As colleges and universities struggle with the economic impact of COVID-19, we are reaching out to Registry members who are serving as interim CFOs and around the country for their insight.
We recently posed three questions to David McConnell, Interim CFO at Oklahoma City University.
1. What is the single most important piece of advice that you would offer to a new Interim CFO about developing a budget in the middle of the COVID-19 crisis?
McConnell: First and perhaps most importantly, the budget development process should be based on the fundamental operation of the school as if it were unaffected by the Pandemic. This budget needs to be balanced and directly related to the metrics used to build the budget. If you are having a downturn in enrollment, then you need to account for the loss of revenue related to enrollment. Be careful to honestly assess institutional trend lines. Maintain disciple throughout the process. Once you have established your operating budget assess your level of liquidity to determine the extent to which you can weather the normal ebb and flow of your operating budget. Additionally, you need to have a clear understanding of your capacity to garner unrestricted gifts to support annual operating expenses. The volatility of gifts will be more related to uncertainty in the markets and the economy. These are things that will help keep you grounded during turbulent times and by no means do they represent all of the variables you need to consider.
2. Thinking in the short term, what is the most serious challenge financially posed by the pandemic for your, and other, campuses?
McConnell: Once you have accomplished the objectives in point one, you should create several additional models that reflect a change in enrollment and/or revenue. Good examples are budgets that reflect 5% and 10% reductions of both revenue and expenses. It’s especially important to identify cost reduction measures you would make before when faced with declining revenues. By doing this you avoid making rush decisions or decisions that undermine your strategic plan and vision. Another important aspect of this planning needs to consider the notification deadlines in your faculty handbook should you need to reduce faculty. Missing a deadline for faculty notification could cost you dearly.
3. How will this pandemic change the way CFOs and presidents lead their campuses, particularly related to financial planning and management?
McConnell: Points one and two deal with good budgeting practices. Now with respect of dealing with managing your budget during this unprecedented time, I would encourage maintaining a totally separate process to track expenses directly related to actions taken on campus based needs during a pandemic. These costs should not be commingled with your normal operating budget; however, they may certainly impact a whole host of activities that occur within the operating budget.