2015 Financial Review.pptx [Read-Only] · Institutional Annual Operating Budget History...

Financial Review

FISCAL YEAR 2015

Overview

Resource Sufficiency & Flexibility

Operating Results

Financial Asset Performance

Debt Management

Financial Outlook

AGENDA

2

Overview

EWU is strong, vibrant, and financially healthy

Prudent planning and financial management and decision-making ensures EWU’s sustainability in a changing environment

Evaluate EWU’s performance in relation to industry measures

3

•Access•Retention•Degree completion•Graduation rates

StudentSuccess

•High quality•Program array•Size of the University•Enrollment levels

Academic Programs

•Ability to respond to changing environment•Enrollment Management Plan•Revenue opportunities•Campus Master Plan

Strategic Planning

•EWU expands opportunities for personal transformation through excellence in learning.

•EWU envisions a future of professionally, socially and culturally enriched leaders, citizens, and communities.

Mission and Vision

•Campus investments•Use of debt capacity•Financial flexibility• Informed decision making

Sound Financial Position

Achieving the Goals of the EWU Board of Trustees

4

Impacts to Eastern’s Financial Position

FinancesEnrollment Demand

Tuition

State Resources

Capital Planning Auxiliaries

Financial Aid

Strategic Investments

Debt

5

6

StableFinancial Position enables Growth.

Financial Performance

meets or exceeds industry

measures.

Solid position enables investment

planning and resource

management to meet future budget

challenges.

Financial Position impacted by

statewide policy and budgetary

decisions.

Preserving and advancing Eastern’s institutional strength and security

A stable financial position is a critical element in support

of developing goals, strategies, and actions for

Eastern to meet the challenges of the future

7

Financial Reporting

FY2015 Financial Report

Communication

Compliance

Evaluation

• Communicating information about the university’s resources and obligations is the primary goal of financial reporting

• Demonstrates an organization is fiscally sustainable

• Public higher education comprehensive financial reports are in compliance with generally accepted accounting principlesand utilize the reporting format prescribed by GASB (Government Accounting Standards Board)• Public disclosure required per bond covenants.

• For evaluative purposes across an industry, financial statements must conform to stated principles for recording revenues, expenses, assets and liabilities

• Financial statements are used in the bond rating process by rating agency for current and future issues

Measuring Financial Health

8

•Return on Net Assets Ratio

•Viability Ratio

•Net Operating Ratio

•Primary Reserve Ratio

Resource Sufficiency &

FlexibilityOperating Results

Financial Asset

PerformanceDebt

Management

• Return on Net Assets Ratio

• Viability Ratio

• Net Operating Ratio

• Primary Reserve Ratio



Financial Asset

PerformanceDebt

Management

Key Financial PerformanceMeasures

Primary Reserve RatioMeasures the financial strength of the institution by comparing expendable net position to total expenses. (Are resources sufficient and flexible enough to support the mission?)

Net Operating RatioIndicates surplus or deficit from operating activities. (Do operating results indicate the institution is living within available resources?)

Return on Net Assets Ratio

Determines whether the institution is financially better off than in previous years by measuring total economic return. (Does financial asset performance support the strategic mission?)

Viability RatioMeasures the availability of Unrestricted Net Position to cover debt obligations at the balance sheet date. (Is debt managed strategically to advance the mission?)

9

Retrospective

• EWU has successfully navigated through the economic downturn to retain a sound financial position

• Tuition policy continues to impact future opportunities• State funding for core operations budget continues to

be constrained• Enrollment: focus on market position, demand,

capacity. • Declining state investment in deferred maintenance

and capital funding presents a major issue for the future.

10

RESOURCE SUFFICIENCY AND FLEXIBILITY

11

Resource Sufficiency & Flexibility

Operating Results

Financial Asset

PerformanceDebt

Management

Planning

State Funding and Tuition

Enrollment

Financial Aid

To support the University’s mission

FINANCIAL PLANNING

12

Planning for Resource Sufficiency and Flexibility

Biennial Budget ProcessLong Term Planning

Budget Process Relationship to Financial Reporting

13

• 2 year budget with internal planning for future biennia

• Multi-year enrollment planning

• Revenue forecast and projections

• Future cost impacts• Analysis of reserves• Strategies for revenues

and funding• Link to Strategic Plan

Budget and Planning Process

• Monthly- various financial reports are produced

• Variance reporting• Benchmarking and

industry level Analysis• Audited annual financial

statements• Audited fund level

financial statements for selected funds.

Financial Reporting

On-going analysis of spend rate and cash balances Interim reporting Budget vs. Actual Revenues and ExpensesOngoing enrollment review Financial Aid review Capital Projects

Financial Management

FUNDING SOURCESOPERATING REVENUE

Education & General• State Funds• Tuition(net of discount)• Dedicated local Funds• Service FundsAuxiliary EnterprisesScholarships & FellowshipsSponsored Program

CAPITAL FUNDING

BUDGET CATEGORIESSalaries & WagesBenefitsOperating ExpensesDebt InterestScholarships & FellowshipsCapital Budget

OPERATINGSTATEMENTSalaries & WagesBenefitsOperating ExpensesDebt InterestScholarships & FellowshipsDepreciationOther Expenses

Adjust Budgetary Basis to GAAP→ Debt Principal→ Scholarship Allowance

← Depreciation

↔ Timing Differences and Other Reconciling Items

14

Planning Process Connects to Financial Reporting

EWU’s Share of Total State GF

0.33%0.35%

0.28%

0.22%0.23%

0.27%

0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

2005-07 2007-09 2009-11 2011-13 2013-15 2015-17

EWU % Share of Total State Budget

47.83%

15.68%

16.81%6.68% 9.24%

1.63%

1.11%

0.35%0.27%

0.27%

0.14%3.77%

Total 2015-17 Budget

Public SchoolsHuman ServicesDSHSSpec'l Approp.Other AgenciesUWWSUWWUEWUCWUTESC

15

Source: fiscal.wa.gov - Operating Budget Statewide Summary

4-Year HE Share

4-Mar-16filepath

GF-State Funding per FTE Student

$6,1

19

$5,6

93

$4,9

37

$3,9

26

$3,8

70 $4,4

85

$4,4

61

$5,3

71$6,0

48

$5,0

79

$4,4

68

$3,4

55

$3,3

19

$3,8

24

$3,8

00 $4,4

63

$3,000

$3,500

$4,000

$4,500

$5,000

$5,500

$6,000

$6,500

2009 2010 2011 2012 2013 2014 2015 2016

Funding per Budgeted FTE

Funding per Actual FTE

16

EWU’s GF-State funding per OFM Budgeted FTE declined by 67% ($2,577) between FY2008 and FY2013, and increased 16% ($615) in FY2014. FY2016 increased due to the College Affordability Act.

Source: Data based on GFS allocations and OFM budgeted state enrollments.2016 projections based on original budget. Actual FTE funding based on GFS allocations and Annual Average state enrollments. 2016 projections based on original budget FTE at 10,407.

17

Key Funding Sources State Funds and Student Tuition

$0

$10

$20

$30

$40

$50

$60

$70

2008 2009 2010 2011 2012 2013 2014 2015 2016

Mill

ions Student Tuition State Funding

62%

38%

58%

42%

Source: FY2016 Original Budget BOT Presentation

Since 2011, the state funding/student tuition balance in operating budget funding sources has shifted completely. Increased state funding FY16 is due to the College Affordability Act.

23.4% 27.0% 26.4% 26.4% 24.2%

19.4% 16.9% 17.4% 17.3% 17.3%

15.3% 14.9% 16.1% 15.5% 17.3%

14.8% 16.0% 16.1% 16.0% 17.3%

14.0% 15.3% 16.5% 17.0% 17.2%6.9% 5.1% 4.5% 5.0% 4.6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2013 2014 2015 2016

Fund Balance (149)*

Recharges*

Service Funds*

Sponsored Programs

Scholarships &FellowshipsAuxiliary Enterprises

State Funds

Dedicated Local Funds

Tuition

18

Institutional Annual Operating Budget HistoryExpenditures

$271.5$224.5 $227.2

Source: FY2016 Original Budget BOT Presentation

Eastern’s total annual operating budget continues to grow with a 7.9% increase in FY2016. The increase is primarily due to state funding investment and growth in auxiliaries.

$245.4 $251.4

19

Critical planning component underpinning resource sufficiency and flexibility

ENROLLMENT REVIEW

Academic Year EnrollmentsState Support (AAHC)

20

Eastern’s enrollments remain stable with undergraduate enrollments continuing to grow. Future enrollment goals will consider access, capacity, and fiscal balance within the context of the strategic plan.

Source: EWU Institutional Research

8543 8815 9141 9428 9551 9749

1224 11211114 1105 971 9029767 9936

10255 10533 10522 10651

0

2000

4000

6000

8000

10000

12000

2010 2011 2012 2013 2014 2015

GraduateHeadcountUndergraduateHeadcount

90% of all enrollments are recorded as state support. The remaining 10% are self support and running start.

21

FINANCIAL AID FY2015

Affordability and access to higher education largely relies on ability to offer necessary levels and types of financial aid

Financial Aid – By Source

2011 2012 2013 2014 2015Federal $84.6 $91.0 $91.3 $90.4 $88.9EWU $13.3 $14.3 $16.9 $17.3 $18.7State $13.3 $14.9 $17.5 $19.8 $21.9Private $4.5 $5.3 $5.9 $6.5 $6.7Other $1.5 $1.0 $1.4 $2.1 $2.6EWU Foundation $0.63 $0.83 $0.93 $0.83 $1.1

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

FederalEWUStatePrivateOtherEWU Foundation

$139.8

$M

$133.9 $136.9

22Source: Financial Aid Office

$117.8$127.3

2.1% increase

Financial Aid – by Type

2011 2012 2013 2014 2015Loans $66.1 $73.9 $74.2 $73.5 $71.8Grants $31.8 $33.3 $36.5 $39.3 $41.6EWU Grants $1.6 $2.1 $2.8 $2.8 $3.1Waivers $9.6 $10.0 $12.0 $11.8 $12.8Other Scholarships $5.1 $5.2 $5.2 $5.6 $5.9Foundation Scholarships $0.6 $0.8 $0.9 $0.8 $1.1Work Study $1.5 $0.9 $1.1 $0.9 $0.9Other $1.5 $1.0 $1.4 $2.1 $2.5

$0$10$20$30$40$50$60$70$80

Loans

Grants

EWU Grants

Waivers

OtherScholarshipsFoundationScholarshipsWork Study

Other

23

$M

Source: Financial Aid Office

Financial Aid Fall 2014

10,065 Students Received Financial Aid

24

Source: Financial Aid Office

74.8%

Percentage of students receiving Financial Aid

43.0%

Percentage of students receiving Pell Grants

17,208 16,977

2014 2015

Applications Processed

-1.3%

OPERATING RESULTS

25


Flexibility

Operating Results

Financial Asset

PerformanceDebt

Management

Income Statement Revenue Expenses Net Assets

Do the operating results indicate the university is

managed within available resources?

What does the Operating Statement mean?

26

At any level of overall university assets, Eastern must live within it’s annual income over time.

Presents a change in net financial position over the prior year

Analysis of performance of the university across the industry.

Expenditures represent the cost of providing services in support of achieving the institutional mission.

27

University Revenues, Expenses and Changes in Net Position

$200

.4

$200

.9

$219

.8

$222

.4

$222

.8

$188

.8

$183

.6

$193

.4

$205

.7

$220

.9

$100

$120

$140

$160

$180

$200

$220

$240

2011 2012 2013 2014 2015

Mill

ions

Revenues

Expenses

Operating revenues increased 6%compared to FY14, while operating expenses increased 7.4%

Source: EWU Office of ControllerFY 2015 Financial Report

28

University Revenues


$71.7

$81.4

$88.3

$89.3

$94.3

$54.0

$48.4

$55.1

$53.4

$41.9

$47.7

$46.7

$49.4

$51.7

$57.2

$18.8

$19.1

$20.2

$20.9

$22.8

$8.2

$5.2

$6.8

$7.0

$6.6

$0 $25 $50 $75 $100 $125 $150 $175 $200 $225 $250

2011

2012

2013

2014

2015

Millions

Student Tuition & FeesState FundsGrants & ContractsAuxiliariesOther

$200.4M

$200.9M

$222.8M

Eastern’s revenue remained stable in FY 2015. Increases in tuition & fees and grants & contracts offset decreases in operating and capital appropriations.

$219.8M

$222.4M

29

Key Revenue Indicators12% increase in reliance on student tuition and fees from 2010 to 2015.

Tuition Dependency RatioNet tuition and fees plus governmental grants to the institution for student tuition divided by the sum of operating and non-operating revenues

FY2010 51.1%

FY2011 54.7%

FY2012 61.9%

FY2013 62.6%

FY2014 62.0%

FY2015 62.7%


30

Key Revenue Indicators

Contribution RatioShows portion of revenue by category to

support actual operating expenses 2014 2015

Student Tuition and Fees 43.9% 43.1%State Appropriations – Operating 19.2% 17.7%State and Local Grants & Contracts 11.9% 12.2%Auxiliary Services 10.3% 10.4%Pell Grant 9.8% 9.3%Federal Grants & Contracts 2.2% 2.4%Investment Earnings 2.5% 1.7%State Appropriations – NCFI 0.4% 0.0%Non-Governmental Grants & Contracts 1.6% 2.3%Other Revenues 1.0% 1.3%

State appropriations covered a smaller portion of operating expenses in FY15.

Source: EWU Office of ControllerNote: Excludes state capital appropriations and contributions to permanent university endowments FY 2015 Financial Report

31

University Expenses by Type

Source: EWU Office of Controller FY 2015 Financial Report

$82.2

$84.3

$92.7

$100.6

$32.1

$36.0

$36.8

$42.2

$27.0

$26.1

$28.5

$28.5

$20.5

$21.5

$21.9

$22.1

$10.7

$10.2

$11.4

$12.1

$0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 $220 $240

2012

2013

2014

2015

Millions

Salaries and wages

Supplies and Materials

Benefits

Scholarships and fellowships

Depreciation

Utilities

Other

Interest expense

NCFI expenses

Special Items

$205.7M

$193.4M

$183.6M

$220.9M

FY15 University expenses increased 7.4% over FY14.

Expenditure Indicators

32


Demand RatioTrend analysis to determine when a particular category of expenses is consuming a growing or dwindling share of student-generated revenues 2013 2014 2015Instruction 31.1% 32.8% 33.4%

Research 0.6% 0.5% 0.6%

Public Service 2.6% 2.6% 2.9%

Academic Support 6.2% 7.1% 6.6%

Student Services 7.5% 7.9% 8.2%

Institutional Support 7.1% 7.6% 8.0%

Operations & Maintenance 10.4% 9.2% 9.0%

Scholarships & Fellowships 11.1% 10.8% 10.5%

Auxiliary Enterprises 15.1% 15.6% 16.7%

Depreciation 5.2% 5.6% 5.6%

Demand by programmatic categories remained relatively stable in FY2015.

Capital Appropriation History

33

$25.2

$16.2 $16.3

$10.7

$15.4

$12.8

$24.6

$30.5

$7.6

$15.1

$0

$5

$10

$15

$20

$25

$30

$35

2007-09 2009-11 2011-13 2013-15 2015-17

Mill

ions

Minor Works Major ProjectsSource: Appropriation schedule - New appropriations only

State capital funding can fluctuate between biennia and types of projects funded. 2013-15 reflects a dramatic decrease in major projects and minor works funding due to recession impacts.

BALANCE SHEET AND INDICATORS

FY2015 (PRELIMINARY, UNAUDITED)

34



Financial Asset

Performance

Debt Management

Does financial asset performance support the strategic mission?

What does the Balance Sheet represent?

35

University Assets and Liabilities at a point in time

A Comprehensive View of all that Eastern Owns… and all that Eastern Owes

Peer analysis of Performance within an industry

Analyze Debt Capacity for future capital investments

36

Balance Sheet Overview

Source: EWU Office of Controller FY2015 Financial Report

FY15 Unrestricted Net Position and total liabilities were affected by new accounting treatment for pension liabilities.

All Funds 2014(millions)

2015(millions)

Total Assets $457.9 $464.0

Total Liabilities $85.6 $107.9

Net Position (at June 30) $372.4 $351.0

FY 2015 Major components-Cash and investments $140.6M or 30% of total assetsCapital assets (land, building, equipment) $303.3M or 65% of total assetsLong term debt $54.4M or 50% of total liabilitiesUnrestricted net assets (not legally restricted) $74.7M or 21% of net position

37

Key Balance Sheet IndicatorsEastern has consistently remained above the industry baseline with about $4 to cover every $1 of current liabilities.


3.794.03

3.66

4.924.56

4.26 4.22

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

5.50

2009 2010 2011 2012 2013 2014 2015

Current Ratio: Measure of Liquidity

Current Ratio Industry Baseline

FY 2009-11: Fluctuations are primarily the result of reallocations of invested assets between short and long term.

FY 2012-15: Temporary increase is from Series 2012 unspent bond proceeds for the new residence hall; otherwise the ratio would have been 3.69, 3.96, 4.18, and 4.19 respectively.

38



Financial Asset

PerformanceDebt

Management

Is debt managed strategically to advance the University’s mission?

Debt Management

Debt Management and Oversight

• University Policy• Debt Issuance approved by Board of Trustees• Annual Report to Board of Trustees

– Compliance with policy– Review of existing debt and associated covenants– Debt capacity analysis– Long term capital plans that require financing– Pending debt financed projects

39

40

Key Balance Sheet IndicatorsEastern is managing debt levels in compliance with the University debt policy.

2.17

%

2.15

%

1.95

%

2.33

%

1.51

%

2.02

%

2.08

%

0%

1%

1%

2%

2%

3%

3%

4%

2009 2010 2011 2012 2013 2014 2015

Financial Debt Burden Ratio: Measures dependence on debt as a source of financing the mission

Financial Debt Burden Ratio EWU Policy


The FY 2014 ratio reflects the first principal payment on the Series 2012 bonds.

Summary

41

• Return on Net Assets Ratio

• Viability Ratio

• Net Operating Ratio

• Primary Reserve Ratio



Financial Asset

PerformanceDebt

Management

EWU’s Financial Performance Profile

EWU Financial Health

42

FY2012 FY2013 FY2014 FY2015

Primary Reserve ratio .48x .52x .53x .40x

Primary Reserve Ratio provides a snapshot of financial strength by indicating how long the institution could function on expendable reserves without relying on additional net position to be generated by operations – a ratio above .40x is advisable.

Net Operating Revenue ratio 2.32% 4.54% 1.59% -0.67%

Net Operating Ratio measures net operating revenues (expenses) in contrast to total operating revenues – the targeted ratio should be between 2%-4% over an extended time period. The decrease in FY14 and FY15 was primarily due to tapering revenuegrowth, increased compensation costs, and strategic use of reserves.


EWU Financial Health

43

FY2012 FY2013 FY2014 FY2015Return on Net Position ratio 5.54% 8.01% 4.67% 0.54%

A positive return on net position indicates that the institution is better off than it was at the beginning of the year. An improving trend in this ratio is indicative of increasing net position that will strengthen the institution's financial future. The FY15 ratio is impacted by tapering revenues and increased operating costs. A ratio between 3%-4% should be targeted.

Viability ratio 1.33x 1.53x 1.68x 1.37xA ratio of >1 indicates the institution has sufficient Unrestricted Net Position to satisfy debt obligations.


•Retention•Degree completion•Graduation rates

•High quality•Program array•Size of the University•Enrollment levels

Academic Programs

• Ability to respond to changing environment•Enrollment Management Plan•Revenue opportunities•Campus Master Plan

Strategic Planning

•EWU expands opportunities for personal transformation through excellence in learning.

•EWU envisions a future of professionally, socially and culturally enriched leaders, citizens, and communities.

Mission and Vision

•Campus investments•Use of debt capacity•Financial flexibility• Informed decision making

Sound Financial Position

University Financial Position as a Basis for Student Success

44

Future Financial Impacts

• Strategic Enrollment Plan will shape Eastern’s future enrollment mix and size

• Affordability and access • Diverse enrollment mix• Higher education participation rates…focus on 4 year sector• Impact of enrollment growth on revenue

Enrollment

• State investment in higher education• Tuition policy• Annual revenue growth rate v. inflation and expenses• Fully allocated revenue base- to invest further requires additional

resources

Revenues

• Salary and benefits• Enhanced investment in student success measures• Continued growth in deferred maintenance backlog• Renewal and investment in technology• Financial aid needs

Costs and Investments

45

CONCLUSION

Eastern Washington University’s

continued financial stability will enable

fulfillment of our mission.

46

48

APPENDIXAdditional Selected

Information

Operating Expenses by Function

$0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 $220

FY 2012

FY 2013

FY 2014

FY 2015

FY 2012 FY 2013 FY 2014 FY 2015Instruction $59.5 $61.0 $66.8 $71.9Auxiliary Services $27.8 $29.8 $31.9 $36.1Scholarships & fellowships $20.8 $21.9 $22.1 $22.7Operation & maintenance of plant $15.6 $20.4 $18.7 $19.5Student services $13.6 $14.8 $16.2 $17.6Institutional support $16.0 $14.0 $15.6 $17.2Academic support $10.4 $12.2 $14.4 $14.1Depreciation $10.7 $10.3 $11.4 $12.1Public service $5.6 $5.2 $5.3 $6.2Research $1.3 $1.2 $1.0 $1.2

$ Millions

49

50

Key Balance Sheet Indicators

Annual Days Cash on HandMeasures the number of days an institution is able to operate -

cover its cash operating expensesPrelim 2015 Eastern Washington University 242

2014 Eastern Washington University 246

2014 Median WA Public Universities 126

2014 Median A1 Public Universities (industry peers) 144

Eastern Washington University Dashboard Indicator Good

Indicates relative advantage in meeting current obligations.

Source: EWU Office of Controller. Peer data from MFRA (Moody’s) FY 2015 Financial Report

Spendable Cash and Investments to Expenses

0.60 0.60

0.70 0.70

0.60

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

FY2011 FY2012 FY2013 FY2014 FY2015

EWU ratio

Median WA PublicUniversities ratioMedian A1 PublicUniversities ratio

51

Source: EWU Office of Controller. Peer data from MFRA (Moody’s)FY 2015 Financial Report

Nearly two thirds of EWU’s annual expenses could be covered by spendable cash; a higher ratio is better.

52


Spendable Cash and Investments to ExpensesMeasures coverage of annual operations by the most liquid resources

Prelim 2015 Eastern Washington University .60x

2014 Eastern Washington University .70x

2014 Median WA Public Universities .70x

2014 Median A1 Public Universities (industry peers) .60x


This indicator suggests Eastern could rely on existing resources to operate in times of revenue volatility.


Spendable Cash and Investments to Total Debt

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2011 2012 2013 2014 2015

EWU

Median WA Public Univ.

Median A1Public Univ.

53

Decrease in FY12 ratio is the result of $25.3M bond debt issued to finance construction of new residence hall. Spendable resources continue to grow as debt is paid. A higher ratio is better.


54


Spendable Cash and Investments to Total DebtMeasures coverage of direct debt by the most liquid resources

Prelim 2015 Eastern Washington University 2.5x

2014 Eastern Washington University 2.3x

2014 Median WA Public Universities 1.6x

2014 Median A1 Public Universities 0.9x


Spendable cash and investments is more than twice as much as outstanding debt.


2015 Financial Review.pptx [Read-Only] · Institutional Annual Operating Budget History...

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Transcript of 2015 Financial Review.pptx [Read-Only] · Institutional Annual Operating Budget History...