http://stevensstrategy.com/blog/ en Copyright 2010 Thu, 22 Jul 2010 23:23:02 -0500 http://www.sixapart.com/movabletype/ http://blogs.law.harvard.edu/tech/rss

Determine if the institution is overly dependent on revenue from a single program.

Initiate a strategic realignment by:

• Identifying programs that feed growing labor demand.
• Increasing investment in academic programs currently offered by the institution that feed growing demand for a particular segment of the labor market.
• Beginning development of new academic programs that the college could serve.
• Analyzing the costs and benefits to the institution.
• Laying out a detailed plan to carry-out the strategic realignment.
If you need help conducting a strategic realignment, contact Stevens Strategy at: Info@StevensStrategy.com]]> http://stevensstrategy.com/blog/2010/07/diversified_revenue_streams_1.php http://stevensstrategy.com/blog/2010/07/diversified_revenue_streams_1.php General Thu, 22 Jul 2010 23:23:02 -0500 "In a Fight to Preserve Their Market, For-Profit Colleges Lobby Hard Against ...Proposed Rule [on Loans and Pay for Graduates}"

"Accreditation of On-Line University Draws Fire"

These two headlines reflect issues that now only target for-profits but could easily become a major cause of heartburn at not-for-profit colleges and universities. Should not-for-profit colleges and universities be concerned or is this just an attack against money-grubbing for-profits who only care about making a buck? The first issue (subjecting for-profits to substantial losses if graduates with federal loans don't earn sufficient income upon graduation) would subject for-profit institutions to enormous federal oversight and huge penalties for non-compliance with fuzzy outcome measures. Of course, the obvious questions are: why just the for-profits and how will the government measure pay for graduates? The government claims that for-profits entice students to enroll in career preparation programs with large federal loan packages, and these programs frequently don't deliver good paying jobs. The government provides some evidence that student loan defaults are more likely in the for-profit sector than the not-for-profit sector. But should laws such as this focus on just one sector when the problem exists to some degree in both? Is this practice OK if perpetrated by a not-for-profit? Of course not! And how will the government measure earnings achievement? Will they measure it through average pay for the job category in which the position falls or will they measure it by requiring the institution to contact every graduate for some period of time (whatever that could be) and report the results? The first method could be imprecise and the second method could be very difficult to affect. Furthermore, the assumption that the pay students receive is the primary responsibility of the college they attended and the college they attended should be penalized for the student's poor achievement after graduation, runs in the face of our country's culture and ethos! Doesn't the student have some personal responsibility for the job and pay he or she receives? Shouldn't not-for-profit higher education stand up against this sort of government intrusion on principal (and as pragmatists who know this camel's nose will find its way to our part of the tent as well)? Of course they should! The second issue (withdrawing the accreditation authority of NCACS) deals indirectly with a new revenue source and a major revenue stream at not-for-profit colleges, but it challenges one of the basic tenets of higher education. In this instance, the government is threatening to withdraw recognition of North Central Association of Colleges and Schools because NCACS accredited a for-profit college with, in the government's opinion, questionable on-line education programs. As the law currently stands, and our free-democratic society would seem to require, regional accrediting agencies (an association of autonomous educational institutions) set the standards for accreditation. When a college is duly accredited, it can then disburse federal financial aid funds. This first line of attack by the government sets the stage for federal proposals to replace our long-standing peer review process with government accrediting bodies. This change would severely weaken our academic freedom to manage our greatest service -- instruction. Why is not-for-profit higher education silent? ]]> http://stevensstrategy.com/blog/2010/07/two_headlines_from_chronicle_o.php http://stevensstrategy.com/blog/2010/07/two_headlines_from_chronicle_o.php General Thu, 22 Jul 2010 23:13:29 -0500 MTownsley@StevensStrategy.com. Strategic Goals and Options to Strengthen the Financial Viability of the Classic Model of Higher Education:

Goals:
1. Direct resources to strongest programs.
2. Reduce the cost of administration.
3. Strengthen position in the market.

Options:
1. Evaluate program and performance and direct resources to strongest programs.
2. Improve cost efficiencies for delivery of support and administrative services.
3. Outsource auxiliary and information services.
4. Form or join consortia to take over high cost administrative and student services.
5. Form partnerships with other schools to create a ladder to graduate degrees.
6. Use continuing education to offer career based degrees while retaining the classic structure as the core of the college.
7. Distribute courses to new markets through on-line programs.
8. Develop career fit for liberal arts programs.
9. Find new markets for students.

]]> http://stevensstrategy.com/blog/2010/07/how_the_classic_model_of_highe.php http://stevensstrategy.com/blog/2010/07/how_the_classic_model_of_highe.php General Thu, 22 Jul 2010 22:36:33 -0500 Higher Education Landscape: Current demographic trends in U.S. higher education):

1. 4.9% of the high school graduates prefer a school with fewer than 2000 students. This could have a dramatic effect at most private colleges, which are typically small (from a seminar with College Board).
2. The number of high school graduates in New England peaked in 2008 and will decline significantly over the next several years, which shrinks the already small pool for private colleges (see the graph for New England).
3. Business majors, a staple of many colleges reached a peak in 2007-08 and began a decline the next year. That decline may have accelerated due to the effects of the recession and falling demand for general and financial managers. This decline magnifies the problem of declining enrollment for many private colleges because business acts as a default degree for many students (see the graph for Intended Majors).
4. Annual change in the cost of attending colleges exceeds the annual change in disposable income, which is the source of most direct family support for education. Rising tuition hits tuition dependent small private colleges particularly hard when they try to attract students (see the graph for Annual Changes in College Costs and Disposable Income).
5. Loans have replaced grants as the major form of supporting attendance at college resulting in heavier debt burden and possibly reduced net value of college attendance (see the graph for Types of Financial Aid).
6. Females as a proportion of total students continue to predominate, while the proportion of males is slowly sliding downward for public institutions and remaining flat for private institutions. This suggests that as male attendance continues to remain flat that the chance of growing enrollment through male recruitment remains problematic (see the graph for Male and Female Enrollment Proportions).

Besides the preceding measures provided by the College Board's current Higher Education Landscape publication, there is other evidence that high school seniors prefer colleges located in an urban rather than a rural setting, more seniors are turning to less expensive public and community colleges, and the state of the economy continues to have adverse impact on parent or student college choice. The result is a set of enrollment conditions that work together to reduce the probability that a student would select a small private tuition dependent college, in particular, a private college located some distance from a thriving urban area. The problem of attracting students may be compounded for colleges where business majors have represented the largest proportion of undergraduate and graduate enrollments. There is anecdotal evidence from several small private colleges in Massachusetts that they are reporting dramatic declines in deposits for upcoming semesters. In addition, parents are taking a very aggressive stance concerning why they should send their child to an expensive private college rather than to a public four-year or community college. They even have asked admission officers to prove the value of the degree; i.e., asking for evidence that graduates of the college gain a large enough benefit so that students can quickly pay back the cost of financing their education? Stevens Strategy is interested in hearing if your institution has seen a major change in deposits or parents insisting that admission counselors prove the value of a private degree. Please send us your remarks in the comment section of this blog.]]> http://stevensstrategy.com/blog/2010/04/are_private_colleges_facing_ne.php http://stevensstrategy.com/blog/2010/04/are_private_colleges_facing_ne.php Fri, 30 Apr 2010 23:00:27 -0500 Spring is here and so are letters from the Department of Education (DOE) about low scores from their Financial Responsibility Test. The purpose of these tests is to assure Congress that every college receiving federal financial funds has the wherewithal to survive so students can complete their education. Since the financial markets caused significant losses in investments and cut into the size of gifts and grants, net assets have shrunk by as much as 10% to 20% at many institutions. These losses affect all three of the DOE ratios - primary, net income, and net worth. DOE scores that fall below 1.5 and above 1.0 will result in a letter indicating that the college has entered a zone of warning. Translated freely, this means that the DOE will monitor your fiscal performance. When scores are less than 1.0, a college will be asked to provide a letter of credit equal to 50% of its federal funds. The letter of credit does have a cost, but the main concern is that the college moves to a "watch list" to see if the financial decline is a one-time or chronic event. If it is determined to be the latter, the DOE could terminate receipt and/or distribution of federal financial aid funds. So what do you do? The answer depends on two conditions. First, is the low score solely due to the recent decline in financial markets? If that is the case, the market has improved enough in the last year to result in sizeable unrealized gains to improve net income and investment values. For colleges in this situation, the problem is episodic and not likely to repeat itself until the next market correction. However, the college should look at revising its investment mix to reduce risk when the next market downturn occurs, which is becoming more frequent. Second, is the low score due to the financial decline and to inherent and continuing weaknesses in the college's financial condition? If this is the reason, the college needs to immediately begin work on devising a strategy to address its financial condition. This should include a thorough financial review to identify the core reasons for financial decline and the development of an academic, market, revenue, and cost based plan to reach financial equilibrium. Even though the cost of developing a well-designed strategy may be high, it is not nearly as high as the cost of losing federal financial aid funds. http://stevensstrategy.com/blog/2010/04/did_you_receive_a_letter_from.php http://stevensstrategy.com/blog/2010/04/did_you_receive_a_letter_from.php General Tue, 20 Apr 2010 08:59:03 -0500 equilibrium occurs when a college has adequate resources in quality and quantity to support its mission. Equilibrium is achieved by maintaining the purchasing power of liquid assets and by maintaining the quality of fixed assets. Preserving the purchasing power of liquid assets requires that cash and other assets that are easily converted to cash grow over time at the rate of inflation. This condition necessitates that:

1. Operational deficits are eliminated.
2. Operations generate cash flows and that these flows grow at the rate of inflation.
3. Investing and financing activities do not negate the value of operational cash.

Maintaining the quality of fixed assets stipulates that fixed assets are preserved at their replacement value and not just at their rate of depreciation. Depreciation simply represents the write down of the original cost and in most cases fixed assets are not replaceable at their original value. In other words, sufficient income is needed to sustain and permit constant upgrading of fixed assets while avoiding a buildup of deferred maintenance - an all too common challenge in higher education. The Cyert model can be converted into a planning grid to identify the gap between the current financial condition of a college and the Cyert equilibrium condition. The grid identifies the gaps for liquid assets and fixed assets, which need to be eliminated to reach equilibrium. The gaps become the basic planks for short- and long-term budget plans. You can request a copy of the Cyert Equilibrium Planning Grid from Stevens Strategy by emailing Michael Townsley at MTownsley@StevensStrategy.com.]]> http://stevensstrategy.com/blog/2010/04/whats_the_cyert_equilibrium_mo.php http://stevensstrategy.com/blog/2010/04/whats_the_cyert_equilibrium_mo.php General Tue, 20 Apr 2010 08:46:36 -0500 Roaring Out of the Recession (HBR, March 2010), authors Ranjay Gulati, Nitin Nohria and Franz Wohlgezogen posit that how organizations deal with forces of recession will ultimately affect their future financial strength. While their research is with private business enterprises, I believe the results may apply equally to colleges and universities. In short, their research demonstrates that "companies that focus simultaneously on increasing operational efficiency, developing new markets, and enlarging their assets bases show the strongest performance, on average, in sales and EBITDA growth after a recession." Would it then hold that colleges and universities that do the same would have increased tuition revenue and operating margins? For those of us in higher education, what would "improving operational efficiency, developing new markets and enlarging assets bases" look like? How difficult is that in the private, non-profit institution, where a governing board has the ultimate authority and responsibility and we operate under a shared governance model? How can we make that happen in an institution that has limited staffing and cash? I would enjoy hearing your thoughts and experiences on this topic and how colleges and universities might best use this research as they prepare for better days ahead.]]> http://stevensstrategy.com/blog/2010/04/facing_the_future_how_to_prepa_1.php http://stevensstrategy.com/blog/2010/04/facing_the_future_how_to_prepa_1.php General Tue, 20 Apr 2010 00:22:21 -0500

UPMIFA transfers are subject to FAS 117-1 (Financial Accounting Standards), which requires institutions to provide the following disclosures:

• The Board's interpretation of the law regarding the organization's net asset allocation;
• Endowment spending policies;
• Investment policies:
  • Return objectives and risks
  • Relationship of the objectives to spending policies
  • Strategies for achieving objectives
• Endowment composition by net asset classification;
• Endowment report on additions and deductions by net asset class;
• Formal disclosure of any underwater funds.
• The Board's fiduciary duty remains that "when considering the purposes and duration of the fund the institution will give priority to the donor's original intent that the fund be maintained permanently".

Endowment assets cannot be unrestricted until appropriated for expenditure.

Absent donor restrictions on gains on the fund, the original donor restrictions are assumed to gains. Therefore, if the fund is restricted so also are the gains.

Reclassification procedures:

• Reclassification is done on a fund-by-fund basis by identifying the amount that is:
  • Permanently restricted;
  • Temporarily restricted, which is subject to a time limit that funds and appreciation are restricted until appropriated for expenditure.
• Reclassification is restricted to the amount of appreciation of the funds (net long-term increase in value) that is declared as appropriated for expenditure. (This requires a very careful and precise list by fund of original gift values and appreciations.);
• Reclassification in consort with FAS 117-1 should include a statement to "maintain the donor's original gift permanently".

UPMIFA requires that any modification of fund restrictions should:

• Notify the Attorney General sixty (60) days in advance for minor changes; or
• Make a cy pres petition to the courts for larger or newer funds.

Senior administrators cannot simply take a fixed amount from restricted endowments and transfer the funds to temporarily restricted funds. The plan must follow the strictures of the law; otherwise the plan could be voided and audits may have to be restated. Before any action is taken with an UPMIFA plan, the president, trustees, and chief financial officer must consult with the auditors and legal counsel for the institution. They should also seek advice from other reliable sources on how to implement the strictures of the plan. The UPMIFA plan should be thoroughly documented by: a) citing the law, b) listing Board policies, c) giving the reason for making the reclassifications, d) listing specific endowment funds and the amounts to be reclassified, and e) including any statements from the auditor or other sources indicating that they have reviewed and are in agreement with the plan. Questions for our readers:

1. Are you planning to use UPMIFA in your financial strategy? If so, what is driving your interest in UPMIFA?
2. Does your institution have "underwater" funds? What has been your strategy to deal with this situation?
3. Do you have a strategic plan to rebuild funds lost to the endowment?

Note 1: The author and Stevens Strategy do not claim that this commentary on UPMIFA fully explains all aspects of UPMIFA. They do not take responsibility for any decisions that are taken based upon the preceding commentary. As noted in the commentary, any institution that intends on developing a reclassification plan under UPMIFA should consult with their auditors, legal counsel, and other authorities on the subject. Note 2: Information for this blog was derived from Moody's Investment Service in a special report published in Spring/Summer 2009 and a second report published in April 2009.]]> http://stevensstrategy.com/blog/2010/01/upmifa_what_is_it_and_why_shou.php http://stevensstrategy.com/blog/2010/01/upmifa_what_is_it_and_why_shou.php General Wed, 27 Jan 2010 22:53:40 -0500

A Mission-centeredness Review that identifies the programs that meet the college's mission and those that don't. Mission-centeredness is measured through carefully crafted surveys of the institution's primary constituencies; its students, faculty, staff, alumni and trustees. These groups understand the true mission of the institution and inherently recognize what programs are vital to achieving both the stated and implied mission of the college.

A Quality Review that identifies those programs that are of high quality and those that aren't. Quantitative indicators vary by institution, but acceptance rates, retention rates, graduation rates and placement rates are often among the major quality indicators everywhere. Qualitative measures include surveys of key constituencies regarding their opinion of program quality.

A Market Demand Review that compares, through survey research, demand for current and prospective programs among existing and potential student populations.

An Institution-wide Responsibility Center Review that identifies the divisions or schools that generate cash and those that use it. It allocates fairly to each revenue-generating department revenue and direct and indirect costs, showing the way to making thoughtful resource allocation decisions.

The most important result of a full academic program review is that presidents have the opportunity to lead transformational change at their institutions and keep their jobs! Other equally important results are the definition of ranges of programs ranked in three tiers from extremely successful ones that provide a surplus of resources to the institution, are highly mission-centered, are of high quality, and experience solid market demand to a few that not only lose money, but do not support the college's mission, are of questionable quality and have little market support. Replacing the losses from non-mission-essential, low quality programs that have weak market demand (the bottom few programs) with enhanced enrollments and additional revenues from the top tier programs can cause a dramatic shift in institution financial performance; $500,000 or more for small institutions and millions for larger ones. Of the factors affecting academic program reviews, competition is the most important driver. Competition in this decade will create simultaneous pressures to reduce price, control costs and adjust program mix. So, institutions need to carefully manage costs; add new revenue programs or revenue sources at least every other year; and weed out poorly performing programs regularly. To respond to the competitive environment, nothing is more important than knowing what programs you should be offering, what programs you should not be, and acting on that information. Accreditors are increasingly reviewing college efforts towards assessing academic programs as an important element of reaccreditation, as you all know. They are particularly interested in objective measures of student learning outcomes and usually do not require a more comprehensive review, but are impressed with more. Boards of Trustees want a full program assessment, but don't usually know how to ask for it. I've heard this complaint from many Trustees. I'm sure you have too, "My College is always starting new programs, but I've never seen it stop one!" The closest current board practices come to a full program assessment is cycled Academic Program Reviews, which typically result in long narrative reports with recommendations for remediation where weaknesses are identified. It's unusual for any significant action to be taken, and more unusual for program closures to result. The bottom line is: Current board practices fall short of a full academic program evaluation, but most boards would desire a full program evaluation process if they knew how to get it done. Most of our faculties want sound assessment of curricular goals and student performance, but our faculties are usually uncomfortable with reviews of their judgments about academic programs. They find financial performance reviews dangerous on their own and are deeply concerned with the idea of closing poor performing programs. Transformative Academic Program reviews account for this sensitivity by engaging faculty intensively with the rest of the institution in a comprehensive review that is required by the board. A Transformational Academic Program Review requires the cooperation of many constituencies (particularly faculty) and can't be conducted in a locked room in the basement of the administrative office building. To be conducted effectively and to engender broad institutional support, these reviews require involvement by a broad cross-section of the institution in developing the analysis and considering the ramifications of the results of that analysis: The programs that require more support, those that require less, and yes, those that should be closed.

• First, the Board should require the Academic Program Review by formal vote. This often is followed by a generative institutional discussion, including the board.
• The President should then carefully select a broadly representative cross-functional work group (composed of a majority of faculty leaders) to conduct the analysis.
• The consultants will help the President select the work group and prepare a careful charge with firm outcome expectations and time-lines.
• Basic research to support the deliberations of the work group should be conducted by the consultants and the college's institutional research office BEFORE the work group begins its formal deliberations.
• The work group should develop a detailed work plan to conduct its study and submit it to the president for approval.
• The work group should then conduct its deliberations and hold 4 open campus meetings to present its work plan, to share its basic research and to discuss its recommendations as they develop. At these open campus meetings, facilitated by the consultant, the work group should honestly seek feedback and deal directly with issues raised.
• After making final edits resulting form the fourth OCM, the work group's final report should be presented to the president and accepted.
• The president should present the work group's report and his or her recommended actions to the board for approval; actions should include the conduct of necessary internal governance reviews on a board required time-line.

The optimum time frame to conduct and academic program review is as follows:

Early spring semester
• Board Decision

Mid to late spring
• President Appoints, Charges and Announces Work Group

Early summer
• Consultants Conduct Research

Late summer
• Work group convenes

Early September
• First Open Campus meeting

Throughout fall semester
• Deliberations, Three Open Campus Meetings, Final Report

As I said earlier, in a highly competitive environment like the one in which we will live this decade, nothing is more important than knowing what programs you should be offering, what programs you should not be, and acting on that information. Stevens Strategy's PRO, Programs and Resource Optimization process, provides presidents and boards the necessary information and the broad institutional support they need to act responsibly. We would be delighted to know your thoughts on this important process.]]> http://stevensstrategy.com/blog/2010/01/programs_and_resource_optimiza_1.php http://stevensstrategy.com/blog/2010/01/programs_and_resource_optimiza_1.php General Wed, 27 Jan 2010 22:29:25 -0500

Threats to tuition and financial aid because parents and students will select less expensive public institutions, which will force private institutions to increase financial aid awards to attract the same number of students that enrolled the prior year. Less selective private colleges (these colleges tend to accept most applicants) are most vulnerable as students switch to public four-year colleges or community colleges.

Loss of value in endowment funds have forced private colleges to postpone or cancel large capital projects planned to attract more students or new research funds. Investment losses have a direct impact on financial ratios (example debt to equity) that are required in debt covenants. Failure to maintain those ratios may mean that the college has to increase its reserves for debt thereby reducing funds for operations or they could be required to speed up their debt payback.

Loss of liquidity because endowments and gifts will generate less cash which will force colleges to cut expense budgets.

Debt at many major colleges was protected or insured by credit swaps which will require colleges to increase collateral to remain in compliance with credit agreements. Injecting new cash to support credit conditions is another factor that suctions cash from operations.

Volatility in credit markets will make it more difficult for colleges to refinance debt if they have to respond to a call provision, the debt has a balloon payment, or they have to rollover a debt package.

Despite these five issues, Moody's believes that most colleges have the resources to withstand the threats that the chaotic debt market may pose to a private institution's financial stability. They do expect that the keys to maintaining stability will depend on "operational management and governance." Operational management will call for increased financial controls, difficult choices on debt versus program requirements, and slowing down the capital boom of the prior decade. The current financial crisis calls for rapid decision making by colleges and universities, which they find to be difficult in the best of circumstances because they are consensus driven and decentralized. Those institutions that can rapidly respond to change have the best chance of rebuilding their strength, according to Moody's. So, have private institutions reached a state where they are strong enough to withstand the gales of misfortune that might have sunk them several decades ago? There is no ready answer to this question. What this book does address is how to determine whether your institution has the financial and strategic resources to withstand major changes in the economics that drive institutional finances. The chapters, appendices, and CD-ROM tools provide a broad range of resources for estimating financial condition, reshaping strategy, designing turnarounds, and identifying the characteristics needed for presidents and chief management officers. Independent colleges and universities do not have huge state bureaucracies or friends in the state legislature who will rescue them when times are tough. Survival of private institutions depends on strong leadership, mission- and market-driven strategies, and relentless assessment of a college's performance and position in themarketplace. The Small College Guide to Financial Health: Weathering Turbulent Times provides the reader with insights on how to deal with the uncertainties that can strengthen or severely weaken the financial and strategic stability of an independent institution. The book is organized to provide answers to questions about developing a strong and flexible independent college or university:

• The current state of finances for private colleges and universities (Chapter 2);
• The economics of markets, prices, and constraints that drive private institutions (Chapter 3);
• The financial structures found in most independent institutions (Chapter 4);
• The practices employed in a well-run business office (Chapter 5);
• Typical business models that are the framework for strategy, operations, and finance among private institutions (Chapter 6);
• The policies and procedures that presidents and chief administrative officers need to consider in managing their institution (Chapter 7);
• How to conduct strategic planning that will improve the performance of the institution (Chapter 8);
• The characteristics needed by a president to manage an independent institution successfully (Chapter 9);
• Warning signs of financial distress (Chapter 10);
• Case histories of several independent colleges that have failed (Chapter 11);
• Case histories of several independent colleges that conducted successful turnarounds and are now flourishing (Chapter 12);
• Major lessons from colleges that closed versus lessons from colleges that successfully rose above major threats to their existence (Chapter 13); and
• The set of principles that college presidents can apply to build and sustain strategic momentum (Chapter 14).

Dr. Townley's book comes with customizable tools, forms, and templates on a CD. These items will improve your understanding of financial analysis and guide the leadership of the college as you analyze your financial and strategic condition and formulate your strategic plans.]]> http://stevensstrategy.com/blog/2009/07/excerpt_from_chapter_1_of_dr_t.php http://stevensstrategy.com/blog/2009/07/excerpt_from_chapter_1_of_dr_t.php General Mon, 27 Jul 2009 10:33:19 -0500 does their institution have enough cash to sustain a significant drop in enrollment? We want to help you by offering several simple guidelines to estimate your financial risk and suggesting ways you can strengthen your financial condition. Under the current financial conditions, the worst strategy is to try and wait out a situation that you know is bad. The chance of a quick turnaround, handout, or miracle is not in the cards! Testing Your Financial Condition:

1. Is your Composite Financial Index (CFI) greater than one? If it is less than one, you need to make immediate plans to reposition your score. Ask your CFO to use the CFI Worksheet and CFI Scoring Guide (also available on our web site's Presidents Page) to complete this analysis. We are always available to assist you on this as well.
2. Do you have at least four months of cash? If your cash reserves barely cover expenses each month, find ways to build cash: make sure students are paying their bills on time, draw down federal cash that is owed, leave positions unfilled, cut out any discretionary spending, reduce administrative perks, or put a hold on capital projects.

Other Critical Issues:

1. Are banks calling your outstanding loan balances? Set up a loan repayment task force with your board chair, executive committee, and most valuable donors - have them negotiate with the banks.
2. Is the Financial Aid Office giving away the college to get students? Ask for regular reports of financial aid awards so you can monitor them closely.
3. Are payroll deductions for taxes and benefits being transferred on time? Ask your CFO to report each week on tax and benefit payments.

Other Suggestions:

1. Set-up a cost control task force. Members should include the chief administrative officers. Their immediate task is to find cash to build reserves. Their strategic task is to find new ways of doing work so that administrative and staff positions can be cut.
2. Out-Source money losing operations. Candidate include: bookstore, custodial services, security, and residence halls if they produce deficits; phone service, computer services, or anything that will reduce the cost of operations. This may require some trade-off between quality and cost. Your willingness to make that trade-off will depend on how quickly and by how much you have to cut costs.
3. Look for partners. Can you create a symbiotic relationship with another college by sharing markets and cutting administrative and other costs?

]]> http://stevensstrategy.com/blog/2009/05/are_your_finances_strong_enoug.php http://stevensstrategy.com/blog/2009/05/are_your_finances_strong_enoug.php General Tue, 12 May 2009 23:57:11 -0500 Turnaround: Leading Stressed Colleges and Universities to Excellence, provides a useful summary of risk factors from earlier studies. KPMG and Prager developed the Composite Financial Index (CFI) that should be added to the meta-list reported in the Turnaround book. CFI is a multi-layered quantitative tool for estimating financial risk by comparing an institution's financial condition against ten scoring ranges. The following list draws together major factors that would suggest that a college or university faces a high degree of risk:

1. Tuition discounting is more than 35 percent.
2. Student default rate is more than 5 percent.
3. Debt service is more than 10 percent of annual operating budget.
4. Average annual tuition increase has been greater than 8 percent for five years.
5. Deferred maintenance is at least 40 percent unfinanced.
6. Short-term bridge financing (credit lines) is regularly required in the final quarter of each fiscal year.
7. Average alumni gift is less than $75, and less than 20 percent of alumni give annually.
8. Enrollment is less than 1,000 students.
9. The conversion yield--the percentage of students who attend the college after applying--is 20 percent lower than that of primary competitors.
10. Student retention is 10 percent behind that of primary competitors.
11. The institution is on probation with a regional accreditor.
12. No new degree or certificate program has been developed for at least two years.

In addition to the preceding meta-factors, the financial risk of an institution is at the highest level when its CFI score is less than one. You can download a free copy of the CFI scoring tool by clicking here. Your chief financial officer should be able to provide the data to compute the Index score and to compute the qualitative scores for several of the meta-factors. The best way of assessing the degree of financial risk to your institution is for the president to meet with the chief administrative officers to discuss the findings from the meta-factors evaluation and the CFI analysis. Presidents of institutions facing a high degree of risk can use these meetings as the first stage in a strategic exercise to build a new path to strengthen the institution.]]> http://stevensstrategy.com/blog/2009/01/assessing_institutions_at_fina.php http://stevensstrategy.com/blog/2009/01/assessing_institutions_at_fina.php General Thu, 22 Jan 2009 11:02:10 -0500 During the past month, the country has elected a new president and the economy continues to founder. For colleges the question is how will the state of the economy shape their financial condition? The state of the economy is no mystery to anyone living through its consequences. Financial markets are severely depressed, Common Fund froze short-term withdrawals at the worst possible time for colleges, debt is almost impossible to sell, and families are squeezed by disappearance of home equity. http://stevensstrategy.com/blog/2008/11/dealing_with_the_shrinking_eco.php http://stevensstrategy.com/blog/2008/11/dealing_with_the_shrinking_eco.php General Sun, 23 Nov 2008 14:38:48 -0500

A rapidly changing demography,

Intensifying recruitment pressures,

A burgeoning population of students poorly prepared for higher education,

A worsening imbalance between male and female enrollments,

Expanding threats for a variety of government efforts toward price controls,

Swelling student financial need, and

Relentless pressure to provide more and more extensive student service programming.

]]> http://stevensstrategy.com/blog/2008/07/the_challenging_strategic_envi.php http://stevensstrategy.com/blog/2008/07/the_challenging_strategic_envi.php General Sun, 20 Jul 2008 18:11:03 -0500 It is my belief that workforce shortages have been creeping up on the US for the past 10 years. With our rapid emersion into economic globalization, these workforce shortages that are quickly developing will become a priority issue within the coming five years. This is not a question of having enough able bodied workers; it is a question of having the right match of our workers--workers with the proper skills and relevant education to fill the new jobs that will emerge in the coming years. A few years ago many people laughed at the suggestion of an emerging nanotechnology industry. Most have stopped laughing now with knowledge of the array of products currently utilizing nanotechnology. Biotechnology, or Bioscience, unheard of 10 years ago now has cities, regions or even states vying to be recognized as the center for biotechnology for our country or possibly the world. http://stevensstrategy.com/blog/2008/07/workforce_shortages_do_we_or_d.php http://stevensstrategy.com/blog/2008/07/workforce_shortages_do_we_or_d.php General Sun, 20 Jul 2008 18:02:51 -0500