Guest Post – Concordia Ann Arbor: A Response – Part 2 by Mark Stern

Concordia Ann Arbor:  A Response, Part II

There are different ways to measure the financial health of a university.  One can look at its “operating income”, or one can look at its “net assets” from year to year.  Those two different metrics can each be accurate, yet tell very different stories.

Say in 2020, you owned a home worth $250,000, and earned $50,000 a year.  Your net assets were $250,000 and your operating income (salary) was $50,000.

In 2021, your home value increased to $300,000, but your salary stayed the same.  Your net assets increased from $250,000 to $300,000 – up 20% – but your operating income did not change.  Plus, your property tax bill went up from the higher home value.

Then in 2022, your house value went down to $270,000, but you received a pay raise, to $60,000 a year.  Your net assets decreased by 10%, but your operating income increased by 20%.  Also, you were able to get your property tax bill on your house reduced due to the decline in the market.

In which year were you better off? 

On paper, you had the most wealth in 2021 because of the 20% increase in net assets, but it wasn’t cash you could spend.  In fact, you had less money to spend because the “paper profit” on your house meant you had to pay a higher tax bill from your “operating income” that stayed flat.  That’s ok if you are 70, retiring, and selling your house to downsize.  But if you are 35, working, and raising a family, you were better off in 2022, despite the 10% loss in “net assets”, because you had more cash to spend from the higher operating income (pay raise), and you have time to wait for the house value to go back up. 

This example shows how Concordia University Wisconsin (CUW) can be “profitable” yet face a “structural deficit” at the same time.   

Retired CUW President Dr. Patrick Ferry defines “profitability” as “positive change in net assets”.  On a recent Lead Time podcast[i], he asserted that for nine of the ten years since the [CUW-Ann Arbor] merger, “CUWAA has been profitable on a consolidated basis, including the last two years.”  He said that the “average positive change in net assets – the average profitability over the last decade – has been $11.7 million a year.”  That is a legitimate way to measure profitability.  However, like rising home values, higher net assets don’t necessarily help pay the grocery bills.  (Yes, one could take out a home equity loan – not normally a good idea to pay monthly bills.)  

Dr. Ferry stated that on June 30, 2024, “assuming the stock market remains flat, CUWAA will certainly end the year in the black without having to sell anything.”  Yet he conceded, “That doesn’t mean that there aren’t financial concerns, right; you cannot have those kind of operating deficits year in year out.”  The latter statement seems to contradict his explanation about how profitable CUW has been over the last two years and will be in 2024, unless you understand that in fact, operating income may be much more relevant to the financial health of CUW than net assets. 

Current CUW President Dr. Erik Ankerberg is focusing on operating income.  In his initial February 13, 2024 message about the financial situation at CUW, Dr. Ankerberg referred to a “structural deficit”, meaning an ongoing shortfall in operating income. 

In a recent email to the CUW community, Dr. Ankerberg explained that in the past, CUW “leaders have used the university’s audits as a ‘North Star’ to denote the relative fiscal health of our organization.  This has occurred, despite the fact that those documents include numbers (such as market returns for our endowment and restricted contributions) that do not necessarily help cover our ongoing and rising operational costs.”  In other words, CUW’s paper profits did not necessarily translate into money the university could use to pay faculty and staff, or pay other operating expenses needed to run the university today.  Your house may be going up in value every year, but unless your salary goes up too, you may still struggle to pay rising monthly bills.

Both Dr. Ferry and Dr. Ankerberg have far more information about the finances at CUW than I will ever have.  The purpose of these articles is not to do a forensic audit, nor to recommend a specific solution for CUW.  Rather, I am trying to provide some clarity and realism for the average reader who is not steeped in the minutiae of higher education finance. 

It would be helpful if Dr. Ankerberg and the CUW administration released their financial analysis.  It would also be helpful if a trio of retired CUW administrators – Dr. Ferry, former CUW interim president Dr. William Cario, and retired CUW Chief Operating Officer Allen Prochnow – would publicize the financial analysis that they have prepared[ii].  Ideally, the release of those two documents would clarify two other significant points.

First, according to Dr. Ferry, “those who say that Ann Arbor has been an anchor to Mequon … it’s just not true.”  Dr. Ferry did not cite any figures in support of that claim.  Even if CUW was profitable as a whole after the merger, that does not establish that the Ann Arbor campus was profitable – nor would a bad year for CUW establish that the loss was caused by Ann Arbor.  Release of the CUW analysis could show the breakdown of costs and revenues between the two campuses, to demonstrate once and for all how each campus is doing.

Second, in speaking of the “average profitability over the last decade [for CUW of $11.7 million a year],” Dr. Ferry said:  “That has been typically just rolled over into the endowment.  This has allowed that endowment to grow.  When I first became president at CUW, we had a $25 million endowment.  It’s about $125 million now.”  He also stated that with regard to the $125 million, “$27 million of that came over from Ann Arbor as part of the merger.” 

Those numbers don’t add up.  Dr. Ferry became president of CUW in 1997.  If he started with $25 million, added $27 million from Ann Arbor, and added an average of $11.7 million a year for the last decade ($117 million total), the endowment would be at $169 million even if there was no growth at all for the 16 years between 1997 and the Ann Arbor merger, and no investment return. 

Dr. Ferry, Dr. Cario, and Mr. Prochnow should provide links to the CUW audited financials and a clear explanation of exactly how the endowment grew; the amount of debt and liabilities that came over along with the $27 million at the time of the Ann Arbor merger; and how their proposal demonstrates that CUW can continue to pay its bills without the “precipitous action” that Dr. Ferry says is unnecessary.

With disclosure of this information from both sides, interested parties can determine what analysis is more realistic, and can more effectively evaluate the options that the CUW Board of Regents may propose.

Mark Stern is the former chairman of the Concordia University Chicago Board of Regents and now serves on the Concordia Seminary Board of Regents.  This article is his opinion and does not speak for either institution.

[i] Available on YouTube at

[ii] The existence of such an analysis was referenced by Ann Arbor faculty spokesman Rev. Dr. Scott Yakimow at the Ann Arbor faculty and staff town hall meeting with Dr. Ankerberg.

5 thoughts on “Guest Post – Concordia Ann Arbor: A Response – Part 2 by Mark Stern

  1. Dr. Ferry, Dr. Cario, and Mr. Prochnow sould realize they no longer work at the institution and are not privy to the most current data and discussions. The data attributed to them may be helpful in understanding, as would be the independent analysis. It seemed bad form for Dr. Ferry to sound off on a politically charged podcast and for faculty/staff to call for a former employee to provide insight and analysis on a situation they are no longer responsible for.

  2. My first comment is that Dr. Ferry is a bit out of line to be speaking publicly on this topic. Audited financial statements are confidential business information unless the BoR decides to release them.

    My second comment is that an increase of the market value of physical assets and investment funds is not a sound measure of profitability. Profit is the measure of revenue generated from operations (here services provided) as compared to the costs of operations. Here we are told their is a $9 million structural deficit or negative “profit”. Otherwise known as a loss.

  3. Thank you, Mr. Stern, for an excellent and very helpful analysis on how “net assets” and “operating income” affect this type of decision-making! I am referring especially to your superb example, that many people would understand, of the homeowner with assets in their house and a salary.

    You are correct that having access to the financials would help the relevant stakeholders understand what is going on, though depending on the detail of the financial reports, questions still might need to be asked of the CFO or President.

    I learned a bit about this while I served as the Director of Concordia Historical Institute, an agency of the LC-MS, from 2002-2008. I had a board member at the time who had served on the board of directors of a non-profit university in the State of Missouri for some time, and he was very knowledgeable about these types of issues. I remember asking him about the types of assets that were reported in our CHI financial reports and what they meant (we had very good reports, by the way). He explained to me the concept of “sunk cost,” which readers can look up under that name on Wikipedia. He said that congregations, colleges, and universities spend a LOT of money on sunk cost in their buildings and their appointments and equipment. These things are not readily convertible into cash, are not liquid, and sometimes are only actually worth the land they sit on. They may actually be worth less, because they might have to be demolished (cost there) before selling the land.

    The university or church buildings, with their campuses, are not like your typical middle or upper middle class home, for which you can almost always find a buyer for “condition as is.” They are not like city office buildings, which can be used by any corporation–just change the name on the sign. They are not like factories, ditto. The university and church buildings are only valuable to the people who built them, except in some rare cases, like the time when Concordia Milwaukee bought the property and buildings of the convent at Mequon outright and could use everything already in place, with a few artistic changes in the chapel.

    The problem is when the administrators think that “net assets” include this type of “fixed assets” which are really a sunk cost. It can lead to “sunk cost fallacy” thinking (see referenced article Wikipedia) and other problems. I don’t know if that is what is happening among those who disagree with the recent CUWAA financial analysis (which I have not seen), but my board member was dealing with the finances of a university when he learned about this problem, so I think that there are at least some parallels.

    Thanks so much for your writing and speaking on this topic! It is very helpful!

    Yours in Christ, Martin R. Noland (LCMS pastor)

  4. The public statements about the institutions’ finances and balance sheets are very alarming compared with what is reported in the Form 990s. It is extraordinarily important that the discrepancies be resolved with transparent public disclosure as soon as possible. The respective Regents bear a fiduciary responsibility and must act to avoid personal jeopardy.

    There has been a precipitous decline in CUW’s assets since the peak of $262 million in 2017. It is also disturbing to see the number of officer / key employee-related party salaries and wages. This should not be happening at an institution of this size.

    The enormous size of the compensation packages and the unusually speculative placement of some of its investments make the CUW Foundation subject to additional scrutiny.

    [Full disclosure – I am a Regent at Luther Classical College. I speak for myself only]

  5. I missed this Steadfast post, but I did catch Mark Stern’s 07 MAR, 35 minute segment on Issues Etc. Everything he said is based on fundamental financial accounting practices. Nothing all that complicated, really. What is driving all of the creative, outside-the-box, thinking going on with “leadership” types these days? Has it always been this way?Would you let a committee of creative thinkers manage your household finances?

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