Report on University of Delaware Finances
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In fall 2011, the AAUP commissioned an analysis of University of Delaware finances by Dr. Rudy Fichtenbaum, Professor of Economics at Wright State University. He has prepared numerous financial analyses of colleges and universities for both collective bargaining and advocacy chapters of the AAUP. Dr. Fichtenbaum concludes that the University of Delaware is in excellent financial condition based on his thorough analysis of its public financial statements. His analysis, which is an update of the analysis he prepared in 2009, covers 2004-2011. It may be accessed here.
The report makes the point that it is much more important to analyze the University’s financial statements rather than focus on the University’s budget. While the budget represents the University’s plan for allocating its resources, it does not provide information on its actual revenues and expenses. For this reason, it is crucial to examine the University’s balance sheet, its income statement, and its statement of cash flows. These financial statements provide information on the University’s accumulated wealth, changes in its finances over time, and actual inflows and outflows of cash over time.
Analyses of these financial statements demonstrate that the University is in a very strong and secure financial position. It has a high ratio of assets to liabilities. The University has great financial flexibility and high reserves relative to its operating expenses. While debt has increased in the past year, it remains low. In addition, the University has been running “a substantial cash surplus every year” since 2004 to 2011.
The allocation of resources for instruction and, in particular, the allocation of wages, benefits and post retirement benefits to instruction, most of which goes to faculty, are of special interest. Between 2004 and 2011, spending on instruction declined from 46% to 45%. While wages, benefits, and post retirement benefits for instruction accounted for 33.6% of operating expenses in 2004, these expenses declined to 32.3% of operating expenses in 2011. In effect, the University is spending less of its revenues on instruction and on wages and benefits for instruction, most of which is for faculty. If the University had kept to the 2004 percentage spent on instruction and departmental research, it would have spent an additional $10 million on compensation for instruction and departmental research in 2011.