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Projects

Financial-Programmatic Analysis and Stress Testing for SDBOR Institutions

Summary

The South Dakota Board of Regents, which governs the six public universities in South Dakota, contracted with NCHEMS to help it plan for its financial future while examining programs to ensure that offerings remain relevant to regional and statewide needs. Like many systems, South Dakota faces a challenging enrollment climate with changing demographics and limited funding. System leaders wanted to ensure that, despite these challenges, its institutions will remain financially stable so that they can meet the needs of students, employers, and residents of South Dakota for many years to come.

NCHEMS analyzed the financial standing of each of the system’s institutions by looking at trends in common financial ratios that relate to revenue, expenses, expendable assets, and debt. NCHEMS also developed a financial projection model that tests the impact of various enrollment, staffing, and budget scenarios on the institutions’ finances. Finally, NCHEMS developed finance-related and other metrics for academic programs.

Topics Challenges Approach Impacts Resources

Topics

Financial Health

  • This project was focused on the current and future financial health of institutions and on academic programs.

Challenges

Projecting institutions’ future finances is a formidable challenge, because they are influenced by many unpredictable factors and are often determined by time-dependent representations of data. NCHEMS approached this in several ways. First, NCHEMS built a flexible and customizable model so that when institutions have better information, they can adjust the model. Second, NCHEMS maintained a focus on the most significant sources of revenue and expenses that are within institutions’ control: enrollment (which impacts revenue) and staffing (which impacts expenses). NCHEMS looked at past trends over seven years, including both pre- and post-pandemic timeframes, and developed institution-specific enrollment projections, to inform the modeling.

Addressing the Regents’ questions about program relevancy and viability was a particular challenge. Programs are embedded in departments, rather than being individual stovepipes that can be added or removed without impact to the institution more broadly. Data about programs and departments are embedded in business units that may not be congruent. Our efforts to respond to the Regents’ interests in identifying programs that needed further review or possible suspension had to address that complexity while also helping Regents understand the nested nature of the questions they were asking. Combining that analysis with information about workforce and student demand, and subsequently identifying solutions that could leverage all the system’s resources effectively, was NCHEMS’ goal for producing the most helpful report and recommendations.

Approach

Like most NCHEMS projects, this work was approached through a combination of stakeholder engagement and data analysis. NCHEMS made several trips to South Dakota to meet with stakeholders at each of the institutions and all parts of the state. NCHEMS also incorporated feedback on the modeling from institutions at several points during the process to refine our work.

Data analysis included first examining context data on the state population and workforce from the U.S. Census Bureau, Jobs EQ (a proprietary source of data on occupational projections, job postings, and other workforce alignment information), WICHE, and the state of South Dakota. Then NCHEMS analyzed a wealth of data from the SDBOR system and IPEDS on students, academic programs, and graduates.

To examine the financial health of each institution, NCHEMS used IPEDS data to compare each institution to a set of peers that we selected based on similarities in size, students, and academic programs. For future financial modeling, NCHEMS primarily used institutions’ audited financial statements, supplemented with some data from the SDBOR system office and the institutions.

Impacts

System leaders are using the report to identify potential areas of financial vulnerability and risk and to work with institutions to shore up those weaknesses.

Institutions within the system are already using the model we developed to identify how their finances could be impacted by different levels of enrollment, changes in revenue from various sources (such as grants), additional debt, changing state appropriations, and more.

NCHEMS also expects the system will modify some of its program review metrics based on our suggestions. This will allow the system to better identify the financial impacts of particular academic programs/departments on the institution as a whole.

Resources

  • Financial and Programmatic Analysis & Stress Testing for SDBOR Institutions – Executive Summary 
  • South Dakota Board of Directors Financial and Programmatic Analysis & Stress Testing for SDBOR Institutions Link