Through a holistic financial health diagnostic, peer university financial metric benchmarking exercise, and the development of a dynamic financial projections tool, Censeo identified a number of ways for a large public research university to optimize liquidity, cost efficiency, revenue growth and composition over the longer-term.
Censeo’s client, a public research university with a budget of more than $1 billion, faced a 10 percent decline in its net position over the prior five-year period. A recent credit ratings downgrade, state funding pressures, and volatility in its Clinical Services division due to the Affordable Care Act were causing financial strain. Censeo was brought in by the Office of the Chief Financial Officer (OCFO) to assess and quantify the overall financial health of the university and develop longer-term financial management practices to improve performance.
Working closely with the Senior Vice President for Finance & Administration and Chief Operating Officer, as well as other key leadership from across the university, Censeo conducted a 12-week comprehensive review of whole-of-university financials. This included assessing historical drivers of financial performance as well as benchmarking key financial ratios and trend analysis against peer universities.
In addition to the historical and peer analyses, the Censeo team also conducted a number of other relevant financial assessments, including an evaluation of cash management, and treasury and related foundation policies and operations. Censeo also built a dynamic financial tool to project the university's three key financial statements based on a range of operating and market assumptions. In order to capture data and develop findings, Censeo conducted a range of university-wide interviews in addition to deep quantitative and qualitative analysis of financial drivers, policies, and practices.
Benchmarking and trend analysis showed that the university was underperforming against peers on nearly all key financial metrics, while the gap was widening on key mission objectives. As such, Censeo identified a number of ways for the university to improve or otherwise optimize liquidity, cost efficiency, revenue growth, and composition to support mission outcomes. These recommendations included:
- Opening a revolving credit facility to ensure steady access to liquidity in times of need;
- Aligning cost and revenue incentives through budget model redesign;
- Identifying high priority areas for cost reductions to balance the budget and free up funds for key investments; and
- Diversifying sources of revenue growth beyond tuition and clinical services (e.g., international student enrollment).
Overall, the effort provided a solid base to help the university better manage its finances, grow thoughtfully, and achieve its strategic goals and increased academic performance.