CIC’s Financial Indicators Tool (FIT) benchmarking report was recently featured as the cover story in the April 2009 issue of Business Officer magazine, a publication of the National Association of College and University Business Officers (NACUBO). “Diagnosing Fiscal Fitness” focuses on the utility and functionality of the FIT by highlighting how senior administrators of Guilford College (NC), Clark Atlanta University (GA), Ripon College (WI), Friends University (KS), and the University of Puget Sound (WA) use the comparative benchmarking tool on their campuses. The FIT is both a diagnostic tool—providing useful information about institutional financial performance—and a resource to assist college leaders with critical campus planning and decision making tasks.

The 2009 edition of CIC’s Financial Indicators Tool (FIT) was released in July. This is the third year that the financial benchmarking report was prepared for member presidents. Customized for each member institution, the annual report provides an assessment of financial performance that is tracked over a six-year period and benchmarked against similar institutions. Balancing financial performance with accomplishment of mission is key to the utility of FIT.

The FIT report uses a set of financial performance measures that rely on the Composite Financial Index (CFI), developed for NACUBO by KPMG, Prager, Sealy & Co., LLC, and BearingPoint, Inc. The CFI is based on four core financial ratios, each representing a particular domain of financial operations: (1) the primary reserve ratio, indicating resource sufficiency; (2) the viability ratio as a gauge of debt management; (3) the return on net assets ratio to track financial asset performance; and (4) the net operating revenues ratio measuring operating results. These ratios are then standardized, weighted, and combined into a single index score––the CFI––to indicate the financial health of the institution. Using a scale from -X to 10, the CFI approach links financial strength with accomplishment of mission. The threshold for financial health and stability is a score of 3, indicating that an institution has sufficient and adequately managed resources to fulfill its mission objectives. Scores should be viewed over a three- to five-year period for the most accurate portrait of financial well being. An average score below 1 is a concern, suggesting that drastic measures may be necessary to ensure institutional survival.

The FIT is distinctive in two ways. First, it utilizes publicly available data from the U.S. Department of Education’s Integrated Postsecondary Education Data System (IPEDS), as well as IRS Form 990s obtained from GuideStar. The use of these public sources precludes the necessity of requiring each CIC member institution to submit six years of audited financial statements. Second, the FIT provides nationally normed comparisons similar to those in CIC’s Key Indicators Tool (KIT). CIC’s FIT is the first financial benchmarking tool to provide national comparisons using the CFI for any group of American colleges and universities.

The U.S. Department of Education’s Financial Responsibility Test, recently featured in news reports of colleges that have been sanctioned, should not be confused with the CFI index used in CIC’s FIT. The Financial Responsibility Test uses a composite score based upon three ratios, two of which are ratios also used in the CFI, the primary reserve ratio and the net operating revenues ratio (formerly called the net income ratio). The third ratio in the Department of Education’s methodology is the equity ratio, which is a measure of financial strength indicating an institution’s ability to borrow. The composite index was developed for the Department of Education by KPMG to determine eligibility for Title IV funds. Its purpose is primarily to identify the institutions that are at financial risk. The CFI presents a more complete picture of an institution’s financial strengths and weaknesses and is a useful strategic indicator for institutions at various levels of financial health.

Each CIC Institutional Member’s customized FIT report can be downloaded from a secure server using a unique username and password. Previous KIT and FIT reports are also available from the same password-protected website. The Austen Group gathers the data and prepares CIC’s benchmarking reports. The benchmarking project was established with grants from the William Randolph Hearst Foundations and is now underwritten by TIAA-CREF, enabling the reports to be provided at no cost to CIC members. For additional information about the FIT and CIC’s other benchmarking services, visit www.cic.edu/FIT.