Statement on the financial management of the College and recent transactions
1. Sale of the Former Campus – The College agreed that the sale price of its former campus to TCU was to be kept confidential. TCU has been an aggressive buyer of property and was a very considerate counterparty in this transaction, so the confidential nature of the purchase price is something they requested and we are committed to honor.
2. Initial Use of Proceeds from Sale – The net amount of proceeds that the College received at closing in April 2012 was substantially lower than the gross amount. Roughly 40% of the sale price was used to pay off prior debt (plus interest) that had been secured by the property. The bulk of this debt had originated prior to the current administration, although it had been refinanced less than nine months prior to the TCU sale. In retrospect, we had to expend not a small sum of capital to make the old campus safe, sanitary, and capable of handling a student body that tripled from 2011-12 to 2012-13. Those expenditures were necessary even if for one year because the College could not have operated in either 2011-12 or 2012-13 without spending that capital.
3. Subsequent Use of Proceeds – The remaining proceeds were used in a manner consistent with the approved strategic plan for developing both the residential College and the online program. The largest part of our annual budget (usually over 70%) goes to salaries for staff and faculty. Currently, expenditures for the online Academy faculty and staff are about double those of the College staff and faculty.
4. Wages, Expenditures, and Operations – We have presented the Board with a comparison of Fisher More salaries against those of similar colleges, and our salaries at virtually every level are significantly lower. (Note: This data was compiled even before austerity measures required a significant reduction in salaries that make any further comparison meaningless.) The College has always attempted to be generous with its salaries and mindful of family and personal circumstances for each individual employee. However, program revenue (tuition) has not yet matched the increased costs associated with a growing student body and staff, so the College relied heavily on the sale proceeds for normal working capital. All of this was approved by the Board and monitored by the appropriate staff. The President works closely with Board members, the Business Manager, and the Director of Operations in making decisions on current expenditures and projecting future operations. Any charge of financial mishandling would necessarily implicate all of these individuals.
5. Austerity Measures – Over the past three years, we have continued to monitor and reduce expenses to fit within a budget that was increasing on an aggregate level (because of student growth and campus relocation) but decreasing on a relative level in terms of available resources per student. More recently due to falling short of fundraising targets, the College has been forced to reduce payroll through austerity reductions, a painful process that has asked for a great sacrifice from the staff (although 85% of our faculty – Academy and College – have remained at full salary during the austerity program, which means that Fort Worth staff and some residential faculty have taken the brunt of the cuts in an act of tremendous sacrifice). In other cases we have been able to cut expenses while not significantly affecting services. It is difficult to imagine that any other organization of comparable size has put as much time and care into managing its operating budget under the limitations and conditions that we have encountered.
6. More on Sale of Old Campus and Search for New Campus – Regarding the real estate transaction and our new campus:
It is important to note that the College decided to sell its old campus for both financial and strategic reasons. The main financial reason was to extinguish debt and generate the capital needed to keep the College from closing down. The strategic reason was to abandon a campus that was unattractive and limited to a residential housing capacity of less than 25 students. Thus, it was determined that there was no future for the College without taking action that would result in two real estate transactions: selling one and finding another.
Obviously, selling the property created an urgent need to find a new campus that was both available and suitable to our mission and long-term strategic plan. For these reasons we expected the campus search to be a very difficult task. We needed a property that could provide for residential housing (up to 100), classrooms, offices, refectory, library, common space, parking, and, most important of all, a chapel. In the end, we marveled at the gift of Providence when the opportunity to acquire a building perfectly suited for our mission was presented. We believe moving into this building has been a good decision and that it is the perfect property for our mission: built by good Catholics over 100 years ago to serve God and the Church in precisely the way it is being utilized.
Regarding the transaction terms, we originally considered purchasing the building with seller financing. As the closing date neared, the Board instructed the President to pursue an alternative structure, and the seller agreed to a lease with an option to buy. The owners gave us very favorable lease terms, and we have no obligation to purchase. We occupy the entire 76,000 square foot building for about $3.20 per square foot, which includes use of three acres and more than sufficient parking capacity. This rate ($3.20 per square foot) is less than the majority of warehouse rates in Fort Worth and substantially less than rates for office and residential space. The notion that our real estate deal has crippled the College is especially ironic because we have always considered this transaction to be a gift bestowed upon us by Providence through Our Blessed Mother, to whom this building is dedicated (Our Lady of Victory). Other than the generous two-year lease obligations, the College was able to remain debt free. In fact, the terms on this “real estate transaction” are so favorable to the College that we consider the building owners (who are not Catholic) as among our biggest benefactors. It is also notable that the Board (which actively participated in the negotiations and eventually approved the transaction) included three lawyers, two of whom practice in commercial real estate. The college also used local counsel for document drafting and review. In short, there was more than sufficient professional support and oversight.
7. Ongoing Operations – As mentioned above, the sale of the former campus was closed in early April 2012, almost two years ago. Since that time, the College has made no frivolous purchases of vehicles, equipment, furniture, or luxuries of any type. Salaries have remained low and operating budgets lean. Anyone who visits our campus should quickly recognize this. However, the College was preparing for growth of students, faculty and staff, and cash was needed for normal operations. Capital expenditures, both at the former and current campus, have focused on the security, health, and convenience of the students, faculty, and staff.
8. Need for Donations – Overall, the sale of the old campus allowed us to retire debt and operate for two years through a period of rapid growth and development. Nonetheless, we still rely on the generosity of benefactors until our programs reach maturity and operate at self-sufficiency. The College has never hidden this fact. In fact, a review of the entire financial history of the College will reveal that this has been the case since its founding. It is also consistent with many similar small colleges. We hoped and expected (perhaps naively) to find a benefactor or benefactors of substance to support our mission and provide the final pieces to our plan, but this has not happened.
9. Financial Diligence – We understand how “word on the street” discussions often evolve, but any possible questions have already been put to our Board and management by interested parties and our auditors. Thus, the College believes there has been an ongoing scrutiny and review of our financial operations to ensure that all expenditures have taken place with the full review and approval of all charged with fiduciary responsibilities.
Statements claiming financial irregularities or crippling real estate deals unfairly malign many people at the College. The Business Manager of the College is better informed and has been employed longer than anyone claiming knowledge of financial discrepancies. The Business Manager has worked closely with the College auditors, a respected Fort Worth firm, to generate three years of audited financials. In addition, all members of the Board, both past and present, are maligned by this allegation, especially when the impression is given that Board members may have left because of financial discrepancies, which was never the case.
10. Contact Information – The College has always been fully transparent, even going so far as to publish our business plan (Statement of the Apostolate) which includes budget projections. Anyone with concerns about financial discrepancies is encouraged to contact the Business Manager, Mr. Joe Marshall at firstname.lastname@example.org. In the end, our desire is to replace innuendo and misinformation with facts.