KEY FINANCIAL METRICS & DASHBOARD REPORTING FOR …

1/26/2016

KEY FINANCIAL METRICS & DASHBOARD REPORTING FOR HIGHER EDUCATION INSTITUTIONS

January 26, 2016

Jim Creeden Partner

jcreeden@

Adam Smith Director

asmith@

1

1/26/2016

TO RECEIVE CPE CREDIT

? Participate in entire webinar ? Answer polls when they are provided ? If you are viewing this webinar in a group

Complete group attendance form with ? Title & date of live webinar ? Your company name ? Your printed name, signature & email address

All group attendance sheets must be submitted to training@ within 24 hours of live webinar Answer polls when they are provided

? If all eligibility requirements are met, each participant will be emailed their CPE certificates within 15 business days of live webinar

GOALS FOR TODAY

Importance of Financial Metrics & Ratio Analysis Review & Evaluate Key Financial Metrics & Ratios Composite Financial Index (CFI) & Linkage to Strategic Planning Presenting Results in Dashboards

2

FINANCIAL METRIC & RATIO ANALYSIS

? Why important?

Recent economic factors & industry pressures Transparency Accountability

? Identification of financial risks ? Method of communication to stakeholders ? Risk with peer comparisons

Apples vs. oranges?

1/26/2016

MOODY'S & S&P RATING CONSIDERATIONS

? Four broad factors in assessing ratings

Market profile Operating performance Wealth & liquidity Leverage

? Self-assessment & benchmarking

3

1/26/2016

MOODY'S & S&P RATING CONSIDERATIONS

? Positive indicators of self-assessment & benchmarking

? Identification of key performance indicators ? Monitoring of key performance indicators ? Examples of leadership actions based on performance relative to key indicators ? Comparison to carefully selected set of peers

4

1/26/2016

Resource Sufficiency & Liquidity Ratios

RATIO/METRIC

? Primary reserve ratio ? Monthly/annual days of

cash on hand ? Monthly/annual liquidity ? Expendable financial

resources ? Monthly/annual liquidity to

demand debt

OVERALL OBJECTIVES

? Sufficient amount of funds to meet current & future operating & capital requirements

? Ability to achieve & sustain a level of resources sufficient to realize mission

? Insight about capacity to manage through stress

? Operating flexibility

Primary Reserve Ratio Calculation

? Compares expendable net assets to total expenses

? Snapshot of financial strength & flexibility

? Indicates how long institution can function using expendable reserves without relying on additional net assets generated by operations

? Assets that could be access quickly to spend to satisfy obligations

? Helps understand affordability of strategic plans

Numerator Denominator

Private Institution

Public Institution

Expendable Net Assets

Expendable net assets plus FASB CU expendable

net assets

Total Expenses

Total expenses plus FASB CU total expenses

Source: Strategic Financial Analysis in Higher Education, Seventh Edition (KPMG, Prager Sealy and Co., and Attain, 2010)

5

1/26/2016

0.80

0.70

0.60

0.50

0.56

0.40

0.30

0.20

0.10 2012

Primary Reserve

0.70 0.65

2013

2014

Represents a sample of 40 Midwest based private institutions

0.70 2015

Monthly/Annual Days of Cash On Hand

? Measure number of days an institution is able to operate from unrestricted liquidity within one month & one year

? Measure of operating flexibility & cushion

? Highly correlated with Moody's ratings

Numerator Denominator

Monthly/Annual Liquidity X 365

Total expenses less: Deprecation

Other large noncash expenses

6

1/26/2016

70

60

50

55

40

30

20

10

0 2012

Days of Cash on Hand

62 64

2013

2014

Represents a sample of 40 Midwest based private institutions

61 2015

Monthly/Annual Liquidity

? Distinguishing between wealth & liquidity

? Takes into account donor restrictions, accounting rules, investment strategies, etc.

Funds available within one month (one year) Consists of unrestricted operating accts or Other non-endowment unrestricted funds

? Assess how much liquidity to meet large unexpected payments, demand or accelerated payments on debt

Lesser of Funds available within one month (one year) in endowment or other long-term funds or Unrestricted Board Designated Endowment

as presented in footnotes or self-reported (public institutions)

7

1/26/2016

Expendable Financial Resources

? Indicates amount of net assets spendable in long run

Total unrestricted & temporarily restricted net assets

Long-term debt, less net investment in plant

Source: Strategic Financial Analysis in Higher Education, Seventh Edition (KPMG, Prager Sealy and Co., and Attain, 2010)

Expendable Financial Resources to Direct Debt

1.40

1.28

1.32

1.20

1.13

1.00

1.00

0.80

0.60

0.40

0.20

0.00 2012

2013

2014

2015

Represents a sample of 40 Midwest-based private institutions

8

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download