Finance and Administrative Services Planning Goal #2

Finance and Administrative Services Planning Goal #2
2002-2006

1. What is a visionary goal that your unit set?

Improve the University’s financial Key Performance Indicators (KPI’s).

2. What information and data did you use to set this goal?

In the fall of 2003, PLNU’s Strategic Planning Committee established 13 KPI’s that would serve as an initial group of “dashboard” indicators for the University. Three of these KPI’s included financial ratios that, with a couple of modifications to make them more meaningful, are commonly used and benchmarked in higher education (for details see Key Performance Indicator Information ). These are:

Modified Net Income Ratio – this measures whether total unrestricted activities resulted in a surplus or deficit. It demonstrates whether the institution lived within its available resources. Improvements in this key ratio will also result in improvements in the Primary Reserve and Viability ratios.
Modified Viability Ratio – this measures the availability of expendable net assets to cover debt. The annual calculation of this ratio is a requirement of the CEFA and ABAG bond debt covenants and PLNU must maintain a ratio greater than 50%.
Primary Reserve Ratio - this measures the financial strength and liquidity of the institution by comparing expendable net assets to total expenses (this number is very important to bond rating agencies such as Moody’s)

Based on looking at these ratios and other financial information, the University recognized several years ago that its financial results (and resulting ratios) were being negatively impacted by the fact that it was largely living hand-to-mouth, that is, while current operating and capital expenses were for the most part being adequately funded out of current revenues, funds were not being set aside out of current revenues for future expenses (primarily facilities renewal and replacement, but also the growing size of technology assets).

3. What actions did you take to try to reach this goal?

Beginning in 2003-04 the University included money for the Renewal & Replacement fund in the annual operating budget.

4. What progress did you make?

For 2003-04 $500,000 was budgeted for the Renewal & Replacement Fund and the University exceeded its target and was able to place $900,000 in the fund.
For 2004-05 $500,000 was budgeted for the Renewal & Replacement Fund but the University was able to place $1,200,000 in the fund.
Despite these significant contributions out of current revenues, two of the financial KPI’s (Viability and Primary Reserve) actually declined between 2002-03 (the baseline year) and 2004-05. (see Key Performance Indicator Information ). This was due to the fact that three fairly significant building projects (total of $12.5 million) took place on campus during this time that had the effect of converting some expendable net assets into fixed assets (buildings). With these building projects completed, the expectation is that these financial ratios will improve.

5. What information and data did you use to evaluate your progress?

Supporting Documents :