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Is This An Example of Incompetence In The MnSCU Office?
by Silence Dogood

On February 23, 2015 Laura M. King, Vice Chancellor of Finance and Chief Financial Officer for MnSCU testified before the Ways and Means Committee in the Minnesota House with Chairman Rep. Knoblach. In her testimony relating to the Composite Financial Index (CFI), she stated that “The trends for the universities is concerning.” Then Vice Chancellor King said “On a scale from 1 to 5, we want to be in the 3 range.” (Referring to the CFI)

The Composite Financial Index (CFI) is calculated from four component measures: return on net assets, operating margin, primary reserve, and viability. Supposedly, the CFI is a way of measuring the financial health of a university. In essence, the CFI is considered a financial “Stress Test.”

On the MnSCU system website you can find a table showing the Composite Financial Index for all of the MnSCU institutions. A portion of the document currently on the MnSCU website showing the MnSCU universities is shown below:

Unfortunately, even as of March 24th, 2015, the data for FY2014 has not been posted. I made a request for the updated data and recently received a copy reproduced below, which includes the data for FY14:

Back to Vice Chancellor King’s statement:

“On a scale from 1 to 5, we want to be in the 3 range.” (Referring to the CFI)

Looking at the data in the table, from FY2009 through FY2014, there are 21 institutions with values less than 1 and includes 4 institutions with values that are negative. The lowest value shown was -1.12 for Lake Superior College in FY2009. Additionally, there are 15 institutions with values greater than 5. The largest value shown was 7.42 for Rainy River Community College in FY2012. From the data shown, the CFI is outside the range of 1 to 5 a total of 40 times, which corresponds to being outside the range 18% of the time.

I’m sure everyone misspeaks. However, the CFI should be one of the most important measures of an institution’s health and the Chief Financial Officer might be expected to know the ranges and the averages for the CFI for the institutions within MnSCU.

The summary data for MnSCU colleges, MnSCU universities and the system as a whole is shown from FY2009 to FY2014 in the following figure:

From the figure, it is clear that only in FY2010 and FY2011 did the average of the MnSCU colleges exceed a value of 3. The averages of the MnSCU universities never reached 3 during the period FY2009 through FY2014 and only half of the time was above 2. In fact, the university average decreased from 2.65 in FY2012 to 0.83 in FY2014, which is a decrease of 1.82 and corresponds to a decline of 68.7%.

If you look more closely at the data for FY2012, the CFI for the system is 2.78 where the values of the CFI for the colleges and universities is 2.72 and 2.65, respectively. In every other year, the average is in between the two. Unless this is some kind of really ‘new math,’ it is hard to understand how the average for the MnSCU system can be above the values for which it is an average.

As the data shows the CFI does not have a scale of 1 to 5. Additionally, if as stated by CFO King: “we want to be in the 3 range”, things look really bad financially for the MnSCU system since in FY14 the average for MnSCU colleges was 2.28 and MnSCU universities was 0.83.

Clearly, the CFO of an organization not understanding the range of values for the CFI or the averages of its colleges and universities is alarming, you be the judge if it rises to the level of incompetence.

2 Responses to “New MnSCU incompetence?”

  • Rex Newman says:

    There is so much wrong with MnScu and UofM, primarily because both are so over-extended. Serious right-sizing is in order at both, and the Legislature should flat line their appropriations accordingly, until they both start closing and selling off unneeded capacity. Yes, that means closing some campuses, like UofM Crookston and Jackson Community College. No student will be left behind, and if the best professors are kept (ha!), the quality of education could improve.

  • Gary Gross says:

    Don’t say that, Rex. You must be one of those Neanderthals that hates young people and professors.

    FYI- I don’t think that. I’m just doing my best Paul Thissen impression.

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