One of the common questions I have been asked during my trek to 20+ clients over the past two years involves the financial performance statistics institutions should be shooting for. That is, what are the benchmarks that typify the better-performing colleges and universities? Here is a rundown of twenty, based on my numerous visits:
1. GAAP-based change in unrestricted net assets (surplus) = or > 4% of operating revenue
2. Long-term debt equaling less than 50% of annual operating revenue
3. Debt service (principal and interest) not to exceed 5% of operating revenue
4. Non-student revenues (primarily donations and investment returns) of at least 12% of operating revenue. (Student revenues include tuition, fees and auxiliary revenues)
5. Non-traditional student revenues equaling or exceeding 40% of overall net tuition and a net contribution from non-traditional operations of at least 40% after facility and overhead costs.
6. Incoming student discount percentage not to be more than three percentage points greater than returning student discount. (ie new student = 46% and returning student = 43%)
7. Average non-traditional class size equal to or exceeding 15 students
8. 85% of non-traditional classes taught by overload or adjuncts.
9. Total salary and benefit costs not to exceed 65% of total operating expenses.
10. A Student to faculty ratio of 17 to 1 or greater with no more than 15% of traditional classes having less than ten students in them.
11. Faculty makeup: 50% Instructors and Asst. Professors, 30% Associate and 20% Full Professors.
12. No more than five percent of overall faculty load assigned to non-teaching appointments
13. Student receivables not to exceed 1.5% of annual student revenue at year end.
14. Matching 403(b) contribution of at least 6%
15. Annual bonus dedicating at least 20% of operating surplus toward summer payment to on-going employees (end of July payout).
16. Budget contingency of at least 2% of revenues.
17. Separate capital budget from operating budget.
18. Capital spending plus principal payments exceeding 120% of annual depreciation expense.
19. Formal five-year forecast with pro-forma balance sheet, income statement, cash flows and ratios, supported by solid (defensible and owned) revenue projections.
20. Budgeting based on the lower end of the range of revenue expectations, with the uncoupling of budgetary assumptions from revenue goals for enrollment, financial aid and advancement (departmental goals exceeding budget)
Keep in mind, these are not hard and fast rules. For instance, your institution may have royalty income that far exceeds the 12% threshold for non-student revenues. That kind of performance can cover a multitude of weaknesses in other categories.
Provided you are able to deliver the above statistics, chances are pretty good you will have a healthy institution that can sustain the hard times that are before us.
Have anything to add to this list?