Depreciation ‘complication’

Ever since Governor Charles McGinty asked about the depreciation line item at last month’s Board of Governors meeting, a lot of people – including us – have been scratching their heads.

What is this new line item that we started including as an expense about half a dozen years ago? What does it mean for Missouri Southern’s finances? The only answer we seem to get is “It’s complicated.” In response to McGinty’s inquiry, University Director of Budgeting and Operations Jeff Gibson said asking about depreciation is getting into “deep accounting waters.” Fine, Jeff. But throw us a line.

Non-accountants are students, faculty, staff and taxpayers, too. They have a right to a more complete answer to the question than “It’s complicated.” It is the job of Southern’s finance team to put the complex into concrete terms that lay people can understand.

Vice President for Business Affairs Rob Yust told The Chart that it is not a cash cost, but did not explain why it is then shown on financial documents as an expense like payroll or pens. He told is it is “not a snow job” and that the questions stem from a lack of understanding. Fine. Help us understand.

As we see it, if depreciation is not a cash expense like salaries, gasoline and furniture why do we act like $3.75 million just disappeared? If it didn’t, we look like we are in the black and not the red. If it did go somewhere; well, where?

The way we see it is from a student’s perspective. Say we have an monthly income of $500. We spend $250 on rent, $150 on food and $50 on gas. We have $50 at the end of the month. But if we include $100 depreciation on our car, it looks like we are $50 in the hole. But we still have $50 in cash in the bank. How much does Southern have in the bank?

McGinty asked that very question last month and to the best of our knowledge it has never been answered.

McGinty’s is a good question, but remains unanswered. We will keep asking until we get better and less condescending answers than “It’s complicated.”