The adequacy of financial resources is judged in relation to the mission and goals of the institution, the scope and diversity of its programs and services, and the number and kind of its students.
7.B.1 The institution provides evidence that it seeks and utilizes different sources of funds adequate to support its programs and services. The commitment of those resources among programs and services reflects appropriately the mission and goals and priorities of the institution.
7.B.2 Adequate resources are available to meet debt service requirements of short-term and longterm indebtedness without adversely affecting the quality of educational programs. A minimum of three years’ history of the amount borrowed (whether internally or externally) for capital outlay and for operating funds is maintained. A five-year projection of future debt repayments is maintained.
7.B.3 Financial statements indicate a history of financial stability for the past five years. If an accumulated deficit has been recorded, a realistic plan to eliminate the deficit is approved by the governing board.
7.B.4 Transfers among the major funds and interfund borrowing are legal and guided by clearly stated policies in accordance with prudent financial planning and control.
7.B.5 The institution demonstrates the adequacy of financial resources for the support of all of its offerings including specialized occupational, technical, and professional programs.
7.B.6 The institution identifies the sources of its student financial aid for current enrollments and provides evidence of planning for future financial aid in light of projected enrollments. It monitors and controls the relationship between unfunded student financial aid and tuition revenues.
7.B.7 The institution maintains adequate financial reserves to meet fluctuations in operating revenue, expenses, and debt service.
7.B.8 The institution demonstrates an understanding of the financial relationship between its education and general operations and its auxiliary enterprises and their respective contributions to the overall operations of the institution. This includes the institution’s recognition of whether it is dependent on auxiliary enterprise income to balance education and general operations or whether the institution has to use education and general perations income to balance auxiliary enterprises.
Standard 7.B – Adequacy of Financial Resources
Between state appropriations and tuition revenue, the college has a stable funding base. The college also receives funding from state and federal grants, auxiliary funds, local dedicated funds and fund raising.
The college has been able to carry forward over six million dollars in operating reserves, or more than 2% of the tuition revenue, for the past several years. This flexibility has allowed the college to meet unforeseen demands and make better strategic decisions. For the last two biennia, the college has not allocated 100% of the operating revenue in order to plan and implement goals in the strategic plan. In the 2207-09 operating budget, funding was approved to support strategic initiatives in sustainability and diversity, with additional funds set aside to address the new faculty union negotiations.
The college continues to seek new revenue streams. An Extended Education program was initiated in 2005 and startup funding was provided. This program was given three years to show whether it would be financially viable.
The college’s resources are sufficient to meet its debt service requirements without negatively impacting operations. Evergreen keeps a minimum three-year history on funds borrowed and operating funds. A five-year projection of future debt service requirements is maintained and included in the notes to the annual financial statements.
The financial condition of the college has been stable for the past five years and there have been no material deficits. Operating revenues are budgeted and divisions are not allowed to deficit spend. Other operations are required to plan and operate in a fiscally responsible manner. Some individual accounts have had deficits during some periods, and these are addressed by the manager, director and vice-president responsible.
Mandatory and non-mandatory transfers among funds are controlled and approved by the appropriate person. These transfers are included in the financial statements and in the operating budget requests. Budget transfers in the operating fund between divisions must be approved by the Executive Director of Operational Planning and Budget.
Evergreen allocates its resources to protect the academic programs and support the educational goals in the strategic plan. When the College receives legislative funding for enrollment growth and tuition increases, instructional costs are funded first at the same level as existing programs. The balance of these funds, combined with internal reallocations, savings from efficiencies and other new revenue streams, is allocated to non-instructional areas for overhead, other growth related costs and a responsible contingency reserve. This reserve is available for funding new prioritized strategic initiatives, unknown contingencies such as union contract agreements, large one-time purchases or unexpected increases in areas like utility costs.
The budget and allocation process establishes a comprehensive practice for the college leadership to employ when making decisions on effectively funding the educational goals of the institution.
Evergreen’s student financial aid comes from three main sources, federal and state programs, Foundation scholarships and institutional aid. Federal and state aid is defined by the various government programs, and Foundation scholarships are governed by the fund raising efforts. Institutional aid, in the form of tuition waivers, was historically funded at 6% of tuition until 2007. In the 2007-09 budget request, the College asked for and received legislative approval to increase the funded waiver amount to 10% over the next 4(?) years. This will increase the amount of institutional waivers by 67%. For student recruitment and retention efforts, the college can and has allocated more than the 6% for tuition waivers with the approval of the board of trustees. This has reduced the net tuition revenue available for operating expenditures. This increase in funded waivers will result in an increase in net operating resources.
To meet fluctuations in operating revenue, expenses and debt service, Evergreen maintains a diversity of reserves. These reserves include:
Funds available from the operating budget that are not fully allocated. These funds are usually set aside for new initiatives and unknown needs.
Divisional and institutional operating reserves. These are allocated operating funds that are under-spent in one year and carried forward either by a division or the institution. These reserves have been in excess of six million dollars for several years. They are usually used to support one-time or temporary requests.
The College’s rainy day fund. This fund of approximately one million dollars is funded from miscellaneous local income and is for emergency use only.
Some self-supporting units, like summer school, have substantial fund balances that are used to augment otherwise unfunded requests in academics and elsewhere.
In addition, the college is conservative in estimating tuition revenue in case enrollment levels or the mix of resident and non-resident students is different than projected.
At Evergreen, auxiliary services are of unique value to the overall operations of the college. Evergreen is physically located in a rural area with little or no services within several miles, except for a few apartment units. Therefore, the services and products provided by auxiliaries such as food services, housing, bookstore and duplicating services are not readily available from private retailers. It would be extremely inconvenient for the students, staff and faculty if these services were not available on campus. This also means some services are provided even though they may not be financially viable.
Evergreen is not dependent on the income of its auxiliaries to financially support the operations of the college. In occasional instances, some auxiliaries have needed financial support from the operating income of the college. All auxiliaries are charged for services provided them by operating units of the college. A brief description of some of the major auxiliary services follows.
For several years, food services suffered significant losses. However, steps were taken to improve the financial condition including contracting with a new food service vendor, combining food services with the housing operation, and requiring all housing freshmen to purchase meal plans. These actions have greatly reduced the losses. Also, the food services facility is slated for a complete renovation in 2009-11 which should have a significant impact on their financial success.
Housing has always been self-supporting. In 2006, housing issued a 7.5 million dollar bond to pay off the remaining balance of the previous bond issue, and perform some major renovations of its oldest buildings. It has met its bond obligations, developed a ten year financial plan, and is building a reserve to continue to capital improvements.
The bookstore has been self-supporting, but has carried a negative fund balance since it first opened. It recorded profits for several years until recently. Most of the current decline is due to competition from on-line bookstores and a facility that is in need of a major renovation. The bookstore, located in the College Activities Building, is also planning for a complete renovation in 2009-11. So, for a one to two year period, the bookstore will be in a temporary location, but will move back to a new facility which should have a positive impact on their profitability.
Conference services has overall been self-supporting, but in recent years it has been challenged with finding space on campus to hold conferences. This has been due to major remodeling of existing buildings, both general academic buildings and housing buildings. This challenge will continue as major renovations of most major campus buildings are planned for the next several years. Although conference services is not highly profitable, its operations creates significant revenue for food services, housing and other operations on campus.
Other auxiliaries such as motor pool and duplicating services are internal service functions that are self-sufficient but are not designed to provide direct financial support to the college.