Higher education finance leaders are on the forefront of efforts to determine how colleges and universities will navigate a new normal after the COVID-19 outbreak.
In the pandemic’s early days, higher education leadership relied on finance teams and data to help guide decisions and ensure long-term stability. Now, finance teams are helping their institutions look ahead to develop budgets, forecasts, and long-range plans that plot the best course forward.
Nearly two dozen higher education finance executives participated in a wide-ranging roundtable discussion hosted by Kaufman Hall & Syntellis on March 30. Here’s what they’re doing to ensure their institutions are ready for every future scenario.
Priority #1: Triaging finances
Naturally, finance executives will first look at cash flow, preserving it as they can while issuing refunds where applicable. But those decisions affect finances going forward, a situation one finance leader described as “not a pretty picture right now.”
A financial analyst for a four-year private institution in New England describes a similar situation: “Almost all of our efforts right now are in getting whatever courses we can online for summer and fall to try to keep the continuity of the academic experience alive for the students. We've been able to calculate refunds as well. For scenario planning, we've really tried to do some things that are extremely high level given that we have so much uncertainty, but we're talking primarily about what it looks like if we have different start dates for our residential programs in the fall.”
Before most institutions refund fees, they first reviewed the potential repercussions. One finance official noted that refunds for housing and dining were appropriate but the institution needed to do so while still making its bond payments. Another institution has suspended construction to preserve funds for academic services.
With academic year budgets in various stages of preparation or approval, tough decisions will need to be made for the remainder of the current year and carried forward into the next.
Priority #2: Educating administrators to make data-driven decisions
Finance leaders report varying degrees of success with injecting reason and data into decision-making as COVID-19 overwhelmed campuses across the country. The budget director of a four-year public university in the Northwest said administrators waived online course fees, an $800,000 impact on finances.
“We have a lot of people making decisions that may not realize the financial impact, but they’ve already communicated the decisions,” the budget director said. “So we have to be agile and adapt to the decisions they’re making.”
A finance executive from the Midwest said he’s been able to put a stop to some knee-jerk decisions by leveraging data from Axiom. “Administrators were talking about doing tuition incentives for summer, for example, and slashing the rate. I showed them pretty quickly how much revenue we’d lose by doing that and everyone realized it wasn’t a wise strategic decision.”
Demonstrating revenue impact in dollars and cents is key to guiding various decisions, especially when pressure to make a certain choice is exerted from beyond the university.
The finance director of a large, four-year public university in the Southeast shared how the governor’s office and state legislature are weighing in on decisions before understanding the potential financial impact. For example, waiving student fees sounds logical, she said, but there are operational costs associated with many aspects of enrollment regardless of whether students are on campus.
Although the finance director can access data from anywhere, not being on campus with other administrators creates new communication challenges.
“At the end of the day, you're trying to make sure all administrators get the same information rather than reviewing financial and academic data that’s different,” the finance director said. “It’s a little bit more challenging virtually because I can't just walk into somebody's office and say, ‘Wait, wait, wait. I don’t think we should do this, and here’s why.’”
Priority #3: Accounting (literally) for COVID-19
Every college and university is incurring unforeseen expenses because of the outbreak. A two-year public college in the Northwest reports spending nearly $1 million already on expenses related to COVID-19.
Accounting for COVID-19 expenses on the front end can bring benefits through more accurate information for potential insurance reimbursement or applying for state or federal funds made available in the pandemic’s wake. It’s also important for institutions to understand how these extraordinary expenses will affect the budget going forward.
The New England private college has separated expenses related to the pandemic to give departments a clearer financial picture. “We're just trying to adapt the chart of accounts in a few different ways,” the financial analyst said.
Priority #4: Managing budgets going forward
One participant expressed a wish that Axiom Long-Range Planning include a crystal ball function to help plan for what’s next — a sentiment surely shared by everyone sheltering in place, homeschooling, and practicing social distancing.
While no one knows what the future will bring, planning for the medium and long terms can help institutions better understand their financial situations.
One new Axiom Budgeting and Forecasting user said her university was deep in the budget planning process for fiscal year 2021 when the pandemic hit. Fortunately, relevant users had been trained to use Axiom, so the budget process continues while everyone works remotely.
“Everybody has been able to submit their plans a lot easier than if we hadn’t had training,” the budget director said. “It's been easier for us to collaborate using the new platform than it previously would have been.”
Another institution is using Axiom solutions to gauge the potential impact of a 10% enrollment drop, as well as a 5%-7% reduction in state appropriations. “One of the big things we're challenged with right now is that based on what happened with this blip, our forecasting is no longer accurate at all,” the finance director said.
The New England university attracts a significant number of international students, and the impact of the coronavirus on enrollment is a complete unknown. At the same time, more local students may choose to attend college closer to home.
“It's a little bit grasping at straws,” the financial analyst said. “Multi-year budgeting, in particular, is still occurring in Axiom. We're able to use the system to think of those scenarios, but those scenarios are pretty opaque right now and the breadth of possibilities is wide.”
Priority #5: Evaluating academic programs
If there is an academic silver living to be found amid COVID-19, it’s the speed at which professors have developed online curricula. To preserve the spring semester, colleges and universities have quickly switched to online learning. It remains to be seen whether the trend is a blip or the new normal for higher education.
The pandemic has shone a bright light on academic programs and increased scrutiny on the continued viability of each. “It’s actually forcing us to be more cognizant of our programs by ability,” said the Midwest finance executive. “In the past, we would offer a course that was a nice to have — not a need to have.”
Each program is receiving close scrutiny based on enrollment and return on investment, which is seen as a necessary yet unpopular strategy. “A lot of people have gone into reactionary mode or are tucking their heads in and not really wanting to address it, but tough decisions will need to be made.”
The demands of working in a college or university finance office can be challenging in the best of times. But these are not the best of times. In addition to navigating the waters of an unknown collegiate future state, like most of us, finance leaders are juggling working from home with family responsibilities and concerns about the health of loved ones and friends.
“It’s just worse than the normal challenge, I suppose,” one finance department leader said. “We're pretty well-trained at this point in making data-informed decisions. Usually we’re using real data from similar scenarios to inform us, but right now, we don't have any.”