from the Commentator:
The Official Student Newspaper of Yeshiva University

Moody’s Credit Update Points Fingers: Study Places Blame on Joel, Board; Not Markets, Madoff

In a damning March 25th report, Moody’s Credit agency pointed to a number of critical judgment errors and chronic mismanagement that sunk the university to its worst financial crisis in the school’s history. The “Credit Focus update” contradicts the school’s administration, which – in emails and town hall meetings – blamed poor markets, the Recession, and the Madoff scandal for the current financial woes.

The report highlighted the university’s “untenable business model,” which, despite short term improvements in financial reporting, some cost reductions, selling of real estate, and employment of external consultants, has yet to become sustainable. “The severity and long duration of Yeshiva’s operating deficits are primarily due to weak financial management and the board’s unwillingness or inability to act,” the study stated. (emphasis added)

… The credit report pointed to three causes of YU’s “rapidly deteriorating” credit: poor financial oversight and high expenses, extremely thin unrestricted liquidity, and a high reliance on banking and debt. Importantly, the report dismissed the losses from the Madoff Scandal in 2008 as a significant factor in the current rating report.

“The $100 million write-down related to the Bernard Madoff scandal is not a primary cause of the university’s current liquidity or operational problems,” the report stated, “but it does demonstrate how Yeshiva’s poor governance has historically impacted investment management and liquidity.” (emphasis added)

… The report also pointed to the President’s decision to rapidly increase academic expenses at the Manhattan and Bronx campuses as a key driver of the university’s large operating deficits. Under President Joel’s tenure, the university expanded programs, constructed costly buildings, and hired over 100 tenured faculty members. Net tuition revenue, which represents a quarter of total revenue for YU, “stagnated over the past five years in part due to increasing competition as other universities attract Yeshiva’s core market.”

The complete Commentator article is available here.