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2009-03-03 issue:

Endowment losses hit MC USA schools

Bethel, Hesston colleges report additional losses since June 2008 reports.

by Everett J. Thomas and Gordon Houser

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Mennonite Church USA colleges, universities and seminaries all suffered losses to their investment portfolios as of June 30, 2008. But the economic recession made matters worse in the months after their fiscal years ended. The situations at Bethel College, North Newton, Kan., and Hesston (Kan.) College drew the attention of the Newton Kansan in a Feb. 13 article by Cristina Janney. Hesston reported additional losses to their endowment. According to the article, 35 percent of the school’s $10 million endowment has disappeared in the current economic meltdown.

(Scroll down for chart.)

Bethel College is also having to respond to economic losses. Bethel has made budget cuts; decreased travel; instituted a weeklong, mandatory, unpaid leave for staff over Christmas break and asked employees and Bethel board members to make greater donations to the college.

From July 1 to Nov. 30, 2008, Bethel lost more than $4 million, around 30 percent of its endowment. According to Bethel president Barry Bartel, the college draws on that endowment for operations expenses. The college has transferred some money out of endowment into liquid assets, so it is difficult to compare the current value of the endowment. However, Bartel says the losses have continued to mount since last November.

The college was forced to cut $330,000 from its $10 million general operating budget this school year. Next year, the school is looking to cut $700,000 to $800,000 from its general fund budget.

In addition to the loss of its investment income, Bethel saw a decline in enrollment for the 2008-09 school year. The college had an increase in its freshman class, but transfers were down, resulting in a decline from 540 to 500 students. Bartel says he appointed a task force last fall to work on “enhanced recruitment of transfer students,” and he’s hopeful that will make a difference.

Mennonite Education Agency released the audited statements for all higher education schools on Feb. 11. Those results show that Goshen (Ind.) College had a realized loss of $2,245,942 and unrealized loss of $23,416,372 as of June 30, 2008. On Feb. 12, Jim Histand, vice president for finance, explained the situation.

“Goshen’s reported figures,” Histand said, “will be substantially more volatile from both a realized and unrealized gain/loss perspective than the other Mennonite colleges, due to the much larger endowment and investment portfolio we have as well as Lilly Foundation grant-related activities. In good years for the financial markets, our numbers will go way up, but in down years in the financial markets, our numbers will go way down comparatively.”

Accounting for the school’s Center for Intercultural Teaching and Learning (CITL) also contributed to Goshen’s losses.

“Two years ago we received the $12.5 million grant from Lilly Endowment for CITL,” Histand said, “but last year was the first full year of operations of the grant. The year those grant funds came in they were recorded as a substantial income item. But then in subsequent years, as those grant funds are expended, they go out as expense without income recorded in that year to offset the expense since it was already recorded earlier.”

Realized losses in the chart below are actual reductions in an institution’s net assets. Unrealized losses are the amount the institution would have lost if the investments were sold as of June 30, 2008.



Acronyms in chart: AMBS is Associated Mennonite BIblical Seminary. EMU is Eastern Mennonite University and Eastern Mennonite Seminary.

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