The Top 3 Issues Facing Community College CFOsPosted on Feb 6, 2017 4:13:56 PM
After forty years serving Northeast Iowa Community College (NICC) as Finance Director, I can tell you firsthand the demands from the finance office at colleges around the country are greater now than they have ever been. The number and complexity of challenges facing the modern college CFO will most likely increase as accountability and transparency demands for local government increases. Trying to match short term demands with long term strategic goals for your ever-changing organization is not easy. The good news, if any, is that we are all facing one version or another of the same issues. The top three issues I see are 1) declining enrollment 2) unreliable state funding levels and 3) increasing program costs.
For most community colleges in America, tuition is the main revenue source. As enrollment declines for many of us, we lose our key revenue source to support our students. Our business is like any other business; it’s much easier to control our expenses than our revenues in challenging times. If your community is like mine, the idea of reducing student services or dramatically increasing tuition or fees is never easy to sell. How do we best communicate the long-term impact of declining enrollment and build support for action needed to increase revenues?
Unreliable State Funding:
If your college budget cycle is similar to Iowa’s, then many times a budget is adopted before knowing the state funding level for community colleges or what percent your college is going to receive. This creates many issues with an operational or strategic budget. It creates even more issues for long term planning and resource allocation. As team members come to the Finance Director seeking clarity about what resources they have for the coming budget year, we need the ability to model different state funding levels into our budget and adapt to more than one possible state funding level. How can you quickly and easily have more than one financial model built to show the financial impact of a 3% state funding increase or a ZERO increase?
Increasing Program Costs:
We all know how it goes…back in 1984, program X was created and in 2016 there are just five students leveraging the program. However, the costs to deliver that program are not going down. In fact, they are increasing. Maybe it’s a program being delivered at a few locations that could be delivered at one. I know how hard it is to build consensus around changes to programs and program delivery. Creating a breakdown of the associated costs, who’s budgets are impacted, where the resources would go if changes were made and how students could be positively impacted by resources going other places is hard. So how do you find the time to create these various scenarios to communicate them to department heads?
Over the last two years, the leadership team at NICC implemented a policy of creating and maintaining a 5-year financial forecast that is presented to the board annually; with official quarterly updates to the board. During working meetings with various committees and budget centers, the finance team has the ability to update the financial forecast in real time and visualize the data for decision makers to understand the financial impact of the proposed action. There are two key takeaways to our process that can enhance your process:
1) the finance team has a seat at the table and can make changes to the forecast in real time so that decision makers can see the impact at all levels of the organization immediately
2) not everyone reads a spreadsheet like a CFO, so visualizing historical data or financial projections is key to some “getting it”
At NICC we have been able to create, maintain, communicate and build consensus around our financial forecast. The financial forecasting process helps us communicate at every level of the organization, provide college leaders a clear financial picture and gives our board the confidence needed to take action that impacts our students positively over the long run. NICC has been able to implement an Early Buy Out Program, set tuition and fee structures to support student services, and think strategically about how “Making the Budget Fit” today secures our long term financial picture.
In my next blog, “Making the Budget Fit”, I will talk about specific steps in the forecasting process that help. And, download our step-by-step guide to create your five-year financial forecast.
Thomas M. Ridout is a Senior Analytics Advisor for the community college market with Forecast5 Analytics. He is the former Executive Director of Finance for Northeast Iowa Community College (NICC) in Calmar, Iowa. Thomas was employed with NICC for 41 years, also serving as an Accountant and Business Manager. Prior to NICC, he was employed with Dee Gosling and Co. CPA’s in Waukon, Iowa. He graduated from Northeast Iowa Community College with an Accounting degree. He is also a member of the Northeast Iowa Community College Alumni Hall of Fame.