stated above! But is it in keeping with collegiate ideals of truth and light that the university's financial reports should provide this particular brand of verity and illumination?

The foregoing illustration is by no means unique. You will find large holdings of United Fruit carried on its books by the same institution at less than $40 per share when the true market value of this stock is nearer $140. You will find Electric Bond and Share common, in big blocks, set down at a merely nominal valuation, when everyone knows that its value is substantial.

Nor is this college different from many others. Its financial statements are clearer and more candid than those issued by the majority of academic institutions; its treasurer is a man of the highest financial skill and competence. The practice of underfiguring assets, and thus showing an artificially inflated return on investments, is common in college financial statements everywhere. It is sometimes carried to a point where the announced figures of total endowment are quite misleading to the alumni and to the public.

There is a reason for this. Figures of modest proportions are desirable in support of the perennial assurance that college endowments are pitifully inadequate. And of course it is much easier to demonstrate this inadequacy of productive resources when book values are deflated 30, 50, or in some instances 100 per cent. It will be urged in extenuation, no doubt, that the college authorities like to be on the safe side and hence prefer to carry investments at what they cost, or even below cost, rather than at what they are worth; but a business corporation that does anything of the sort is likely to find itself charged by its professorial critics with a concealment of assets

for the benefit of the insiders. Financial statements, by whomsoever issued, should aim to give a true portrayal of the actualities. If not, the only ethical ground for issuing them disap

pears.

Of course there is a reason why the colleges are not always ready to practise what they preach for the benefit of others. They claim to be engaged in the pursuit of truth, but that is not the whole story. The colleges are also engaged, with equal ardor, in the pursuit of funds. They want more endowment, and there are two good talking-points in their quest for it: namely, that the college authorities have great financial competence in handling the funds already committed to their care (as is proved by the high net yield), and, second, that if additional benefactions are obtained they will be made productive with the same efficiency. To this end, the invested funds are often juggled down and various assets written off. The valua tions are shrunk to a point where they will not jeopardize the success of the college when it passes the hat among its alumni.

For the college must bear the protective coloration of poverty, no matter what its opulence. The exigencies of an endowment campaign sometimes call for a moratorium on the promptings of the academic conscience, but he who would be successful as a mendicant must not jangle the gold in his pockets. So the sum total of collegiate resources is neatly whittled for insertion in the president's report, and then the need for increasing it by new subscriptions is assiduously proclaimed, in season and out, by those loyal house organs known as alumni bulletins. Their job is not merely to sell the college to the alumni and the public, but to keep it sold - which is a more difficult task. Very often these alumni publications

are subsidized from the college treasury, from the tuition fees or other income, and the amount is hidden in the regular college budget under the head of 'publicity' or 'promotional expense.'

Looking through the reports of college treasurers, one is impressed, moreover, by the frequent examples of inadequate diversification. It will be conceded, I think, that trust funds should not be heavily thrown into investments of any one type, or concentrated in a single locality. In the interest of safety there should be a reasonable spread. Yet there are some colleges which have invested from two thirds to three fourths of their entire endowment in real-estate mortgages, with a very large proportion of these mortgages in their own immediate neighborhood. The danger of a serious financial reverse, in such cases, is by no means negligible — especially where farm mortgages bulk large in the list.

Safety is sometimes sacrificed to yield in other respects. The investing is usually directed by a finance committee of the board of trustees, with the college treasurer as a member. These men, although not slothful in business, have their own financial idiosyncrasies, or, what is more to the point, their own respective financial affiliations. They are directors of directors of banks, railroads, public-utility concerns, or industrial organizations. If you keep the personnel of this committee in mind when you glance through the list of college investments, you will discern the possible explanation of a good many things, including the retention of some holdings which are obviously speculative or otherwise not suitable for such a list. If they were held by a bank, they would promptly come under the examiner's censorship.

II

Then as to deficits. It is sometimes said that a college without a deficit is a rarity. That statement needs qualification. It is a rare college whose operating balance does not stand in the red at the end of the fiscal year, to be sure; but this does not necessarily mean an excess of current expenditures over current income, as in the case of business corporations. I have known a university to announce a deficit at the end of a year, and to plead urgently with its alumni for contributions on that account, when the total income actually exceeded the total expenditures for that year by several hundred thousand dollars. The deficit, as a matter of fact, was in unrestricted income only. It meant that the institution did not have too little money, but too little leeway in the spending of it.

In other words, a college deficit is sometimes a bugbear which is conjured up by the comptroller's office as a spur to professorial economy and to alumni generosity. In accomplishing this it becomes necessary at times to employ some of the subterfuges which holding companies have devised for masking their true financial operations. One method is to charge against unrestricted income various expenses which could have been defrayed out of gifts for designated purposes, leaving the latter to pile up by the accretion of interest. Another plan, even more common, is to charge against current income a lot of items which are in reality outlays on capital account, and which would be so dealt with by any well-managed business organization. The whole cost of a new heating plant, or of reconstructing some old building, or the money expended for additions to the campus, or for the acquisition of permanent equipment - such things