Measuring Operations: An Analysis of US Private Colleges and Universities' Financial Statements

As events in the business sector have highlighted, companies can play by the rules and yet produce misleading financial statements. This study examines non‐governmental organizations that provide a substantial portion of higher education in the United States. We seek to determine whether private colleges and universities take advantage of the discretion available to them under accounting and auditing standards to present an operating measure in their statement of activities. We find that nearly 60% of schools report an operating measure but the items included or excluded from operations vary widely.