Standard Nine: Financial Resources

STANDARD NINE: FINANCIAL RESOURCES
Because of the nature of this standard, some of what might be considered as Appraisal is addressed in the Description, which includes structure, policies, procedures, some brief history, current status, and response to fluctuations in the marketplace. Much of the data explicating UNH’s financial resources is captured more fully in web pages, policy excerpts, and financial reports, all of which are appended.
Description
The University of New Hampshire comprises 70% of the University System of New Hampshire’s financial context. For example, we account for 71% of the overall System budget of $926 million (see page 28 of the USNH 2013 Annual Report) and 56% of the total student enrollment of 28,931. UNH’s financial situation, then, both deeply affects and is affected by the University System.
The University System office includes staff who perform the following financial operations, and who report through the chancellor to the USNH Board: treasurer, controller and accounting, internal audit, debt management and staff to the USNH Investment Committee. The USNH Vice Chancellor and the Campus Chief Financial Officers sit as a Finance Executive Council (FINEC) to coordinate implementation of the Board of Trustees’ financial policies. Each campus is responsible for managing its financial affairs within these policies and a few key ratios: operating margin, unrestricted net financial resources to debt and annual budget parameters that may set limits on prices and expense growth. Within this system of shared responsibility for fiscal management, UNH provides sufficient financial resources to sustain the quality of our educational programs and sufficient financial resources to support institutional improvement now and in the future. We provide here verifiable internal and external evidence of our capacity to graduate our entering class. Finally, we provide examples of how we administer our financial resources with integrity.
The paragraphs below address each of these statements. Direct links are provided to support our claim. Financial materials, in general, are housed in the office of the Vice President for Finance and Administration (VPFA).
The historical record in achieving our goals provides the best evidence of sufficient financial resources to meet key financial strategic indicators that can be compared with ratings of comparable institutions provided by the Moody’s rating agency. We have annual targets for two key measures of fiscal health: operating margin, and unrestricted financial resources to debt. The history of UNH performance is shown in the five year history of each of these measures compared to the Moody’s median. Recent written reports on the University System of New Hampshire in conjunction with issuance of debt by Moody’s and Standard & Poor’s provide further external evidence of competent financial management. Externally audited financial statements for the last five years demonstrate fiscal health despite the 2007-2010 US financial crises and a significant $33 million per year reduction in the UNH state operating appropriation in FY 2012 and 2013.
The following are some key highlights of effective financial performance over the past five years:
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Full time credit enrollment in the fall of each year USNH operating margin UNH operating margin USNH unrestricted financial resources to debt UNH unrestricted financial resources to debt Consistent growth in net assets

FY2009 13,925

Key Financial Indicators by Year (000)

FY2010

FY2011

FY2012

14,250

14,211

14,335

3.6% 1.3 24%

2.3% 1.6 31%

3.5% 1.9 45%

3.5% 2.9 52%

28.2%

36.8%

48.1%

54.8%

$581,342 $631,240

$687,090

$713.448

Unrestricted Institutional Financial Aid Per Year (000)

FY2013 14,500
6.2% 6.4 64%
67.6%
$784,352

Five Year Average 14,244
3.82% 2.82 43.4%
47.1%
+35%

We demonstrate our commitment to support institutional improvement in several ways:
1. Consistent investment in reversing the effects of deferred maintenance of facilities as seen in the Capital Investments – Facilities from FY04 through FY13 in the chart below. See also Standard 8.
2. The capacity to increase financial aid to worthy students as indicated by the growth in need- and merit-based financial aid for the last ten years.
3. Growth in responsibility centered unit (RCM) reserve levels and FY13 debt coverage ratio in excess of requirements. These indicators demonstrate flexibility at the unit level to respond to rainy day events and to have funds set aside to invest in new strategic investments. Growth in reserve levels is reported over the past ten years, and a calculation of RCM reserves is depicted as a percentage of each unit’s annual operating budget.
The following chart reflects our investment in facilities from FY 2004-2008 (summed) and per year from FY 2009-2013. It is a good illustration of UNH’s capacity to invest in physical assets while maintaining positive operating margins. (See also Standard 8.)

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Capacity to invest in physical assets while maintaining positive operating margins:

Capital Investment - Facilities

Five Years FY2009 (2004-2008)

FY2010

FY2011

FY2012

New Buildings

Gables Apartments

36,600,000

Housing Office

3,300,000

Southeast Residential Community 49,800,000

DeMeritt Hall

19,900,000

Chase Ocean Engineering addition 2,500,000

Marine Research Facility

11,400,000

Flow Physics Facility

2,800,000

Paul College of Business

15,000,000

FY2013 35,000,000

Renovation/Expansion
Kingsbury Hall 73,000/135,000 Philbrook Hall 5,000/11,800 James Hall 53,800/22,500

56,300,000 5,800,000

34,200,000

Renovations
Cole Hall Philbrook Hall Thompson Hall Stillings Hall Fairchild Hall New Hampshire Hall Indoor track and Mooradian Field Intermodal Station Adams Tower East Swasey Pool Jackson Lab and Coastal Lab Whittemore Center Arena Adams Tower West Smith Hall Woodside Apartments Police Station Parsons Hall
Annual repair and adaptation of facilities

2,500,000 3,700,000 4,700,000 2,300,000 8,500,000 4,900,000 1,000,000 1,000,000 1,820,000

1,000,000 2,600,000 1,700,000

1,900,000 1,100,000

1,500,000 25,600,000

24,000,000

Utility and Infrastructure
Central Power/CoGen Plant South Underpass Main Street East improvements EcoLine Plant, pipeline, generator Outer Recreation fields Main Street West improvements Steam line extension to Philbrook
Total Capital Investment

28,300,000 8,700,000 1,900,000
48,800,000
303,720,000

2,100,000 36,300,000

1,100,000 9,200,000

1,400,000 4,400,000

42,100,000

59,000,000

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Having sufficient resources in the future demands a response to the stresses of a changing environment for higher education, one in which prevailing price points and costs of degrees will be challenged and may have to decline in relation to growth in the economy. These stresses will further challenge UNH to reinvent itself as a more flexible and innovative university in order to be able to adjust and respond to market demands. The UNH Strategic Plan of 2010 lays the groundwork for fiscal responses to changing conditions. In addition, the Board of Trustees requires UNH to construct a Multi-Year Financial Plan linked to its institutional strategic plan. These plans were deemed so important that the Board conducted a two-day planning retreat in September of 2012 and 2013 at which UNH presented its strategic plan update with all key planning assumptions listed in a 10-page UNH Strategic Issues Briefing Summary and our mission clarity. The presentations from the two September meetings updated the Board on progress in implementing the 2010 plan. The following planned actions were highlighted: (1) Strengthen the UNH brand. (2) Deepen research and increase commercialization. (3) Strengthen and diversify enrollment. (4) Complete a successful fundraising campaign. For each of the planned action implementations, specific goals and expected results were given. For example, a goal for (1) was to strengthen the UNH brand among New Hampshire citizens, alumni, students, parents, and prospective students. Expected results included increased undergraduate visits, applications, and enrollments from select geographic areas, an increase in web traffic and use of other social media, as well as evidence of other improved campaign and marketing metrics. The Board of Trustees was uniformly impressed with the UNH vision, mission and progress against the 2010 plan. They acknowledged the initial efforts at establishing metrics of success and encouraged further development and specificity. The latter constitute an ongoing activity at UNH. Several of the goals articulated in the Briefing Summary are addressed within the appropriate standards in this Self Study.
Financial integrity is manifest in several key ways, as noted in the following three paragraphs.
The UNH Responsibility Centered Management (RCM) system localizes within 20+ units the responsibility to balance revenues and expenses and to build operating margins. The system has a fair and robust method for allocating revenues and expenses to each unit. The current RCM manual spells out policies and procedures. Since RCM’s adoption in 2002, recent RCM reviews and adjustments to the formula methodologies indicate attention to selfimprovement and updating.
All academic and administrative departments perform systematic reviews of performance to, in part, ascertain if resources are being deployed efficiently and effectively, and to a purpose consistent with the institutional strategic plan. Common review instruments are used for academic reviews and for administrative reviews.
In order to support our RCM system and to achieve local financial controls and efficiencies, UNH established Business Service Centers (BSCs). The BSCs carry out the management of the institution's finances at a level where there is the greatest understanding of current circumstances. The BSCs are composed of well-qualified and trained personnel who can assure implementation of policy at a grass roots level. Further, the BSCs are best positioned to record the day-to-day transactions of the institution in the most accurate manner. The university and system hire staff qualified for this work as indicated by the biographies of UNH and USNH financial staff.
The university provides internal oversight of financial planning and decision making through the Budget and Financial Planning Group, the Provost’s Council, and the President’s
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Cabinet in supporting the University, rewarding excellence, and upholding the UNH mission. Oversight of the student fee process occurs through a Student Financial Affairs Committee culminating in a discussion with the Trustee Financial Affairs Committee in April each year.
A well-developed, five-person internal audit function within USNH reports to the Board and is based on UNH’s Durham campus. This group coordinates with the external auditors and annually conducts a risk-based plan of audits and consultation projects. Internal and external annual audits test and document the mechanisms of financial management, risk management, and internal control, including assessment to determine if policies and official procedures are adequate and if practices comply with them. Formal audit reporting includes management’s written responses to audit comments and recommendations. Internal Audit tracks management’s follow-through on action plans and reports the status of any significant outstanding audit issues semi-annually to the Audit Committee of the Board of Trustees until the underlying risks have been adequately addressed. Audits have been conducted and formally reported for the past two decades that involved monitoring related to UNH’s financial management, integrity, and operational effectiveness as well as USNH central systems and controls on which UNH relies.
Additional checks and balances that are sufficient to provide consistency and compliance with regard to our fiscal policies include the Controller Office’s regular monitoring of transactions for compliance and interaction with RCM units as required, and the VPFA office’s staff that serves as a resource to the RCM units.
Finally, the university has in the last five years significantly increased our investment in building a culture of philanthropy to support our mission. These investments include: a new installation of the Banner advancement information system; a 50% increase in the size of the advancement organization; and a reorganization that unites development, communications and marketing, and alumni relations in one organization with one leader who is also the president of the UNH Foundation. The Foundation conducts the fundraising activities for UNH according to a set of policies and procedures that support our mission and strategic plan, while accurately portraying needs for and use of funds to donors and following sound practices of gift acceptance. The Foundation webpage publicly states its investment philosophy, “gifts at work,” honor roll of supporters, and annual financial report. The UNH gift webpage indicates how to make a gift and also provides the honor roll and annual financial report to supporters. Gifts offered online and by mail are linked directly to the intended offices. Further, UNH demonstrates sound financial practice by leveraging donor contributions. For example, the new Peter T. Paul College of Business and Economics that opened a new 115,000 square foot building in 2013 financed by a $25M gift from Mr. Paul was matched by $5M of other private donations and the balance from university resources. Key finance-related advancement policies of the University System of New Hampshire and the University of New Hampshire Foundation are appended.
These investments in building a culture of philanthropy are evidenced by the Advancement dashboard results for FY 2013 shown below.
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Appraisal
The University of New Hampshire is fiscally sound and able to sustain the quality of our educational program and support institutional improvement now and in the foreseeable future. UNH resources are managed with integrity using widely accepted procedures that follow sound financial practices. Reports are filed in a transparent manner, in keeping with expectations of a public land grant institution.
Appraisal of biographies of UNH and USNH personnel who handle financial matters indicates that they are well qualified. All hold business-related degrees, have engaged regularly in professional development activities, and have a long history of professional experience.
UNH does a good job of handling its financial resources. Review of appended exhibits indicate our strong performance on key financial ratios, a financial and management strength corroborated by the reports of Moody’s and Standard and Poor’s that periodically examine the USNH and UNH financial condition and our financial management practices when they rate our bonds. A recent example of our financial health occurred after the State of New Hampshire cut our operating appropriation by $33M, a 48% cut. The state appropriation is now less than 7% of the UNH operating budget. Over fiscal years FY 2012 and FY 2013 we were able to manage the
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cuts through early retirement programs; a hiring freeze with a careful President’s Cabinet-level review of positions that resulted in filling only those deemed most critical to the mission and strategic plan; instituting a process reengineering program; and implementing over 100 activities to accelerate achievement of our strategic plan, particularly those elements that will create new sources of revenue or sustain existing sources.
While we are confident in our fiscal strengths, we and the University System Board of Trustees Audit Committee also believe that in these most uncertain of times in higher education we must engage in a more systematic process to assess and manage risks to our strategic plan. USNH Audit Committee has made a request of all campuses to complete a risk assessment heat map that will display a measure of major risks we are managing in five clusters:
Student Enrollment (shifting demographics, tuition levels and affordability, student indebtedness, diversity [especially racial cultural, geographic]); Economic (fund-raising, state operating support, capital needs funding, net tuition, revenue diversification); Campus Environment (infrastructure and facilities, safety and accessibility, community relations, appeal to students and visitors, sustainability); Emergency Management (campus-wide crisis, building-specific disaster, threatening behavior incident, IT operational shutdown, informational security breach); Other (brand recognition and value, research/commercialization, new educational delivery modes, governance/management teams and transitions, academic quality and accreditation)
The matrix for this assessment, when completed in January 2014, will assign a number to each risk category according to the following scheme: 5-Major concern and high risk requiring immediate attention and new resources (red); 4-Major concern and high risk being addressed with current resources (yellow or green); 3-Moderate concern and risk requiring less urgent attention or modest resources (yellow); 2-Moderate concern and risk being addressed with current resources (green); 1-Not an immediate concern; very low risk (green). The campuses are invited to provide a narrative page, where appropriate, to define any risks or explain their ratings further. It is expected that this matrix will serve as a vehicle for ongoing dialogue; discussion and action to better manage risk. The Risk Management Assessment is the subject of reference for the Projection given below.
Projection
The Vice President for Finance and Administration will oversee completion of a Risk Management assessment at the behest of the USNH Board of Trustees in spring, 2014.
Institutional Effectiveness The key mechanisms we employ to evaluate our financial condition and management are
internal and external audits, agency rating reviews by Moody’s and Standard and Poor’s financial service bench marking through professional associations (e.g., housing, dining facilities), proactive process reengineering to constantly seek new economics and efficiencies, and seeking out best practices through active membership and participation in The Educational Advisory Board. These metrics and procedures are applied consistently and effectively.
STANDARD NINE DATA FIRST FORMS
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