When Hugh Scott was inaugurated as the 12th president of Piedmont University in 1991, the university was experiencing a financial crisis. For several years enrollments had been declining and costs had been increasing. The resulting deficit had been made up by using the principal of "quasi-endowment" funds. For true endowment funds, only the income could be used for operating purposes; the principal legally could not be used. Quasi-endowment funds had been accumulated out of earlier years' surpluses with the intention that only the income on these funds would be used for operating purposes; however, there was no legal prohibition on the use of the principal. The quasi-endowment funds were nearly exhausted.

Questions
1. How should each of the issues described above be resolved?
2. Do you see other problems with the introduction of profit centers? If so, how would you deal with them?
3. What are the alternatives to a profit center approach?
4. Assuming that most of the issues could be resolved to your satisfaction, would you recommend that the profit center idea be adopted, or is there an alternative that you would prefer?

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EXHIBIT 1 Rough Estimates of 1993 Impact of the Proposals (millions of dollars) Revenues Expenditures Profit center Undergraduate liberal arts school Graduate liberal arts school Business school S 42.0 7.8 21.4 23.8 9.4 1.7 7.0 $113.1 $ 40.9 16.1 17.2 24.2 9.1 4.8 ngineering schoo Law school Theological school Unallocated revenue Total, academic $112.3 Other Central administration Athletics Computers Central maintenance Library S 14.1 3.6 4.8 8.0 4.8 s 14.1 3.6 4.8 8.0 4.8 LUnresticted gifth and endomentrvee, to he allocated by the president