University Business - October 2011 - (Page 60)

independent outlook your financial realities, I urge you: wait no longer. Here are some thoughts about where to begin. Listening and sharing Start by examining the depths of financial literacy on your campus. As Dunkelman listened to concerns and questions during his first months, he quickly identified gaps in our community’s financial savvy. Readers probably will not be surprised to learn of significant lacunae about the role of the endowment in college finance, the college’s dependence on tuition, the hazards of using one-time sources of revenue (e.g., a bequest) to fund ongoing expenses (e.g., salaries), and the function of reserves (“no, reserve funds are not there to be able to say ‘yes’ to those who ask”). With the ability to address the campus’ level of understanding, the next step is to prepare a tutorial to improve financial literacy and, even more importantly, to stimulate needed conversations. At Whittier, one helpful element of the tutorial Dunkelman prepared was a fiveyear budget projection, with reasonable placeholders for tuition, salary increases, and financial aid, and assuming constant enrollment and a declining endowment payout. Most critically, he took into account two long unmet college goals, both widely shared on campus and affirmed by our board of trustees. First, he factored into the five-year budget the cost of raising faculty salaries to achieve “parity,” using an index established some years before. Second, like most colleges and universities, Whittier has plans for expansion, but already had built up a rather large deferred maintenance agenda for its 125-year-old campus. Jim added a hefty capital renewal line to reverse the direction of this liability. Factoring the funds necessary to address unmet, high-priority goals into a five-year budget projection, to say the least, would be illuminating to any campus community. At Whittier, doing 60 | October 2011 so immediately demonstrated the wide chasm between reasonably predictable revenue and the amount needed to achieve our goals. The projections showed that we would continue to offer the same great education that our students had come to expect and that we could pay our bills. But, without substantial additional revenue or dramatic restructuring of our mission or the way we did business, we did not stand a chance to achieve faculty salary parity nor enhance Whittier’s physical plant, as wise stewardship required. college campus, the commitment to small classes, a low student-to-faculty ratio, healthy financial aid, residential character, and many other factors have concrete ramifications for the draw on revenue and for a budget’s high “fixed” costs. Everyone on campus needs to comprehend this basic fact, and from this common understanding, productive campus conversations will ensue. OutcOmes At Whittier, these conversations have led to rethinking our enrollment capacity and investing in growth—producing a host of changes to course scheduling and advising that better respond to students’ needs. With a larger student body, but the same commitment to small classes and close mentorship by faculty, we now are engaged in deliberations about the curriculum and where to expand the faculty. Knowing that our endowment would likely remain small for some time, we also invested resources and energy in growing the annual fund, to good effect. A second important outcome has been widespread recognition that neither growing enrollment to match our capacity nor heightened annual giving will produce the revenue sufficient to achieve our high-priority goals. This realization has stimulated new modes of collaboration among staff, faculty, and administration to become a much more entrepreneurial campus and find new sources of revenue through entirely new business ventures and partnerships. Can everyone on campus explain our budget in strategic terms? Are we a perfectly cohesive engine of collaboration for resource generation and allocation? Not yet. But we are on our way. And it all started because of a worldwide economic crisis and a CFO who sought to do what we all do on a college or university campus—educate and use the results of that education to better our community. universitybusiness.com Can everyone on campus explain our budget in strategic terms? Not yet. But we are on our way. Another informative element of any tutorial involves setting a campus’ budget allocations in the context of national and sector norms for expenses and sources of revenue. Pie charts comparing the proportion of expenditures for the academic program, student services, and administration can build trust in decision-making and priorities, or point the direction for further study. Comparing sources of revenue is equally useful. In Whittier’s case, our relatively large dependency on tuition and small endowment payout displayed the challenges we faced in achieving our goals, despite a strong commitment to try. Sharing these types of analyses in a series of meetings and workshops with constituencies throughout the campus stimulates creative thinking and motivates action. Two examples on our campus lead me to recommend the same exercise to readers. First, Dunkelman’s tutorial graphically illustrated the tradeoffs represented in a budget and why the mantra of great planners is often the seemingly simple statement “a budget is a strategic plan.” On a private http://www.universitybusiness.com

Table of Contents for the Digital Edition of University Business - October 2011

University Business - October 2011
Contents
Editor's Note
College Index
Ad Index
Behind the News
Sense of Place
Viewpoint
Human Resources
Cloud Email
Tuition Setting
Campus CFO
Independent Outlook
End Note

University Business - October 2011