Reinhardt University SACSCOC Compliance Certification

 

2.11.1 Financial Resources

The institution has a sound financial base and demonstrated financial stability to support the mission of the institution and the scope of its programs and services. (Financial resources)

Judgment check box Compliance

Narrative

Reinhardt University (RU) has a sound financial base and a consistent trend of financial health and stability that supports the University's mission and the scope of its programs and services. Through the budget and planning processes as described in Core Principle 2.5, the University prioritizes needs and adequately appropriates resources to meet those needs.

Budget Planning and Approval Process

The preparation of the budget at Reinhardt is a collaborative process that is also tied to the Academic Assessment and Planning Process.  A Budget Calendar is prepared for the Leadership Team, and a training session with the Leadership Team is convened to review the timelines and responsibilities. [1] [2] The institution also maintains a document called, “Overview of Assessment and Budget Process” to help faculty and staff understand the link between assessment and budget processing. [3]

Once the budgeting process begins, the Controller sends a Budget Packet to each Leadership Team member, which consists of the following:

  • Instructions for Completing the Form
  • Summary for Staffing Changes
  • Operational Expenses
  • Capital Request
  • Initiative Requests [16]

Throughout the year, the president, provost and the vice presidents interact with department coordinators, directors, deans, and faculty to discuss budget issues based on strategic goals and emerging opportunities. Initial budget planning begins in late fall with the estimation of the enrollments for the upcoming fiscal year and fundraising goals. These are discussed with the President’s Leadership Team. The completed budget is presented to the President and Leadership Team for approval and then to the Finance Committee.  Once approved, the budget is presented to the Board of Trustees. [4] [5] [6]

Budget revisions (referred to as the “forecast adjustments”) are allowed at any time throughout the year to reallocate funds from one department or account to another. Throughout the budget cycle, the President's Leadership Team and other governance groups, including Student Government representatives, interact with the president, provost, and other administrators to discuss budget and resource issues pertaining to their various constituencies, activities, and operations. After consultation with the provost and other vice-presidents, the president determines budget allocations based on the strategic plan and mission of the university.

Five Year Projections

In conjunction with the Master Plan and financing opportunities, the University hired an accounting firm to work with management to develop a five year projection for revenue, expenses, capital, debt, and cash. This analysis provides a means to forecast stress points that enable campus leadership to manage resources timely.  In prior years, a single budget was produced for approval.  Future fiscal budgets will also include an annually revised five-year forecast of revenues, expenses and capital expenditures [7]

Audited Financial Statements

Reinhardt University prepares its financial statements in accordance with generally accepted accounting principles (GAAP). Audits are performed annually by an independent auditor with expertise in the non-profit and higher education industry. The University has always received unqualified (unmodified) audits indicating compliance with GAAP. The most recent audit, for the 2017 fiscal year, reflects an unmodified audit opinion and reports no material weaknesses or other deficiencies in internal controls over financial reporting. The annual audit report, including the management letter, are provided to all members of the Board of Trustees and to the Georgia Student Finance Commission along with other state oversight agencies. [8]

Management Letters

The University receives a management letter each year in conjunction with its annual audit.  The most recently received letter was for the fiscal year-ended 2017.  The letter reported no material weaknesses in internal controls and did not indicate any outstanding deficiencies from previous audits. [9]

Statement of Unrestricted Net Assets, Exclusive of Plant

As an additional means to examine financial stability, the University prepared a statement of unrestricted net assets, exclusive of plant and plant-related debt (UNAEP).  The statement reflects the change in unrestricted net assets attributable to operations.  For fiscal year ending June 2017, the statement shows the change in revenue less expenses is $2,584,307 with plant included, but the change is $1,468,620 when plant is excluded.  This increase can be explained by noting there was a significant increase in fundraising, investment income, and releases from restriction. While there was also an increase in capital projects, the revenue gains unrelated to plant were strong enough to cover the increased investment in plant, allowing the University to maintain a strong unrestricted net position. [10]

A significant portion of the University’s endowment is unrestricted, so the market change can have an impact, as seen in the prior year.  In fiscal year ended 2016, investments were down, contributing to a deficit year, and the University had also invested heavily in plant.

The Mission & Strategic Planning

Reinhardt University’s mission statement is current and comprehensive: “Reinhardt University educates the whole person by developing the intellectual, social, personal, vocational, spiritual, and physical dimensions of its students.”  The University mission guides the institution’s operations, institutional effectiveness system, and strategic plan, as documented in Core Requirement 2.5 [17].  The mission is reviewed before the adoption of a new strategic plan and is updated as needed.  As evidenced in Core Requirement 2.4, the revised mission is approved by the Board of Trustees, and is communicated to the institution’s constituencies through academic catalogs, faculty and employee handbooks, student handbooks, and the University website. [18]

Every five years, the Reinhardt University community engages in the development of a new strategic plan that guides it in achieving its vision. This process starts with a review of the University mission.  Prior to the latest review and modification, the mission was revised and approved by the Board of Trustees in May 2005. That revision preceded the launch of “Celebration 125 – A Strategic Plan for Reinhardt College 2005-2010.” Following the 2005 update, the mission was reviewed again in 2010 in the initial stages of developing the 2010-2015 strategic plan for the university ("Excellence at Reinhardt, 2010-2105”), but no changes were deemed necessary. [11] As President Mallard began work on a new strategic plan in 2015-16, the University mission was reviewed and revised to its current form in 2016. [12]

Reinhardt University maintains an annual planning cycle and has recently completed a 5 year strategic financial plan in conjunction with its strategic planning process. The plan was developed around the principles of Reinhardt LearnsReinhardt Moves and Reinhardt Connects. The strategic planning process at RU involves a planning committee appointed by the President, is chaired by the Provost and has several members including Vice Presidents, Academic Deans, faculty and staff members. [13] The primary purpose of the committee is to assist the President in developing long-range plans for allocating human, financial, and physical resources to support the University's mission, identify challenges and opportunities, set University objectives to identify and assess educational outcomes and assure continuous improvements in outcomes, and monitor the University’s performance in achieving its goals.

Trend Analysis

A component of the Strategic Plan was to increase enrollment to ensure long-term financial stability.  This included undergraduate students, on and off-campus students; graduate students at satellite instructional sites; on-line students, and athletic programs.  New programs for 2016-2017, included a Bachelor of Fine Arts in Creative Writing, Bachelor of Business Administration Online, Associate of Business Administration Online, Bachelor of Nursing, and JV soccer and volleyball.

Enrollment at Reinhardt University has increased from 1,357 students in Fall 2015 to 1,537 students in Fall 2017, for an increase of 180 students. [14]

Reinhardt University has succeeded in growing its student population while maintaining a low discount rate.  Net tuition has continued to grow and the University’s discount rate is consistently lower than the NACUBO national average.

NET TUITION AND FEES/Undergrad

FY17

FY16

FY15

Tuition and fees/Undergrad

      24,986,052

   22,157,906

    21,806,789

Less:  Scholarships

       (9,259,349)

    (7,784,158)

    (7,553,994)

Net tuition and fees

      34,245,401

   29,942,064

    29,360,783

Annual discount rate

37.06%

35.13%

34.64%

NACUBO National Avg.

N/A%

42.50%

41.30%

 

Ratio analysis shows Reinhardt University has a consistent trend of meeting benchmarks for financial health and stability. As part of the presentation to the Finance Committee, the auditors present trend ratio analysis whereby they benchmark Reinhardt against several other local Universities of comparable size. A key ratio included in this analysis is the Department of Education Composite score. This score is a measure of the institution's overall financial health, based on key ratios demonstrating sufficiency and flexibility of resources, debt management, the asset performance, and the operational results. Reinhardt’s projected 2017 score of 3.0 is the highest score available and is considered the threshold for financial health. [15]

Key ratios from the audit presentation for FY17:

2017

2016

2015

5 Yr. Avg

Bench mark

Dept. of Education Composite score

3

2.2

3

2.7

>1.5

Debt Management
Debt burden ratio

6.2

4.09

6.4

5.55

<7%

Leverage ratio

2.25

1.91

2.09

2.13

1+

Viability ratio

0.87

0.75

0.87

0.86

1+

Resource Sufficiency and Flexibility
Primary reserve ratio

0.54

0.54

0.65

0.63

>.40

Capitalization ratio

74.28%

72.81%

75.19%

74.43%

50-80%

Asset Performance
Physical asset reinvestment ratio

1.03

0.41

0.38

1.81

1+

Age of facilities

15.8

15.5

14.5

14.9

10-14

Operating Results
Net tuition coverage ratio

57.88

56.43

56.18

56.59

<60

Instruction demand ratio

10.86

11.96

3.24

4.86

+

The Primary Reserve Ratio measures the financial strength of the institution and flexibility by indicating the length of time the institution could operate without relying on additional net assets generated by operations.  Reinhardt scored .54, which exceeds the benchmark requirement of .45.  In addition, the University scores very well with the Capitalization Ratio. This ratio determines financial flexibility, not only for the current period’s return on net assets, but the accumulated return from previous years.  Reinhardt scored approximately 74% in a desirable range of 50-85%.

The University manages its debt well, as is evidenced with a Debt Burden ratio of less than 7%.  This ratio compares the level of current debt service to expenditures.  Reinhardt also scores well by exceeding the 1.1 benchmark for the Leveraging ratio, with a score of 2.25.

Overall, Reinhardt has many strengths that demonstrate a sound financial base and financial stability.

 

Supporting Documents

[1] Budget Calendar, 2017-18

[2] Budget Process and Training

[3] Overview of Academic Assessment, Planning and Budget Process

[4] Approved, revised and actual budget summaries (2015-2017)

[5] Finance Committee Minutes 061317 budget approval

[6] Finance Committee Packet 040617

[7] Reinhardt Feasibility and Five Year Forecast Study 2017 - 2022

[8] Reinhardt Financial Statement Audit, FY17

[9] Management Letter and Presentation, FY17

[10] Reinhardt Statement of Unrestricted Net Assets, Exclusive of Plant

[11] Excellence at Reinhardt, 2010-2015

[12] BOT Minutes 01.24.17

[13] University Committee Assignments, 2017-2018

[14] Comparative Actual Headcount Data

[15] Board Presentation Ratio Trend Analysis FY 17

[16] Budget Instruction Page

[17] Core Requirement 2.5

[18] Core Requirement 2.4