By law, the figures —compiled annually by the Texas Higher Education Coordinating Board — will be reported to the Texas Legislature and Gov. Rick Perry on May 1.
“Coastal Bend College did not meet five of the indicator thresholds,” the report says. “The CFI, return on net assets and operating margin were negative. Net assets fell $3.5 million, which lowered the primary reserve to less than 10 percent.”
The CFI — Composite Financial Index — blends four financial ratios into one metric, the board explains, including “a more valid view of the institution’s finances (because) weakness in one measure can be offset by strength in another.”
To determine the index, the board weighs a college’s:
•Return on net assets – is the college better off financially now than (it was) a year ago? The statewide figure is 7.10 percent; CBC’s was -25.69 percent.
•Operating margin – Is there an operating surplus or a deficit in the given fiscal year? Did the college balance operating expenses with available revenue? The statewide figure, similar to a profit margin, was 7.32 percent; CBC’s figure was -6.36 percent.
•Primary reserve ratio – measuring the college’s financial strength and flexibility. How long can it survive without additional net assets generated by operating revenue? The statewide ratio was .40; CBC’s was .07.
•Viability ratio — comparing total expendable net assets to total liabilities – How much of its debt can the institution pay off with its existing resources? The statewide ratio was 1.03; CBC’s was .39.
The statewide CFI, averaged from 50 community colleges was 3.67; The CFI for CBC was -2.97, the lowest of all 50.
The report continues, “The overall financial health of an institution can be assessed via two dimensions of inquiry. First, is the institution financially capable of successfully carrying out its current programs? Second, is the institution able to carry out its intended programs well into the future?”
To determine the answers, the Coordinating Board asks four salient questions:
•Are financial resources sufficient and flexible enough to support the mission?
•Are financial resources, including debt, managed strategically to advance the mission?
•Does asset performance and management support the strategic direction?
•Do operating results indicate the institution is living within available resources?
The report also cites three additional colleges that failed to meet the threshold of three or more indicators: Austin Community College (did not meet four); Frank Phillips College and Victoria College (did not meet three).
The board gave each institution the opportunity to respond.
“Fiscal Year 2012 was a transitional period for Coastal Bend College,” wrote CBC President Dr. Beatriz Espinoza. “In the span of one fiscal year, the college has three presidents along with changes and additions in upper administration. During this period, unplanned expenditures were incurred.”
CBC’s fiscal year is from Sept 1 to Aug. 31.
Espinoza continues, “...cost-saving measures were pursued in fiscal year 2013 in order to increase (the) operating efficiency of the college. Board of trustees, administrative officers, faculty and staff are all actively involved in the budgeting process for fiscal year 2014, allowing for a more complete and accurate working budget.”
Espinoza had been in office only a few months when the college was forced to return a $218,000 federal nursing grant when not as many students as expected enrolled in a nursing program at the Kingsville campus. Concurrently, the college experienced utility costs $300,000 higher than expected.
Espinoza says she inherited both, along with discovering CBC’s debt reserve had been significantly tapped.
Her ensuing tenure has been marked by layoffs, resignations and a campus-wide reorganization aimed at paring down the college’s operating costs to make its resources match the reality of a continuing drop in enrollment — which the college attributes greatly to the competition from the Eagle Ford Shale production.
To be fair, while CBC has made significant strides to bring its finances in order, they won’t appear in the Coordinating Board’s report because its scope is only for fiscal year 2011-2012.
Bill Clough is a reporter at the Bee-Picayune and can be reached at 358-2550, ext. 122, or at beepic@mySouTex.com.