Concordia University Addresses Financial Concerns

With Dr. James M. Koerschen’s announcement of his retirement, the university had begun a search for an interim president however, the board recommends that the school find another financial institution to hold letters of credit and a line of credit before naming one.

According to BHE/CUS policy, any CUS school looking for a new president must call for a transition-review study.

Concordia’s current letters-of-credit holder, Allied Irish Bank (AIB), has requested the university to find another holder of the letters, because “Ann Arbor failed to meet some critical indicators for operational effectiveness which were included in [its] covenants” with AIB said BHE executive director Dr. William F. Meyer.

Although making no further comments on the “critical indicators,” Meyer said that Koerschen’s decision to retire was “not related to the matte of the letter of credit.”

Meyer said that the letter for tax-free bond issued from Michigan Educational Authority are for “capital costs for renovation and expansion of facilities over a number of years” at Ann Arbor.

"As soon as the refinancing of the bonds is completed, Concordia will engage an interim president to replace President Koerschen," said Meyer, who pointed out that the university "is presently discussing letter-of credit relationships with a number of entities."

Concordia’s transition review, now complete, "is intended to provide ... insights regarding the future viability of the institution as well as recommendations for the continued effective operations of the institution," Meyer said. "In a sense, it offers potential candidates for the office of president basic information to hit the ground running."

Meyer provided an "executive summary" of the transition-review report.

The bottom line of the transition review," the summary concludes, "is that Concordia, Ann Arbor, has a future. It serves an effective purpose in the larger design of higher education in the LCMS."

"A review of the management of the institution indicates there is no impropriety in the operation of the institution," the summary says.

It points, however, to several "concerns" for the university:

-- "low enrollment" as "a problem it has continued to address. ... In today's educational environment, [an] institution with less than a thousand students struggles with maintaining financial strength even though it fulfills its primary mission. Concordia, Ann Arbor, will need to address this situation in the coming year."

-- "whether or not the congregations and members of the [LCMS] Michigan District have adopted Concordia as their institution"; and

-- insufficient "third-source income ... to offset operational budget expense. ... Capital costs for renovation and expansion of facility requires third-source income."

"In summary," the executive summary says, "the transition review notes there are significant revisions to operations that need to take place immediately in order for Concordia, Ann Arbor, to be an effective educational institution in the future."

The summary lists the following as ways the concerns are being addressed:

-- "Alternative financing of debt issues are being addressed";

-- "Consultations from the [CUS] to assist in areas that have potential are in place";

-- "The Michigan District Office is supporting the transition";

-- "Expansion of the recruitment process and productivity of faculty/student ratios is in review";

-- "The BHE/CUS office staff is serving in the interim as an administrative team to assist Concordia to make significant decisions on effective educational operations for the future"; and

-- "The board of regents will appoint an interim president as soon as financial concerns are clarified."

By Mike Moon