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Delta State ranks high in national sustainability study

By July 30, 2012General

CLEVELAND, Miss. — An analysis of nearly 1,700 public and private nonprofit colleges unveiled last week by Bain & Company found that one-third of the institutions have been on an "unsustainable financial path" in recent years, and an additional 28 percent are "at risk of slipping into an unsustainable condition." Despite those findings and projections, Delta State University rated in the strongest category as a financially sound institution

At a surprising number of colleges, "operating expenses are getting higher" and "they’re running out of cash to cover it," said Jeff Denneen, a Bain partner who heads the consulting firm’s American higher-education practice.

The methodology for the study was based on two financial ratios, and they produced some findings that may seem incongruous with conventional views on colleges’ financial standing. One of the ratios, called the "equity ratio," was based on the change in value of an institution’s assets, including its endowment, relative to its liabilities. The other, the "expense ratio," looked at changes in expenses as a percentage of revenue.

The analytic tool classified colleges based on whether their expense ratios increased or their equity ratios decreased, giving the harshest rankings to those with changes of more than 5 percent, moderate rankings to those with changes of 0 to 5 percent, and good rankings to those where expense ratios didn’t increase and equity ratios didn’t decrease.

The tool classified wealthy institutions such as Cornell, Harvard, and Princeton Universities as being on an "unsustainable path" alongside tuition-dependent institutions like Central Bible College, in Missouri.

According to the study, Delta State was rated in the strongest category and was the highest rated Mississippi university in terms of financial stability.

"We were definitely happy to see the ranking. We’ve worked hard to control spending and grow revenues in the last few years. It’s been difficult, but well worth the effort. We’re better prepared for whatever the financial future will bring," said Greg Redlin, Vice President for Finance & Administration.

Bain & Company is a global management consulting firm headquartered in Boston, Massachusetts. Bain has 48 offices in 31 countries and more than 5,500 employees. It is considered one of the most prestigious consulting firms in the world.