University of New Jersey comes under scrutiny amid financial emergency


New Jersey City University is under intense scrutiny from the state government following a financial meltdown that led to a dramatic reversal of fortunes, with the institution going from a surplus of 108 million in 2013 to a deficit of $67 million under NJCU campus expansion plans.

Last week, Governor Phil Murphy, a Democrat, called for an investigation into the university’s finances.

“These figures, if true, are deeply troubling and require an immediate and independent investigation to understand how the financial situation has deteriorated so rapidly over an eight-year period,” Murphy wrote in a letter to the Comptroller. state formally requesting an investigation.

It now appears that state authorities are about to open such an investigation.

“We will review what happened at NJCU and follow the facts where they lead us,” Acting State Comptroller Kevin Walsh wrote in part of an email to Inside higher education. “If anyone has any information on this, please contact us through our website.”

The NJCU Board of Trustees acknowledged the request in a statement from Board Chairman Joseph F. Scott, who said, “We welcome any additional review of the university’s financial condition as we work in working with our partners in government, labor and our student, faculty and staff community to place our institution on solid ground and set it on a path to future sustainability.”

The board did not respond to a request for comment. But NJCU officials pushed back on criticism — and reporting — arguing that critics misunderstand the university’s financial situation, that reporters exaggerated the reported surplus, and that enrollment issues and changes in National Accounting Standards are the true cause of the NJCU. financial woes.

Now NJCU, a minority-serving institution that enrolls about 6,000 students, many of them low-income and first-generation, is in the crosshairs of state investigators heading into the fall semester.

The financial collapse

According to faculty members and local media, the NJCU went from a major surplus to a major deficit in less than a decade under former president Sue Henderson, who resigned last month, earning a payout potential of $1 million in case of financial emergency. , whose board of trustees is seeking a $10 million lifeline to keep the university afloat.

Faculty members pointed to a number of alleged financial missteps by Henderson, largely related to ambitious expansion plans that emptied the university’s coffers and failed to bear fruit.

Under his leadership, NJCU built a new trade school, expanded its campus to nearby Fort Monmouth — which a state official is now urging NJCU to move to another college — and aimed to expand the campus. by building a new luxury and performing arts center. apartments.

Prior to Henderson’s departure, employees noted — in a University Senate resolution criticizing his leadership — numerous other factors, such as “changes in the state’s contribution to the university’s budget ; changes in student enrollment and retention; adjustments to secure pensions, and other reasons.”

Enrollment and retention challenges have weakened NJCU’s finances, said Francis Moran, professor of political science and chair of the NJCU University Senate. Inside Higher Education by email. According to university figures, NJCU has grown from 7,951 total students in fall 2019 to 5,841 students this fall, though officials note that those numbers will likely increase before the semester begins.

“I think the main problem was that we are a tuition-driven institution, and we hit a bad cycle of declining enrollment just as we embarked on ambitious expansion plans,” wrote Moran. “COVID hasn’t helped anyone (other than the lifeline that federal funding has provided in the short term; it’s killed enrollment at our feeder community colleges). Our retention rates haven’t been as strong either. and we were on this conveyor belt of constantly finding new students to fill the seats.

University leaders argue that a number of factors, not poor leadership, depleted its finances. NJCU spokesperson points to declining state contributions — from $26.1 million in 2015 to $21.5 million in 2020, with fluctuations along the way — and declining enrollment of over 2,000 students during the COVID-19 pandemic, which it has yet to do. recover from. But the main cause of NJCU’s financial difficulties, officials say, is a change in accounting standards.

A statement provided by NJCU from First Tyron Advisors, a financial services firm retained by NJCU, argues that the university never had a surplus, but rather that its net position was positive at $108 million and that Recent reports have confused the concepts of surplus and net position.

A key issue, First Tryon Advisors said, is the 2015 adoption of amendments issued by the Governmental Accounting Standards Board, an organization that sets accounting and financial reporting guidelines for state governments. and local and entities such as public colleges.

“The reference to the decline in net position is also discussed without proper context, as the [] the article does not provide commentary on the implementation of GASB 68, a new accounting standard related to pensions that was required from 2015,” reads part of the NJCU statement. “NJCU’s Net Position is currently negative ($61 million), but only because of GASB 68. NJCU’s net position would be $84 million without the 2015 change in accounting standards.

The statement added that attributing the decline to leadership “is totally inaccurate.”

Ben Durant, NJCU’s recently hired Chief Financial Officer, added, “In the year of its implementation, GASB 68 negatively impacted NJCU’s net position by $115 million. This was a change in reporting requirements and not an actual decline in net position. In all practical aspects, nothing had changed. Accounting rules simply required NJCU to demonstrate a liability that it was not previously required to present. In the most recent fiscal year, the GASB 68 adjustment had a negative impact of $145 million on the net position.

When GASB guidance was first issued in 2012, to take effect for fiscal year 2015, GASB Chairman Robert H. Attmore said the new accounting standards would “provide a more faithful representation” of obligations such as pension liabilities and expenses. At the time, Attmore, now retired, said: “Among other enhancements, net pension liabilities will be reported on the balance sheet, providing citizens and other users of these reports clearer picture of the size and nature of financial obligations to former and former employees.”

And after

Caught in a financial emergency, the NJCU passed a 90-day draft budget from July 1 to September 30. This budget, according to university spokesperson Ira Thor, “provides funding only for fixed, mandatory, or other costs that are necessary to operate the campus, allowing campus management to develop a comprehensive annual budget. (to replace the provisional budget) which will incorporate a comprehensive resizing plan for long-term sustainability.

NJCU focuses on five key areas to achieve long-term financial sustainability: enrollment and revenue generation; reducing costs in the short, medium and long term; sell significant assets; review its academic offer; and administrative efficiency, Thor said via email.

“Specific strategies in each area are currently being developed by critical and collaborative priority teams,” he wrote. “A detailed resizing plan will be presented with the annual budget, which will replace the current interim budget and whose adoption is scheduled for the end of September.”

Durant said the university has identified $12 million in cuts.

“Some of these reductions (including furloughs, pay cuts and freezing vacancies), however, are short-term budget reduction measures, adopted to contain costs while we develop a more comprehensive resizing plan. to align the size of our institution with the current level of our enrollments,” Durant said in an NJCU statement. “But resizing takes time. This cannot happen haphazardly or in a way that visibly erodes the quality of services expected of students. As such, we are requesting an injection of stabilization funds from the state to give us the track we need to develop and implement a thorough and comprehensive plan for long-term sustainability. »

In the meantime, the university will await a decision on its request for a $10 million lifeline.

According to Moran, details on financial sustainability efforts “have been scarce, but the general view is that we’re going to lighten up and get back to our primary mission of serving our community here. There’s also talk of offloading some of the real estate we resumed and stopped projects that had been planned, but the main thing is that we must recruit students and keep them in the seats.

Moran added that the new administration has been more forthcoming with details in recent days.

Where is the monitoring?

NJCU faculty members have been sounding the alarm for months. In September, they voted against Henderson, who resigned in June, over financial mismanagement and a lack of shared governance. At the time, they noted that NJCU’s financial situation had taken a dive under his leadership. The NJCU Board of Trustees responded to the vote of no confidence by affirming its support for Henderson.

While the NJCU Board of Directors noted in a statement that it “believes[s] deep in transparency and openness,” members avoided discussing NJCU’s financial issues with the press.

But what exactly is the role of administrators in protecting a college from financial collapse?

Larry Ladd, senior consultant at AGB Consulting, noted that while budget management is not the responsibility of the board, it is responsible for ensuring institutions are financially viable.

“They are not responsible for financial management, but they are responsible for ensuring assets are used appropriately and a sustainable financial model is in place,” Ladd said. “They are responsible for protecting the institution’s assets over time. That doesn’t mean they manage day to day – they hire a president to do that. But they have to ask themselves the questions to make sure that the institution is financially responsible in making the decision.”

Ladd said boards must be prepared to understand the risks of bold expansion plans, as well as ask questions about deficits and how those will be brought under control by university officials.


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