Description
Eyes on the Balance Sheet Fiscal Lessons for Higher Education Strategic Perspectives and Implications.
Eyes on the Balance Sheet: Fiscal
Lessons for Higher Education
Strategic Perspectives and Implications
Michael Townsley, Ph.D.
Senior Associate, Stevens Strategy
Contact Information: [email protected]
Or, [email protected]
!"#$% '()")*("+ ,-%.//
• Major Stresses
– Cash
– Uncollectable Receivables
– Net Tuition Competition
– Delay in Government Funding
– Continued Reduction in Gifts and Grants
– Attrition
• What could tip the balance at small colleges?
– Loss of cash reserves
– Huge increases in uncollectable receivables
– Tougher federal response to weak financial condition
Will Consolidation of Colleges Increase?
• Buy outs of not-for-profits by for-profits has been
going on for the past several years.
• For-profits continue to look for not-for-profits
with weak financials that have accreditation, have
a decent reputation, and are located in good
market.
• Faster of pace of consolidations among not-for-
profits or between for- and not-for-profits will
depend on changes in government funding
regulations or auditors choosing not to approve
shaky institutions.
Critical Turnaround Strategies
• Rebuild Financial Equilibrium.
• Rework your strategic plans.
• Find new markets.
• Sharpen your competitive skills.
• Cut costs by reducing the administrative tail.
• Create Net Tuition Slack – difference between
net tuition and breakeven price.
• Create cost synergies with other colleges.
• Get the best skills and technology for your
business office.
Key Measures of Equilibrium
• Long term growth rates for revenue are equal
to or greater than expenses.
• Composite Financial Index score should be at
least three and increasing over time.
• Cash as percentage of expenses should
increase.
• Credit line growth should not exceed revenue
growth rates.
• Cyert’s Equilibrium should guide financial
actions.
Cyert’s Equilibrium Model
• The organization fulfills its mission with
adequate quality and quantity.
• The organization maintains the purchasing
power of its financial assets.
• The organization maintains needed facilities
in satisfactory condition.
Cyert’s
Critical Equilibrium Factors
• Mission – finances undergird the mission so
that there is:
– Adequate quality and
– Quantity.
• Purchasing Power: cash and liquid assets
maintain their value despite inflation.
• Needed Facilities: finance is sufficient to
provide new facilities and maintain existing
facilities.
Implications of Failing Department of
Education’s “Stress Test”
• Note: Title IV stress test components include
– primary, net asset, and net income ratios.
• If it is the first time that your college failed –
you will need to show how your college will
meet the requirements of the stress test.
• If you have failed several years in a row – the
college could lose access to federal financial
aid funds.
What Are the Key Questions to Ask about
Financial Performance
• Cash position
• Financial Equilibrium
– Revenue and cost growth
– Liquidity and capacity to maintain facilities and
mission
• How excess revenues were used
• Unit costs changes
• Benchmark comparisons for revenue and
expenditure functions
Good Financial Practices / Policies
• Regular and precise financial reports
• Increasing cash balances
• Close management of receivables
• Checking if expenditures from annual increases
in revenue fit strategic goals.
• Reconciling enrollment to receivables
• Expanding markets
• Monitoring net revenue from income producing
programs
• Tracking unit costs and reducing costs
• Presidential support of business office policies
Copyright © 2003-2009 by Stevens Strategy Contact: [email protected] Title-11
Strategy Colleges, Universities and Schools
Stevens
Michael Townsley, Ph.D.
Biography
• Dr. Townsley is Special Assistant for Finance to the President and
Professor of Business at Becker College, and Senior Consultant at
Stevens Strategy where he has developed financial strategies and
forecasts for many colleges on the east coast.
• Dr. Townsley also was the President of the Pennsylvania Institute of
Technology and Senior Vice President for Finance and Administration at
Wilmington College.
• He authored Weathering Turbulent Times, The Small College Guide to
Financial Health Beating the Odds, The Financial Toolbox for Colleges
and Universities, Strategic Turnarounds, and Debt - Investment
Strategies. He has published widely and made presentations on financial
management, strategy and major issues facing colleges and universities .
• He holds a Ph.D. from the University of Pennsylvania.
• You can reach Dr. Townsley at: [email protected] or
[email protected].
Copyright © 2003-2009 by Stevens Strategy Contact: [email protected] Title-12
Strategy Colleges, Universities and Schools
Stevens
Stevens Strategy
Strategic management consulting services for
colleges, universities and schools
Stevens Strategy is a full-service management consulting firm specializing in
managing the process of strategic change in colleges, universities and schools.
We offer professional services to the leaders of these institutions in:
Strategic Planning
Strategic Governance
Focused Strategic Analysis
Financial Analysis and Planning
Institution-wide Policy Manual Development
Compensation System and Salary Equity Analyses
Regional Workforce Analysis
doc_894294262.pdf
Eyes on the Balance Sheet Fiscal Lessons for Higher Education Strategic Perspectives and Implications.
Eyes on the Balance Sheet: Fiscal
Lessons for Higher Education
Strategic Perspectives and Implications
Michael Townsley, Ph.D.
Senior Associate, Stevens Strategy
Contact Information: [email protected]
Or, [email protected]
!"#$% '()")*("+ ,-%.//
• Major Stresses
– Cash
– Uncollectable Receivables
– Net Tuition Competition
– Delay in Government Funding
– Continued Reduction in Gifts and Grants
– Attrition
• What could tip the balance at small colleges?
– Loss of cash reserves
– Huge increases in uncollectable receivables
– Tougher federal response to weak financial condition
Will Consolidation of Colleges Increase?
• Buy outs of not-for-profits by for-profits has been
going on for the past several years.
• For-profits continue to look for not-for-profits
with weak financials that have accreditation, have
a decent reputation, and are located in good
market.
• Faster of pace of consolidations among not-for-
profits or between for- and not-for-profits will
depend on changes in government funding
regulations or auditors choosing not to approve
shaky institutions.
Critical Turnaround Strategies
• Rebuild Financial Equilibrium.
• Rework your strategic plans.
• Find new markets.
• Sharpen your competitive skills.
• Cut costs by reducing the administrative tail.
• Create Net Tuition Slack – difference between
net tuition and breakeven price.
• Create cost synergies with other colleges.
• Get the best skills and technology for your
business office.
Key Measures of Equilibrium
• Long term growth rates for revenue are equal
to or greater than expenses.
• Composite Financial Index score should be at
least three and increasing over time.
• Cash as percentage of expenses should
increase.
• Credit line growth should not exceed revenue
growth rates.
• Cyert’s Equilibrium should guide financial
actions.
Cyert’s Equilibrium Model
• The organization fulfills its mission with
adequate quality and quantity.
• The organization maintains the purchasing
power of its financial assets.
• The organization maintains needed facilities
in satisfactory condition.
Cyert’s
Critical Equilibrium Factors
• Mission – finances undergird the mission so
that there is:
– Adequate quality and
– Quantity.
• Purchasing Power: cash and liquid assets
maintain their value despite inflation.
• Needed Facilities: finance is sufficient to
provide new facilities and maintain existing
facilities.
Implications of Failing Department of
Education’s “Stress Test”
• Note: Title IV stress test components include
– primary, net asset, and net income ratios.
• If it is the first time that your college failed –
you will need to show how your college will
meet the requirements of the stress test.
• If you have failed several years in a row – the
college could lose access to federal financial
aid funds.
What Are the Key Questions to Ask about
Financial Performance
• Cash position
• Financial Equilibrium
– Revenue and cost growth
– Liquidity and capacity to maintain facilities and
mission
• How excess revenues were used
• Unit costs changes
• Benchmark comparisons for revenue and
expenditure functions
Good Financial Practices / Policies
• Regular and precise financial reports
• Increasing cash balances
• Close management of receivables
• Checking if expenditures from annual increases
in revenue fit strategic goals.
• Reconciling enrollment to receivables
• Expanding markets
• Monitoring net revenue from income producing
programs
• Tracking unit costs and reducing costs
• Presidential support of business office policies
Copyright © 2003-2009 by Stevens Strategy Contact: [email protected] Title-11
Strategy Colleges, Universities and Schools
Stevens
Michael Townsley, Ph.D.
Biography
• Dr. Townsley is Special Assistant for Finance to the President and
Professor of Business at Becker College, and Senior Consultant at
Stevens Strategy where he has developed financial strategies and
forecasts for many colleges on the east coast.
• Dr. Townsley also was the President of the Pennsylvania Institute of
Technology and Senior Vice President for Finance and Administration at
Wilmington College.
• He authored Weathering Turbulent Times, The Small College Guide to
Financial Health Beating the Odds, The Financial Toolbox for Colleges
and Universities, Strategic Turnarounds, and Debt - Investment
Strategies. He has published widely and made presentations on financial
management, strategy and major issues facing colleges and universities .
• He holds a Ph.D. from the University of Pennsylvania.
• You can reach Dr. Townsley at: [email protected] or
[email protected].
Copyright © 2003-2009 by Stevens Strategy Contact: [email protected] Title-12
Strategy Colleges, Universities and Schools
Stevens
Stevens Strategy
Strategic management consulting services for
colleges, universities and schools
Stevens Strategy is a full-service management consulting firm specializing in
managing the process of strategic change in colleges, universities and schools.
We offer professional services to the leaders of these institutions in:
Strategic Planning
Strategic Governance
Focused Strategic Analysis
Financial Analysis and Planning
Institution-wide Policy Manual Development
Compensation System and Salary Equity Analyses
Regional Workforce Analysis
doc_894294262.pdf