Institutional Financial Assessment: Methodology and Meaning

This paper responds to the fourth annual report by W. John Minter and Howard R. Bowen on Independent Higher Education "Financial and Educational Trends in Independent Higher Education, 1978." Primary thesis: established financial reporting does not tend to do justice to a sound assessment of the financial condition of colleges and universities. Because the latter belong to the "service" economy, we must know more than we do about changes in quality. Such studies also must say how well institutional objectives are being achieved. College presidents and deans have tended to provide researchers with overly optimistic information. When they later see that Bowen and Minter report this very fact, they complain that their conclusions are not gloomy enough. Such double standards damage realistic program assessment efforts. The blame falls on the respondents and not on the authors. Neither can the authors be blamed for shortcomings in financial accounting ignoring the total cost of institutional activity. If accounting practice were based on a total cost concept the news about higher education finance would more nearly reflect what we all know is true: colleges and universities are worse off than the statistics say.