For the fiscal year (FY) ending June 30, 2012, Babson achieved an operating surplus of $8.8 million on a Generally Accepted Accounting Principles (GAAP) basis, the largest in the College’s recent history.
In FY 2011, Babson’s operating surplus was $5.2 million. FY 2012 is the sixth consecutive year that Babson has been GAAP positive, and we are projecting GAAP positive performance for each of the next five fiscal years.
The College will use this surplus to continue its investments in facilities and in the endowment, which we will use to fund improvements in technology, faculty, and the student experience.
Babson had an increase in total net assets of $4.9 million in FY 2012, compared to a total increase of $48.6 million in FY 2011. Last year’s increase was due mainly to a substantial endowment investment return of 19.4%. This year, the College’s endowment broke even in a challenging investment environment. The current value of the endowment is $239 million.
In FY 2011, the College began a master planning project with Sasaki Associates. The master plan will serve as a road map for Babson’s capital planning during the next 15 years. The initial project associated with the master plan, a first-year residence hall, will begin construction in 2013.
In FY 2011, the College transferred $10 million from operating earnings into the endowment to help fund the master plan. In FY 2012, Babson drew and set aside $2.9 million from its endowment for future capital spending related to the master plan. Total funds from FY 2011 and FY 2012 available for capital projects related to the master plan are almost $13 million. The College also may use part of its substantial uncommitted cash ($18.4 million at the end of FY 2012) to fund projects associated with the master plan.
To fund FY 2012 operations, the College took $6.8 million from the endowment. Combined with the funds set aside for the master plan, this is 4.75% of the average endowment value during the last 20 quarters. We are lowering the endowment draw to 4.5% in FY 2013. The purpose of this change is to maintain the purchasing power of the endowment for future generations. Babson relies on endowment spending for less than 6% of its operations.
To date, Babson has completed $4 million in projects related to the American College and University Presidents’ Climate Commitment. These projects not only improve our environmental footprint, but they also have reduced the College’s operating costs. In FY 2012, Babson avoided almost $1 million in energy costs compared to our baseline year (2006) adjusted to reflect current energy prices. The College saved $400,000 in energy costs compared to the preceding fiscal year.
The financial statements, from which the accompanying condensed financial data have been extracted, were audited by the College’s independent auditor, PricewaterhouseCoopers LLP. For each year presented, the College has received an unqualified opinion on its financial statements from PwC.