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Eckerd warned about finances

By SHANNON COLAVECCHIO-VAN SICKLER
Published December 22, 2006

ST. PETERSBURG - Six and a half years after a $20-million financial scandal edged out Eckerd College's longtime president, new questions over the institution's finances could threaten its accreditation.

The Southern Association of Colleges and Schools has placed the small liberal arts college under "warning" status, one step away from probation, because it failed to comply with three accreditation requirements related to financial stability and campus facilities.

David L. Warren, a trustee since 1997, called the SACS decision "a bit of a mystery."

"We've had five years in a row of surpluses, enrollment has gone up, retention is up, budgets are balanced, there's been an improved bond rating," Warren said Thursday. "If you look at the trend lines, they're all headed in the right direction."

Just two months ago, Eckerd's board of trustees praised president Donald R. Eastman III who arrived in 2001 and has helped to turn around the private college's finances. In October they gave Eastman a new five-year contract that includes $260,000 in annual pay.

SACS officials could not be reached Thursday.

But according to a report from SACS' meeting in Kissimmee earlier this month, Eckerd is under warning for 12 months because it did not comply with three standards.

SACS requires a college to demonstrate it "has a sound financial base, demonstrated financial ability, and adequate physical resources to support the mission of the institution."

It also requires documents proving a college's "financial health." Being placed on warning is the lesser of two possible SACS sanctions, with probation being more serious.

The association can ultimately deny reaccreditation if they deem a college to be "significantly out of compliance with one or more of the comprehensive standards."

Financial picture called complicated

In a letter last week to Eckerd's trustees, faculty and staff, Eastman said he believes SACS simply wants more information about Eckerd's "extraordinary recovery" from the money problems revealed in 2000.

He said SACS officials had questions after seeing Eckerd's recent report and another submitted last year.

"They seemed to misinterpret some things. I frankly believe that the real failure here is our failure to communicate effectively in writing to SACS where we are financially and where we are going," he said. "That's partly because our financial picture for the last few years has been extremely complicated."

For example, Eckerd sold off College Landings a few years ago for $7.5-million and College Harbor last year for more than $10-million, but College Harbor was still on the books for a 2006 audit.

Also, Eckerd recently built a $14.5-million library and a residence hall and secured $30-million in bonds to help cover the cost.

"It makes your books look a little crazy at times," Eastman said.

He also believes SACS wants a more long-term financial plan than what Eckerd provided, but the omission was intentional.

The college has spent six months working on such a plan, and it will be finished by January, Eastman said.

Eckerd's finances have been under scrutiny ever since 2000, when a failed real estate venture and unauthorized spending depleted about $20-million from Eckerd's $34-million endowment.

President Peter Armacost retired from the post he had held for 23 years amid the controversy.

In 2001, Eckerd trustees lured Eastman from the University of Georgia. That same year, SACS reaccredited Eckerd through 2011 - as long as the school submit reports outlining its progress.

Eastman said Eckerd submitted one report last year, and another in June to answer SACS questions.

According to Eastman, Eckerd sent documents showing five consecutive years of balanced operating budgets; five years of clean audits; and five consecutive years of increasing net reserves, including a $2.2-million surplus for the 2006 budget year.

Eckerd submitted proof of the College Landings and College Harbor sales, a move that wiped out $24-million of Eckerd's debt.

The college also turned in documents showing the endowment stands at $20.4-million.

Not included in the SACS report, however, is more than $35-million in donations recently raised through Eckerd's silent capital campaign, including a $25-million gift announced earlier this year from trustee Miles C. Collier. Some, but not all, of that money will go into the endowment.

"If we really thought we were going to have problems with SACS, we would have gotten Miles Collier's gift in earlier so we could count it for the budget year," Eastman said.

Until SACS sends Eckerd a detailed letter next month outlining the committee's concerns, administrators don't know for sure where their report fell short.

Merle Allshouse was director of the Academy of Senior Professionals at Eckerd for eight years before leaving in 2002. He said a key indicator of a college's financial health is the value of the endowment per student, "and at Eckerd it's going down."

Eckerd's endowment has increased by 6 percent in five years and enrollment is up by almost 16 percent in the same period to about 1,800. Eastman anticipates the college's capital campaign will eventually boost its endowment to about $40-million. By comparison, Bowdoin College, also a liberal arts school of about 1,730 students in Maine, has an endowment of $578-million.

In his letter to trustees, faculty and staff, Eastman was confident that Eckerd will keep its seal of approval.

"We can provide the information the commission will be seeking," Eastman wrote. "The college's accreditation continues intact."

Here are the accreditation standards with which Eckerd failed to comply, according to the Southern Association of Colleges and Schools:

1. The institution has a sound financial base, demonstrated financial stability, and adequate physical resources to support the mission of the institution and the scope of its programs and services.

2. The institution's recent financial history demonstrates financial stability.

3. The institution provides financial statements and documents, including multiple measures for determining financial health as requested by the commission, which accurately and appropriately represent the total operation of the institution.

[Last modified December 22, 2006, 00:05:43]