DOCUMENT RESUME ED 469 346 HE 035 306 AUTHOR Kenton, Jay D. TITLE Presentation and Analysis of Financial Management Information. 2nd Edition. INSTITUTION National Association of Coll. and Univ. Business Officers, Washington, DC. ISBN ISBN-1-56972-021-5 PUB DATE 2002-00-00 NOTE 242p. AVAILABLE FROM National Association of College and University Business Officers, 2501 M St. NW, Washington, DC 20037-1308 ($49.95, members; $64.95, nonmembers). Tel: 866-348-6300 (Toll Free); 301-362-8198; Web site: http://www.nacubo.org/shop. PUB TYPE Books (010) Guides Non-Classroom (055) EDRS PRICE EDRS Price MF01/PC10 Plus Postage. DESCRIPTORS *College Administration; *Educational Finance; *Financial Policy; *Higher Education; Management Information Systems; *Reports ABSTRACT This book is designed to help financial and other managers of colleges and universities in identifying and responding to the needs of individuals and groups requesting management information. The book attempts to facilitate the communication process through management reports. In addition to guidance on report preparation and data analysis, the book provides guidance on effective presentation techniques, on how to analyze and present information, and on how to assess the adequacy of existing reports and reporting practices. Model report formats are presented to illustrate these processes. The chapters are: (1) "The Nature and Role of Financial Management Information"; (2) "Importance of Monitoring and Reporting"; (3) "Financial Management Information";(4) "Indicators of Academic Performance"; (5) "Evaluation and Reporting Criteria for Noninstructional Units"; and (6) "Synthesis and Conclusions." Six appendixes contain three sample reports and discussions of motivations and activities, data for strategic management, and a theoretical model for evaluating productivity. (Contains 64 exhibits and 48 references.) (SLD) Reproductions supplied by EDRS are the best that can be made from the original document. 'resentation and Analysis of Ffinancial Management Information 2nd edition U.S. DEPARTMENT OF EDUCATION Office of Educational Research and Improvement EDUCATIONAL RESOURCES INFORMATION CENTER (ERIC) 'IS This document has been reproduced as PERMISSION TO REPRODUCE AND received from the person or organization DISSEMINATE THIS MATERIAL HAS originating it. BEEN GRANTED BY 0 Minor changes have been made to improve reproduction quality. Points of view or opinions stated in this document do not necessarily represent official OERI position or policy. TO THE EDUCATIONAL RESOURCES INFORMATION CENTER (ERIC) 1 an" NACUBO Nati, onal Atsuritnittn 111 (.1 Illege and Univel,ity Husiu +soific,, BEST COPY ikyLk!LA§LE Presentation and Analysis of Financial Management Information 2ND edition By Jay D. Kenton NACUBO National Association of College and University PI usines5 Officers 3 © 2002 by NACUBO All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the publisher. National Association of College and University Business Officers Washington, DC www.nacubo.org Printed in the United States of America ISBN 1-56972-021-5 I TABLE OF CONTENTS ACKNOWLEDGMENTS vii Evaluation of Financial Performance 24 PREFACE ix Operating Statement Ratios Net Operating Ratio 24 CHAPTER 1: THE NATURE AND ROLE OF FINANCIAL Contribution Ratios 24 MANAGEMENT INFORMATION 1 Demand Ratios 25 Characteristics of Useful Management Information 1 Evaluation of Creditworthiness: Purposes of Financial Management Information 1 Creditworthiness Ratios 25 Considerations in Financial Management Financial Ratios: Viability Ratios 25 Information Reporting 1 Sources of Financial Management Information 2 Financial Ratios: Debt Burden Ratio 25 Need for Financial Management Information 3 Financial Ratios: Debt Coverage Ratio 26 Desirable Qualities of Financial Management Information . 4 Student Demand Ratios 26 Recipients of Financial Management Information 4 Debt Policies 26 27 Summary 5 Service Efforts and Accomplishments Reporting FASB's Business Reporting Research Project 28 CHAPTER 2: IMPORTANCE OF MONITORING Summary 28 AND REPORTING 7 Cost and Accountability Pressures and Demands 7 CHAPTER 4: INDICATORS OF ACADEMIC PERFORMANCE. 29 Addressing the Value of Higher Education 9 Reporting Academic Accomplishments 29 Competition for Students and Faculty 9 Reporting on Teaching, Mentoring, and 30 Global Economic Issues 9 Curricular Activities 38 Performance and Managerial Control 9 Assessing Academic Quality Internal Reporting 9 Assessing Research, Scholarship, and Other Creative Activities 39 External Reporting 10 Evaluating Public Service and Community Outreach 41 Benchmarking 10 Evaluating Library Operations 41 Summary 11 Summary 42 CHAPTER 3: FINANCIAL MANAGEMENT INFORMATION . 13 CHAPTER 5: EVALUATION AND REPORTING CRITERIA Basis of Accounting 13 FOR NONINSTRUCTIONAL UNITS 43 College and University Financial Statements 13 Academic Support Functions 44 Statement of Net Assets 15 Graduate Studies 44 Analyzing the Statement of Net Assets 15 Research and Sponsored Projects Support 44 Statement of Revenues, Expenses, and Changes in Net Assets17 Computing Support 44 Analyzing the Statement of Revenues, Expenses, Student Services 44 and Changes in Net Assets 18 Admissions and Records 44 Statement of Cash Flows 19 Advising 50 Notes to the Financial Statements 19 Career Center 50 Analyzing College and University Finances 19 Financial Aid 50 Recommended Fiscal Policies 20 Student Affairs 51 Revenue Policies 20 Student Counseling 53 Debt, Reserve, and Expenditure Policies 21 Plant Operation and Maintenance 53 Ratio Analysis 22 Facilities 53 Assessment of Overall Financial Condition Ratios 22 Institutional Support and Development Activities 61 Current Ratio 22 Accounts Payable 61 Primary Reserve Ratio 22 Alumni Relations 61 Return on Net Assets Ratio 23 Budget Office 61 Viability Ratio 23 Collections 64 BIBLIOGRAPHY 95 Development Office 65 APPENDIX A: General Accounting 65 Oregon University System Financial Statements 97 Human Resources 66 APPENDIX B: Mail Services 68 Grand Valley State University Annual Report 113 Payroll 68 APPENDIX C: Security 68 Stanford University Annual Report 159 Purchasing 68 APPENDIX D: Treasury Services 69 Understanding Institutions and Faculty Auxiliary Enterprises and Internal Service Activities 71 Activities and Motivations 231 Athletics 71 APPENDIX E: Bookstores 72 Data Necessary for Strategic Institutional Management 237 Food Services 72 APPENDIX F: Housing Operations 73 Theoretical Model for Evaluating Institutional Productivity.. 241 Parking 74 Student Health Services 74 Student Union Operations 74 Summary 74 CHAPTER 6: SYNTHESIS AND CONCLUSIONS 75 Blending Financial and Performance Information 75 Sources and Uses of Peer Information 77 Comparative Financial Information 80 Understanding Institutional Revenue and Cost Structures ...80 Categories of Revenue and Cost Bases 86 Indirect Revenues and Costs 86 Unrestricted, Restricted, and Temporarily Restricted Funds .86 Designated and Undesignated Funds 87 Hard and Soft Revenues and Expenses 87 Fixed and Variable Revenues and Costs 87 Budgeted and Unbudgeted Revenues and Costs 87 Historical and Fair/Current Market Values and Costs 87 Controllable and Non-Controllable Costs 87 Opportunity and Sunk Costs 87 Different Views of Institutional Revenues and Expenses 88 Analyzing Trends in Financial Management Indicators 90 Prospective Financial Management 91 Looking Forward with Projections 91 Setting Goals and Monitoring Outcomes 92 Providing Meaningful Financial Information for Management Decision-Making 92 The Costs and the Benefits of Information 94 6 iv EXHIBITS CHAPTER 3 5.9:Facility Operating Cost per Square Foot 3.1: Financial Statement Reporting Model Compared to Peer Institutions: 1999-2000 55 Comparison 14 5.10: Investment in Facilities: June 2001 56 3.2: Statement of Fixed Assets 16 5.11:Percent of Building Valuation in Deferred 3.3: Tuition and Required Fee Comparison with Maintenance 57 Competitor Institutions 21 5.12: Type of Space by Department and by Usage 57 3.4: Current Ratio 22 5.13: Education and General Fund Budget 3.5: Primary Reserve Ratio 23 by Program 60 3.6: Return on Net Assets Ratio 23 5.14: Education and General Fund Budget by Organization 60 3.7: Viability Ratio 23 5.15: Income Projections 61 3.8: Net Operating Ratio 24 5.16: Revenue, Expenditure, and Transfers for the 3.9: Contribution Ratio of Student Tuition Past 10 Years 62 and Fees to Operating Expenses 24 5.17: Revenues by Source 1991-92 63 3.10: Demand Ratios-Instruction and Research Expenses to Operating Revenues 25 5.18: Revenues by Source 2000-01 63 3.11: Debt Burden Ratio 26 5.19: Expenditures by Object-1991-2001 64 3.12: Debt Coverage Ratio 26 5.20: Expenditures by Function 2000-01 64 5.21: Expenditures by Function 1992-2001 65 CHAPTER 4 5.22: Accounts Receivable Aging Analysis 66 4.1: Three-term Credit Hours by School/College, 5.23: Accounts Receivable Aging Analysis Department, and Student Level 30 (bar graph) 67 4.2: Three-term Enrollment by School/College, 5.24:Gifts and Pledges 1994-2001 67 Department, and Course Level: 1996-2001 32 Private Support: 1993-2001 68 4.3: Enrollment by Major/Program and 5.25: Student Level 34 5.26:Faculty Salary Comparisons by Discipline and Rank 69 4.4: Unduplicated Headcount Enrollment: 2000-01 36 5.27: Employee Health and Dental Insurance 4.5: Degrees