Coronavirus realities for colleges and universities – rethinking fiscal resilience

Colleges and universities find themselves challenged to meet the academic, health and safety needs of students, faculty and staff at a time when ensuring liquidity and managing the balance of operating expenses to available funding has tipped negatively for many institutions. The current situation only exacerbates and further illuminates the struggle to provide quality academic programming and ensure achievement of mission within fiscal constraints. Governing boards have an obligation, now and always, to position their institutions to deliver on their missions and meet obligations to their stakeholders.

Higher education institutions across our nation are experiencing significant reductions in student-based revenues as physical campuses have closed and remote learning is the new norm. Meanwhile, the costs of providing these services and maintaining capital assets remain. For many academic institutions, future downward trends in enrollment-related student revenue, lost sports revenue and significantly lower earnings on endowment assets will compound for a long-term negative revenue impact. A perfect fiscal impact storm results from these trends when combined with the deterioration in students’ (and their parents’) ability to pay for the cost of attendance, along with unanticipated expenses related to the remote delivery of services, unanticipated costs to ensure safety and further refunds due to campus closures.

The continuation of these uncertain times – resulting in major changes to all aspects of institution operations and programs – puts tremendous pressures on accurately projecting the financial picture and ensuring future resilience. It takes collected cash, not expected student and auxiliary revenues, to meet obligations and survive economic downturns while achieving institutional objectives. When available cash reduces precipitously, operating costs and institutional commitments require scrutiny and diligence to understand cash flow and liquidity realities and options.

Start by conducting a cash flow and fiscal driver diagnostic assessment

At a minimum, to survive this perfect storm, leaders should examine key drivers of fiscal and institutional performance and ensure careful analysis of options for now, and in the future, to make critical decisions and navigate potential alternatives for optimal performance. Confidence that available funding sources and levels are considered in the context of current realities, key drivers of fiscal performance and expected missional commitments require a careful and comprehensive assessment across a number of functional areas (e.g., academic continuity, stimulus relief options, capital asset management, debt and liabilities, resource allocation, contract obligations, etc.). Asking the right questions and examining the right variables can make the difference between “good” and “bad” decisions. Further, knowing what acceptable performance “looks like” relative to the current situation is paramount.