Performance Management in Higher Education

Transcription

1 Performance Management in Higher Education Advisory Services and Software Solutions That Enable Colleges and Universities to Succeed in a Changing Environment

2 Given the number and magnitude of pressures in higher education today, the need for more effective planning and greater financial discipline is more critical than ever. Without a strong strategic financial and capital plan in place, and without the tools to manage the execution of that plan, colleges and universities face the very real risk of moving down an unsustainable path. Kaufman Hall provides advisory services and the industry-leading Axiom Software Suite to help higher education institutions balance growth with fiscal responsibility and realize sustained success amid a rapidly changing business environment. Achieving Financial Strength in High Education The Challenges You Confront Threats to Core Revenue Sources Pressure on Operating Costs Need to Support Fixed Assets The Goals You Pursue Financial Health Funding for Strategies Reduced Risk The Plans and Tools You Need Financial Planning Process Redesign Financing Risk Management

3 Integrated Strategic Financial Planning FINANCIAL PROCESS DESIGN Solid long-range planning serves as the foundation for integrated financial risk management a process that connects operations, core capital, strategic capital, liabilities, and invested assets under a single analytical umbrella. It is as much about the allocation of financial resources as it is the management of risk. When done correctly, integrated financial risk management connects a myriad of frequently disparate thinking and expertise, and helps the institution move from transactional to systemic financial management. We start by identifying and quantifying material financial risks from operations, capital spending, strategy, and capital structure. We then assess the liquidity reserve requirements to serve as a hedge of last resort and prescribe a balanced strategy for investment and the overall role of cash for the enterprise. Importantly, the framework is a sustainable communication and analytical platform that promotes unified planning across all disciplines of the institution on an ongoing basis.

4 LONG-RANGE STRATEGIC PLANNING When properly developed and implemented, the strategic financial plan serves as a blueprint for future growth. Applying quantitative reasoning, it brings key issues into focus by mapping out available financial resources and matching those resources with strategic capital requirements. It also will highlight any gaps, allowing an institution to make proactive adjustments. Drawing on more than 30 years experience helping organizations in rapidly evolving industries develop Integrated Strategic Financial Plans, we bring the expertise to ensure an effective balance between strategic needs and financial capabilities. Our advisory and software solutions allow institutions to develop multi-year plans with confidence. These plans model existing operations and proposed strategic initiatives and capital projects that encompasses both income statement and balance sheet effects. This approach allows our customers to easily create scenarios to mix and match assumptions and initiatives to compare different courses of action and stress test the impact of various external shocks against existing plans and commitments. Institutions can build any number of driver-based models with assumptions for internal factors current and projected enrollment, as well as external factors such as wage inflation and interest rates. Our team s ultimate goal is to ensure your financial plan answers seven critical questions: 1. What are the institution s strategic capital requirements? 2. How much cash and investments should the institution have on hand? 3. How much debt can the institution afford? 4. What short-term and long-term performance targets? 5. What level of operating change is required to meet performance targets? 6. Where the capital be obtained in the short and long term? 7. What transactions are required to obtain the necessary capital?

5 Financing Specific financing strategies must be consistent with your organization s longer-term business objectives. Kaufman Hall s approach assures clients that every debt and derivative transaction achieves this consistency, thereby creating the highest possible benefits within acceptable levels of risk tolerance. CAPITAL STRUCTURE AND FINANCING Kaufman Hall offers our clients complete objectivity. We do not provide investment banking services, sell or distribute debt or re-investment securities, or represent state or local financing authorities. In addition, our fees are not related to the size of the debt or other transaction. This independence gives us the unique ability to explore the widest range of financing options, make conflict-free recommendations, and vigorously advocate your interests throughout the financing process. The combination of independence, objective advice, and strong advocacy of client interests has positioned Kaufman Hall as trusted financial advisor to hundreds of organizations across the country. With every transaction, we focus on your long-term strategic financial planning, capital structure, and ratings goals.

6 FINANCIAL ADVISOR PORTAL A growing number of institutions are not only seeking Kaufman Hall s help with issuing new debt but also tapping into the power of the firm s Financial Advisor (FA) Portal to build a central platform for all relevant capital structure data and identify opportunities to lower cost and optimize risk exposures. FA Portal is a powerful tool used by Kaufman Hall advisors and university Treasury teams to: Catalogue instrument details Track market-reliant products on an ongoing basis Run What if scenarios to gauge before and after capital structures Access capital structure analytics that foster integrated risk decision-making, inclusive of operations and investment Manage debt reporting and prepare for board/ rating agency updates A secure, web-based platform, FA Portal is helping colleges and universities more proactively manage their liability portfolio. Financial Process Best Practices Specific financing strategies must be consistent with your organization s longer-term business objectives. Kaufman Hall s approach assures clients that every debt and derivative transaction achieves this consistency, thereby creating the highest possible benefits within acceptable levels of risk tolerance.

7 BUDGETING & REPORTING Today s dynamic market environment requires that higher education finance teams embrace agile budgeting and forecasting processes, including rolling forecasting and scenario modeling. Kaufman Hall advisors and the Axiom Budgeting solution offer institutions an effective framework that reduces the time spent on the budgeting cycle while also ensuring the proper business drivers are included. OPERATIONAL BUDGETING Axiom allows institutions to streamline the budgeting process to make it more collaborative, while also ensuring accurate results. Designed for finance professionals, Axiom leverages a familiar Excel interface, hosted in the cloud, to deliver the sophistication and control you need to be highly responsive to the needs of your institution. Axiom enables users to create dynamic scenario modeling to create and manage what if scenarios using key financial and operational drivers. COSTING AND REVENUE ANALYTICS The Axiom Costing and Allocations Suite enables institutions to develop cost pools, allocations, and margin analysis on a divisional or departmental basis. The solution enables universities to manage complex allocation rules and may be allocated on any metric available such as FTE, square footage, student credit hours, major, minor, etc. This functionality allows customers who use de-centralized budget approach (such as RCM or others) better insight into cost and revenue across schools or departments POSITION PLANNING On average, salary constitutes just over 50% of an institution s operating budget. Axiom s budgeting solution allows institutions to effectively model salary expenses by person, position or job class. Axiom securely integrates with HR and payroll systems to combine salary expense data with other data sources that impact the operational budget. Axiom supports sophisticated salary distribution needs across various funding sources, organizational units, and/or projects. MANAGEMENT REPORTING & DASHBOARDS Visualizing financial and operational performance data allows institutions to quickly highlight key performance indicators (KPIs), trends, rankings, variances and outliers in a matter that a spreadsheet or matrix just can t. Axiom s reporting and dashboard solution

8 provides the ability to create compelling visualizations that bring focus to key areas of the institution. Reports and dashboards can easily be configured for any number of recipients, from board reports to departmentspecific packages. ENROLLMENT PLANNING Effectively managing and modeling enrollment is becoming increasingly important for universities as applications rise while overall high school graduates remain constant. Students and their families are also becoming increasingly price conscious and aware of tuition differences among schools. Axiom Software offers a set of modeling capabilities that monitors starts, persistence across school and programs that leverage historic data, user-defined assumptions, and statistical modeling. Axiom s enrollment planning enables customers to optimize enrollment and understand how to most effectively use scarce financial aid funds. Enrollment planning sits at the front-end of a best practice operational budget process, and with Axiom Software it is fully aligned and unified with other portions of the operational budget. This alignment ensures that budgeting decisions are based on accurate enrollment and tuition revenue data, rather than making assumptions based on outdated historical trends. GRANTS PLANNING Axiom Software s grant planning solution enables your university to monitor forwardlooking contractual funding to better plan grants, both new and in progress. Allowing for that level of visibility enables institutions to coordinate a grant s utilization across research initiatives and for position planning. By allowing schools to compare projected grant installments against individual spending by project, the software provides full visibility to income and expenditure across a grant s lifecycle. Further, Axiom allows you to calculate the impact on your fiscal or academic years for grant installments that may not align evenly with your planning timeline.

9 CORPORATE RISK MANAGEMENT Achieving a manageable risk position implies that the same resources that shape financial health also are balanced across the competing imperatives of pursuing return and managing risk. Kaufman Hall offers guidance to ensure institutions remain inside a risk-centric corridor of control, in which the institution is neither over-risked nor under-risked. The plan provided accounts for the internal and external environments facing an institution. Kaufman Hall works with institutions of all sizes to develop and apply a corporate framework into their financial and risk management efforts. The framework has four defining characteristics: High $ Strategy and related investment Low $ Short-term concern Over-Investment Corridor of Control Financial Capacity Under-Investment Long-term concern High $ 1. It is built on a solid understanding of the institution s comprehensive risk portfolio. The portfolio consists of claims on cash sourcing from all of the institution s operating and capital activities 2. It reflects a clear understanding of the contribution that different balance sheet resources make to the risk management process 3. It uses risk-based asset allocation, which tightly connects all invested assets to the total risk portfolio, and is based on the premise that invested assets should first respond to managing risk and second to pursuing return, as described earlier 4. It becomes part of the institution s decision support infrastructure

10 Our solutions At Kaufman Hall, we believe that sustained success is never an accident. Rather, it is the result of sound decision making, based on datadriven analysis and disciplined thinking, guided by the fundamental principles of corporate finance. For more than 30 years, we have been helping organizations incorporate proven methods into their strategic planning and financial management, quantify the impact of their plans and actions, and consistently achieve their goals. Kaufman Hall combines deep consulting expertise with modern financial planning and decision support solutions that empower you to make better decisions today for better outcomes tomorrow.

11 BUDGETING & REPORTING GRANTS PLANNING LONG-RANGE STRATEGIC PLANNING TREASURY MANAGEMENT CAPITAL ALLOCATION & TRACKING FINANCIAL PROCESS DESIGN ENROLLMENT PLANNING

12 To learn more, please visit Old Orchard Road, Suite N700 / Skokie, Illinois / phone / fax