Welcome to the summer issue of In the Know, the quarterly e-newsletter that addresses the current business issues facing administrators, faculty, staff and governing boards of colleges, universities and independent schools.

Armed with timely, accurate information (in the know), these stakeholders can make effective business decisions. Informed business ensures efficient pursuit of the REAL business of the school: teaching, learning and research.

This issue discusses how the annual report can support strategic goals and decision making. I hope you find this discussion helpful.

Sincerely,

Tracy Filosa

It's annual report season. The books are closed, the financial statements are being finalized and the Board of Trustees will be meeting in the upcoming weeks. Institutional leaders will be looking for specific analysis and reporting that provide an assessment of prior and current financial health and inform the decisions they need to make about the future.

Many colleges and universities produce an annual financial report, which is distributed in the fall. The annual update typically reports the financial results of the completed fiscal year. Before you open lasts year's document and simply replace prior year numbers with this year's, consider how the report and the amount of information presented can support strategic goals and decision making. The annual tradition does not need to be stale. Board members and other stakeholders can learn new things about the institution's condition, challenges and accomplishments each year. The report is also an opportunity to educate and orient new stakeholders.

This newsletter provides some food for thought as you consider the theme and information to disseminate in your annual report:

Audience Analysis
Who will receive this report and how will they use the information? Is it intended solely for the Finance and Investment committees? Or does the report also go to a broader audience that may include all board members, overseers, regulators, creditors and current and prospective donors? Are the recipients familiar with higher education financial management tools such as ratio analysis and endowment spending rules and renewal and replacement of physical plant? Or do they need some basic explanation of some of the issues that are specific to the management of your institution? Answering questions about the needs of the readers will determine what information should be included and at what level of detail.

Reporting Obligations
All 501(c)(3) organizations have federal and state filing and reporting requirements. There may be additional reporting obligations specified under the organization's charter. Most financial annual reports include the fiscal year financial statements:

These statements vary in their level of detail, but must meet the requirements of the Governmental Accounting Standards Board (GASB) and Financial Accounting Standards Board (FASB). The annual report is an opportunity to narrate and illuminate the information in the financial statements. The statements provide a foundation for discussion about recent performance and future financial and investment goals of the institution.

Management Priorities
Proactive administrators participate in the school's agenda with other stewards and volunteer leaders. The annual report is an excellent opportunity to enumerate the top management priorities and institutional goals. The report can provide narrative and statistics that explain financial and programmatic health, peer and competitor analysis, and industry trends. This information shows how the mission and the financial condition of the institution relate, and can set expectations for how and when specific goals can be met.

Upcoming Decisions
What are the pressing issues facing the school? Does the information provided in the report address those issues? For example, if the board will be addressing the funding of renewal and replacement of the physical plant, your report should talk about the current funding, capital needs and decisions that will determine the future investment in plant.

Once you consider institutional reporting obligations, the needs of the people reading the report, the top administrative priorities and decisions that the report can inform, you have an outline that will determine what will be discussed in the annual report.

The content and composition of the report should be your focus as you pull the document together. Based on your audience and your school's priorities, determine the appropriate length of narrative, the right number of informative charts and comparative statistics. For each component ask:

After answering these questions, you may determine that an executive summary would better suit the needs of your readers instead of a 20 page narrative, or that a letter from the President would help position financial data within the overall university mission. You may set data in context by updating charts to include ratio analysis with comparative institutions. You may decide to increase your distribution of the report, or to focus only on the stakeholders who participate in financial decisions.

The annual report is an opportunity to communicate, inform and shine. Consider your needs and your message and take full advantage of the opportunity you have this season.

If you would like discuss your annual report, email TAF at intheknow@ tafconsulting.com.

TAF CONSULTING works with administrative leaders at colleges, universities and independent schools to deliver essential business analysis and training to stakeholders.

TAF participates in a range of business projects at schools including: organizational planning, issues briefings to chief executives and trustees, financial modeling, management reporting, administrative system implementations, policy and procedure documentation and faculty and staff training.

Learn more about TAF Consulting »