So, depreciation, what’s that all about? Well, lets say you buy a car, or a computer or a $15 million dollar campus; that asset loses value as you use it over time. That’s the depreciation of your asset. Eventually you will have to buy new stuff, you know, a new computer, a new library, a new shower for the executive suite. So the idea of booking depreciation into your budget as a liability is that if you would set aside money every year to the amount that your asset loses value, the next year you can fix up your asset or buy new stuff. So basically, it’s paper money unless you actually have the funds to cover that. We don’t loose that money unless we actually have that money to spend, but we nevertheless have to show that our assets loose value. So it puts an expense into our budget, whether we have it or not.
Up until 2001, Antioch University carried the depreciation for all campuses, amounting to about $2,9 million. To cover that cost, the University used gains on the endowment – that’s how much your stock etc. increases in value – to offset that paper expense. Although everything that is Antioch, including this campus, is owned by the University, the vast majority of the endowment [about 30 million of a total 32 million] consists of gifts earmarked to the College. So theoretically, the majority of the growth should be ours too, since we are making use of the majority of buildings that make up the majority of the cost of the depreciation. This fair and square deal was in place until 6 years ago. In 2001 as one of the outcomes of a university run Financial Stabilization Task Force, the university mandated all campuses to include depreciation of their assets as an expense in the campuses budgets. The outcome was that the College suddenly had to book $1.4 million in their annual expense budget, with no additional endowment growth to offset that cost. Over the past 3 years the endowment has grown an average of 12 percent, but because we only get 5 percent of that growth, the other 7 percent that is left over goes straight to the University books not the College’s budget. 7 percent of $30 million is 2.4 million. This amount was taken away from the College and placed on the University’s revenue line. Considering this school operates on a $20 million budget a year, with an average cash deficit of $800.000 to $1.2 million dollar over the last 6 years, our books could have looked a lot healthier if we would have been able to show this full asset growth in the College’s budget.

- The Blaze Editorial Collective

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Filed under: depreciation, finances, University Board of Trustees, Antioch College, editorial collective