Navigating the New Normal: Financial Imperatives for MSI Effectiveness and Avoiding Financial Exigency
2014 – Minority Serving Institutions (MSI) leaders are often concerned with financial exigency, and the policies, practices, and processes that can enable it. This brief provides considerations and strategies for Boards of Trustees as they approach the difficult task of providing financial guidance, management, and oversight to their respective MSIs. The goal is to equip Trustees with the necessary tools to probe deeper into the financial health of their institution, which is especially necessary post the Great Recession of 2008-2009.
Practical Steps for Boards and Administrations
1. Create an enrollment strategy that takes into consideration both the changing demographics in the United States, and the ability of students to pay.
2. Hire qualified and experienced business analysts (preferably with a statistical background) into the enrollment management group to ensure that statistical analysis and modeling informs the framework for enrollment and retention projections. If the institution cannot afford to hire a full-time business analyst, they should seek the services of a reputable firm to contract a part-time business analyst. If possible, invest heavily in a strong and robust business intelligence (data warehousing) platform to generate accurate information to make decisions.
3. Understand the operating cash flow needs of the college to assist with shaping the institutional-aid programs. Do not simply attempt to meet enrollment goals, but make sure that despite the size of the institution the “net tuition revenue” is positive to cover the operating budget. Deficit spending and other financial stress-related approaches should be of a last resort.
4. Engage with fundraising consultants who can assist with market analysis and surveys to support establishing benchmarks around fundraising for both annual goals and capital campaign goals.
5. Train the institutional advancement staff to understand the hierarchical needs of fundraising, and how they work in tandem with the budget office to manage both expectations and results.
6. Engage with seasoned financial officers from the higher education sphere to conduct training workshops for the board of trustees. An in-depth discussion of the institution’s financial health and challenges should be the focus of at least one board of trustees meeting during the year.
7. Create a timeline for board review of the financial and OMB A-133 audits, and the IRS Form 990.
8. At the beginning of the year, review cash-flow projections that highlight unrestricted and restricted sources.