Title

FINANCIAL VARIABLES PREDICTIVE OF COLLEGE DEMISE

Date of Completion

January 1985

Keywords

Education, Finance

Degree

Ph.D.

Abstract

Recently, the National Association of College and University Business Officers (NACUBO) developed an instrument that collegiate institutions could use to gauge their fiscal status during these financially beleaguered times in academe. However, the NACUBO instrument has not been broadly tested for its utility.^ It was therefore the main purpose of this study to test the instrument preliminarily by answering to what extent and in what manner 27 selected NACUBO indicators could differentiate open from closed, small, less selective liberal arts (L.A. II) colleges. Financial data on 284 small, open L.A. II colleges and 19 small L.A. II colleges that had closed or merged with other institutions between 1976-77 and 1981-82 were first garnered from the National Institute of Independent colleges and Universities. Then, discriminant function analysis was utilized, yielding an equation with ten significant predictors. Of these, three accounted for 67% of explained variance: (1) Financial Full-Time Equivalent Student Enrollment was derived by subtracting unrestricted-fund scholarships and fellowships from tuition and fees and then dividing that figure by annual tuition rate. The indicator may suggest that, to meet expenses, tuition dollars must be used sparingly in subsidizing students. (2) Private Gifts, Grants, and Contracts Proportion was derived through division of private funding by educational and general expenses along with mandatory transfers. The indicator may note varied income as an important contributor to solvency. (3) Student Services Expenditures per Student was derived through division of student services expenditures by the Higher Education Price Index and then through division by total students. The indicator may suggest that student services (particularly counseling) are important in student retention.^ The equation explained 44.12% of all variance (p < .0001). The cut-off D value was -32.99. The centroid equalled -30.68 for closed colleges and -40.67 for open colleges. The equation correctly classified 292 of 303 colleges (96.4%). This was 62.7% above chance (p < .001).^ The study therefore suggested that the NACUBO instrument may be a powerful tool, at least for small L.A. II colleges. The study also provided a model through which L.A. II colleges might partially gauge their well-being. ^