Professors Say Accounting Guidelines Conceal State of University Finances

Present accounting practices conceal the true financial status of most universities and allow treasurers to point to deficits which are meaningless, two Cornell University accounting professors said in a paper made public this week.

Harold Bierman Jr. and Thomas R. Hofstedt said that their calculations, based on the reported statistics of ten universities, showed that all the universities had actually increased their wealth during the 1970-71 academic year, although they were announcing budget deficits.

Their results show that, although Harvard reported a $1.4 million budget deficit for 1970-71, the University's wealth increased by $314.3 million in the same period.

Hofstedt said yesterday that he and Bierman were "frustrated by the practice of universities quoting 'the deficit' and then raising tuition, cutting salaries and undertaking other measures of economic repression."

The professors said they would like university accountants to include all gifts to the university and the market appreciation of the university's endowment in their budgetary analyses.

Generally accepted accounting guidelines for university budgetary statements do not require inclusion of market appreciation or gifts not specified for operating costs.

These guidelines are "bad rules and should be changed," Hofstedt said.

Hale Champion, vice president for Financial Affairs, said yesterday, "There isn't any discrepancy or deception in reporting an operating deficit of $1.4 million."

Champion also said that an income-expenditure study has to cover more than one year to be meaningful.

He said that many universities in 1970-71 were recovering from disastrous losses suffered in 1969-70. "On the basis of that kind of volatility in the market, you can't start spending market gains," Champion said.