News | Tori Sundholm for The Clarion
In May 2013, Bethel received an alarming notice from the Department of Education informing them that their financial responsibility score failed to meet set standards. The Department of Education requires all higher education institutions to demonstrate financial responsibly to enable them to qualify for federal student aid programs. Each institution's financial responsibility score is determined by the school’s annual financial statements and is based on a scale of -1.0 to 3.0. Any school at or below 1.5 is considered not financially stable.
For FY12 (fiscal year 6/1/2011-5/31/2012) the Department of Education calculated Bethel’s financial responsibility score at 0.4. This came as a surprise to Bethel administrators, like Senior Vice President for Finance and Administration, Kathleen Nelson, whose calculatoins were drastically different.
“This was a complete surprise to Bethel since our independent auditors calculate our score for us each as a part of our audit and their calculation was a score of 2.4 which easily exceeds the 1.5 standard for determining financial responsibility," Nelson said.
Department calculations by the Department of Education for financial responsibility were not available until the fiscal year 2009. Before 2009, schools submitted their financial statements to The Board of Education but were not informed of their financial responsibility score. Each school could only base their financial responsibility score by their own calculations.
In 2010, each institution's score was made available on the Department’s website due to a Freedom of Information Act request by the Chronicle of Higher Education. Also in 2010, the Chronicle brought attention to the 114 institutions that failed the 2009 requirements and the 149 schools that failed requirements in 2010. With this new information posted and a considerable amount of schools and institutions failing requirements the industry received a lot of media attention.
The National Association of College and University Business Officers (NACUBO) and the National Association of Independent Colleges and Universities (NAICU) stepped in and researched the issue of calculation differences at hand. They determined that the Department of Education was making errors in calculations resulting in misleading scores.
Then, in 2010, NAICU and NACUBO created a group to review the Department’s compliance with its own regulations. In 2012 they published a 70-page report revealing in detail the Department’s mistakes and misinterpretations, which resulted in inaccurate scores. The report also cites the mistreatment of retirement plans in the financial calculation, which is the main error that caused Bethel to fail the test. The Department’s refusal to recognize Bethel’s defined benefit pension liability, as a “post-employment or retirement liability” is inconsistent with generally accepted accounting principals (GAAP).
In learning of all of the problems with the Department of Education along with receiving a letter from them, Bethel immediately looked to NACUBO, NAICU and U.S. Representative Betty McCullom for guidance in appealing to the Department.
Nelson and other Bethel University staff members met with Rep. McCullom this summer and learned that the Department decided to wait to make a decision on Bethel’s appeal until after Bethel’s FY13 financial statements were submitted and their financial stability score was known.
Bethel submitted these financial statements last week and is now awaiting a response from the Department. If the Department's score does not change, Bethel will be required to post a $4 million letter of credit to secure the $40 million per year that Bethel students receive in federal student aid. It would cost Bethel nearly $100,00 in per year to post a credit letter of that size, in bank fees alone.
For now, Bethel is waiting with a hopeful attitude. “Bethel is confident in its long-standing history of financial stability and financial responsibility. Accordingly, we are hopeful that we will successfully resolve our appeal with the Department," Nelson said.