AUC Caravan

The American University in Cairo’s finances have been battered in the past fiscal year, as revenues have dropped $50 million, while expenses rose a near $16 million, according to its latest filing with the U.S. government.

Meanwhile, the $400-million new campus continues to weigh in on its budget, forcing the university to increase its borrowing, adding $50 million in mortgage loans.

The decline in total revenue is not the only bad news. In fiscal year 2008, the worth of AUC’s investments was over $500 million. However, by the end of the year, the investments saw their investments fall by roughly another $84 million.

For the first time in four years, AUC saw its total revenue substantially decrease by 49 percent. University officials, however, are assured that the current financial situation is under control.

“We actually tracked pretty closely with the global stock market and we were better off than other universities,” said Provost Lisa Anderson.

In 2008, the university reported a total revenue of over $185 million. In the same fiscal year’s report, expenses increased to $113 million, leaving the university with $72 million in the end. But, AUC has had to spend 60 percent of this figure on faculty salaries, pensions, benefits, and travel.

Comparatively, in 2007 the university reported $121 million in excess revenue. Meaning that AUC saw a $50 million decrease in profits in 2008.

The $50 million loan that the university has tapped into was out of a loan worth $100,000,000 credit line from Mellon Bank N.A., borrowed against $170 million of AUC’s endowment funds.

That loan is a concern for the provost, who pointed out that the university would be better off clearing this debt rather than continuing to use it.

“If this was my household, I’d get rid of the debt as fast as possible, rather than continue using it,” Anderson said. “However, it may make sense for the university to use the loan to enhance facilities or create new programs.”

In order to pay for construction expenses, salaries, and other costs, the university is sometimes forced to use money from the loans, increase student tuition, or simply admit more students.

During 2009, the AUC did just that. Students saw a 3.18 percent increase in tuition and over 1500 new students were admitted into the university.

Despite the growing number of students coming into the university, Anderson confirmed that the tuition for future semesters will continue to rise with “modest amount.”

Nonetheless, some experts say that the decline in the university’s investment can be partially blamed on the current situation of the global economic crisis.

“The economic crisis is happening everywhere, this is nothing new,” Galal Amin, Economics Professor at AUC said.

Anderson also pointed out that other American universities such as Harvard, invested in more “risky” markets simply because they had the money to do so, therefore they lost more money.

“Look around the world, it happened to everybody,” Anderson said.

While Harvard and AUC are both private universities, Harvard, on the other hand is a profit organization. In December 2008, The Boston Globe reported that just in a four-month period, Harvard’s endowments plunged $8 billion, showing a 22 percent decline, which has proven to be the “steepest in history.”

“Other academic institutions have fared much worse with declines as high as 30 percent,” said Alaa Shoreibah, Vice President of Financial Affairs. “In general, we haven’t fared the best nor the worst; we have fared somewhere in the middle.”

Although, officials say that the university is faring well, AUC is currently taking specific measures in order to come back from the previous year’s decline. Cutting back on travel budgets, limiting the hiring of faculty, and running a planned deficit are among these measures.

“We limited our plans, for example, instead of hiring 18-20 faculty members, we only hired 12 this past semester,” Anderson said.

The administration, however, expects to staunch the decline of the endowments soon.

“We believe that over the long-term, our investments will regain their value,” Shoreibah said. “As such, we have not engaged in market timing, fled asset classes entirely, or drastically altered our asset allocation; however, we do continuously assess our funds and diversify them as needed.”

Additionally, the university also has investments in private companies and real estate worth $47 million.

However, despite the decline in investments and total revenue, AUC still managed to provide faculty with a one-step raise this year.

“The fact that we were able to give faculty a raise is something that we are very proud of,” Anderson added.

According to Anderson, the university does not plan to freeze hiring or discontinue faculty raises anytime in the near future.

Some students however, find that the current situation may be harming students financially more than anyone else at the university.

“The Administration is not seeing what the students have to deal with,” Omar Kandil, Student Union President said. “The university cannot continue to increase tuition while still providing us with the same services.”

Kandil points out that the student union has been receiving complaints from students concerning the lack of facilities, overcrowded classrooms, and transportation problems; all issues that the student body have been suffering from since the move to the new campus.

“If the university is going to accept more students, then they should make sure that they are able to accommodate all of us, instead of just increasing our tuition and fees,” Kandil said. “However, with the way things are going now, this is just unacceptable.”

-By Reem Abdellatif