit of Fund Accounting Standards and provide an academically respectable description of university finances. The nature and import of the actual distinctions are further explained in the author's book. (Weber, R.E., Financial Analysis of Colleges and Universities, (private issue) Oct. 1991, E. Brunswick, NJ), (There is considerable variability in the terminology used in Fund Accounting both within the educational sector and between it and the business sector. We have adopted as far as possible the terminology used in Audits and in: Robert N. Anthony, Financial Accounting in Nonbusiness Organizations, Financial Accounting Standards Board, Stamford, CT 1978.)

Use of Comparative Statistics

Throughout this report comparison will be made to sample statistics developed from colleges and universities we have examined in recent years. Our complete sample consists of a total of nearly one- hundred institutions including six community colleges, three medical universities, twelve quasi-state, twenty-six state and fifty private colleges and universities. We have defined quasi-state universities as those having substantial inflows from sources other than students and state appropriations, resulting in both a significant independence from variations in state and student income and a number of significant differences in financial structure. University of Delaware falls in our Quasi-state category. This is not a statistically selected sample of the universe of colleges and universities in the United States; but it does represent a broad range by size, type and affiliation, and provides what we believe to be a satisfactory basis for general comparisons.

Appendix B provides a set of graphs of statistics for 11 Quasi- state universities (the number available the last time we compiled statistics) for FY83 through FY93. Included on each graph is the comparable trend for this university. The names and relative sizes of those in the sample from which the graphs were prepared are listed in Appendix B. We believe this to be a good representative group against which to compare University of Delaware.

This is not the place to give a lesson on making statistical comparisons, however, we feel that a cautionary note is in order. For several reasons, one should be very careful in drawing conclusions as regards any particular university from its relationship to the sample statistics.

First, being above (below) the median does not in itself mean that the university is doing well (poorly). It is a statistical fact that half of the universities examined must be below the median. Thus, all universities in the sample could be doing very well (poorly) and a particular position vis-a-vis the median would be the same for any particular university.

Second, there are often factors unique to a university that would cause it to be quite different in particular respects than others in the sample. For example, one university may specialize in liberal arts studies and another in technical studies. "Acceptable" ratios for these two would be quite different.

Third, an apparent disadvantage (advantage) in one ratio might be balanced and advantage (disadvantage) in another relevant ratio(s). For example, a university could have comparatively large values of both debt and financial assets. This would put it above the median in both cases. Being above the median in debt would not be considered particularly good, but being above the median in financial assets would be. The net effect might leave the university to be about as well off as one with lower debt and lower financial assets. Comparison of either ratio taken by itself would be misleading.

Our approach, particularly with such a small group for comparison, is to rely mostly on relative trends for the particular university being examined versus the sample trend. Beyond this, major deviation from the sample median is used as an indicator that further analysis of a particular factor may be warranted.

Aside from the trends, we use the graphs for:

to help in establishing the suitability of our data set for comparison to the university being examined. If it generally remains within the 25th to 75th %tile on these four characteristics, we feel there is good support for use of the data set, i.e., the university being examined is well represented by the statistics. On these four measures the University of Delaware fits closer to the 25th %tile.


March 26, 1995