Future Perfect - University of North Carolina
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Transcript Future Perfect - University of North Carolina
Best Practices in
Strategic Financial Forecasting
Brett Matteo
The PFM Group
Kevin Hyatt
UNC – Charlotte
Session Etiquette
• Please turn off all cell phones.
• Please keep side conversations to a minimum.
• If you must leave during the presentation, please do so as quietly as
possible.
• Thank you for your cooperation!
2
Framework for Discussion
• Overview of the PFM Group
• Overview of the proposed engagement
• Demonstration
• The implementation process
• Illustrative pricing
• Why strategic financial forecasting?
3
Overview of the PFM Group
Public Financial Management, Inc.
Financial advisory services
•
Public Financial Management, Inc. (PFM)
provides independent financial advisory
services
General government
States
Cities
Counties
Local governments
Utilities
Water
Wastewater
Power
Gas
Transportation
Toll roads
Transit agencies
Airports
Ports
Healthcare institutions
School districts
501c(3)’s
•
#1 ranked financial advisor for debt
transactions for 15 years
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PFM Asset Management LLC
Investment management services
•
Experience
33 years of asset management experience
$49.9 billion of assets under management
•
Specialties
•
Fixed-income strategies
Cash and short-term asset management
Bond proceeds management
Arbitrage rebate management
Derivative products strategies and procurement
Multi-asset class investments
Success
Long record of performance in excess of
benchmarks
Successfully navigated the credit crisis
Completely avoided defaulted credits, SIVs,
subprime mortgages, CDOs, auction-rate
securities
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Higher education finance
•
The PFM Group is the #1 advisor to higher
education institutions
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All types of institutions
Colleges
Universities
University systems
Community colleges
Community college systems
Public/private
Large/small
Our financial advisor provide analysis and
advice in a fiduciary capacity
Capital structure development
Financial risk management
Transaction structuring, pricing, and
optimization
Credit management
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Overview of the Proposed Engagement
The problem
•
At most colleges and universities strategic
forecasting is often difficult and inefficient
Complex (multi-variable, multi-order) relationships
among key variables
Data is often scattered among single-focus models,
accounting systems, ERP systems
Difficult to project a Statement of Net Assets
Difficult to track Net Assets
Most institutions are resource constrained
•
Mission-level questions from key stakeholders
(Board, President, investors, rating agencies) take
days, weeks, or even months to answer
Answers are not comprehensively determined and
are often uni-dimensional
Staff is inefficient in providing the answers because
there is no single institutional analytical approach
•
Stakeholders should be able to get nearly
immediate feedback on key strategic questions
An institution’s strategic plan should be
crossed against a reliable business plan
(with supporting sensitivity analysis)
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The solution
• The PFM Group provides strategic
forecasting services
Comprehensive
Fully-integrated
Customized
• Permits institutional users to quantify the
strategic ramifications of changing
operating variables, operating initiatives,
capital initiatives, and funding
alternatives
Single institutional point of view
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The value proposition
• Future Perfect is not a software, system, platform, or tool
• Future Perfect is an ongoing Consulting Relationship
PFM becomes your
financial modeling staff
Primary deliverable is an Excel-based projection model, but the Value
Proposition is NOT in the model, it’s in the service
• Future Perfect is a simple but elegant modeling architecture
Permits efficient manipulation of structural elements to mimic client business
models and ongoing changes thereto
• Efficient customization
• Efficient support
• Future Perfect is a modeling discipline
Fastidious application of modeling rules mitigates risk
• Future Perfect staff add value 3 ways:
Understanding of your business (your vocabulary)
Understanding of your accounting (GASB)
Providing world-class modeling services (fast, smart, efficient advice)
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Customized projection logic
• Establish relationships among the hundreds of interdependent
operating, capital, and financial variables, including:
Student revenues
Enrollment/retention
Pricing
Financial aid
Employees
Salaries
Benefits
Sponsored research
Appropriations
Foundation(s)
Non-personnel expenses
Capital projects
Facilities and deferred maintenance
Debt
Future Perfect is offered as an ongoing
Consulting Relationship
NOT Software
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Customized dashboard and outputs
Cross-walk to SRECNA
Financial ratios and other metrics
Rating agency ratios (benchmarked)
Moody’s Scorecard
Composite Financial Index (CFI)
Facilities Condition Index (FCI)
Other in-house or mandated metrics
Return on net assets
15%
10%
5%
0%
-5%
-10%
-15%
Current
Base 1
Base 2
A1-rated
Aa3-rated
Peer group
Calculated metric should exceed
target comparable
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FY24
Others (e.g., auxiliaries, research)
FY23
FY22
Institution
FY21
Base 2
FY20
Cash-based budget statements (P&Ls)
Base 1
10%
8%
6%
4%
2%
0%
FY19
Statement of Cash flows
Annual operating margin
FY18
Current
10.0
8.0
6.0
4.0
2.0
0.0
FY17
SRECNA
Expendable financial resources to direct debt
FY16
Base 2
0.0
FY15
Statement of Net Assets
Base 1
1.0
FY14
Current
2.0
FY13
GAAP-based financial statements
Base 2
3.0
FY12
Base 1
4.0
FY11
• Customized outputs
Current
5.0
FY10
• Customized dashboard-driven variables and
assumptions
Expendable financial resources to operations
FY09
• Projection model mimics the institution’s
business model
No black box
•
Future Perfect becomes the projection
model you would build internally if you
had the time, expertise, and resources
Unlimited users (no seat licenses)
Unlimited copies
•
Expendable resources to debt
Current
Base 1
Base 2
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
Conduct rigorous analysis and provide
immediate feedback on the short- and
long-term impact of strategic choices
0.0
Debt
New money
Refundings
Existing debt
500M
400M
300M
200M
A1-rated
Aa3-rated
Peer group
Future Perfect resides on your computer(s)
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FY24
FY23
FY22
FY21
FY20
FY19
FY18
FY17
FY16
FY15
FY14
FY13
FY12
0M
FY11
100M
FY10
Engage stakeholders in quantitativelysupported discussions, brainstorming
sessions, and consensus-building
exercises
FY09
•
Ongoing consulting services
• PFM staff supports the institution in the use of
your Future Perfect model
You define the questions of the day at your
institution
You conduct the analysis needed to answer those
questions using the Future Perfect model(s)
residing on your computer(s)
Develop the analytical approach
Manipulate assumptions
Change data
Conduct sensitivity analysis
You interpret the results
• PFM ensures your Future Perfect model is
structurally capable of supporting the analysis
you define and answering the questions you pose
Direction
Aspirations
Strategy
Vision
Possible
Future
Scenarios
Constraints
Financial
Human
Space
PFM becomes your modeling staff
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Demonstration
The Implementation Process
Customization process
• The Customization Process is well-conceived and quickly results in a fully-integrated view of the
institution’s prospective strategic/financial position
Initial
Assessment
Design
Process
Customization
Process
Delivery
Ongoing
Preliminary analysis
Meeting 1
(design session)
Revenues/expenses
Meeting 2
(training)
Periodic updates
Webinar I
(assessment)
Webinar II
(Designer Workbook)
Debt/investments
Punch List
Annual rollover
Data request
1st draft of
Final Design
Webinar IV
Ratios
Projects
Pre-load data
Receive and load
requisite data
Dependencies/Dashbo
ard/ Projects
Projects
Ratio analysis
Base Model
Webinar III
(Designer Workbook)
Webinar V
Webinar VI
Structural changes
Initial Design
Final Design
Preliminary Model
Final Model
Help and support
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Approximate timeline
Week
Initial
Assessment
Design
Customization
Delivery
• Preliminary analysis
• Webinar I -- Assessment
• Initial Assessment
• Receive and pre-load requisite data
• Base Model
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2
3
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13
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• Meeting 1 -- Design Session (in Philadelphia)
• Webinar II – Preliminary Designer Workbook
• 1st Draft of Design Specification
• Receive requisite data
• 2nd Draft of Design Specification
• Webinar III – Final Design
• Build students, grants, gifts, auxiliaries
• Build employees, expenses, facilities
• Build investments, debt, covenants, ratios
• Webinar IV – Accept design to date
• Build dependencies, dashboard, projects (2)
• Webinar V – Accept Preliminary Model
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2
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10
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2
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4
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2
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• Upload to Citrix server
• Meeting 2 -- Training Session (on campus)
• Develop and complete Punch List
• Ratios update
• Build remaining Projects (4)
• Webinar VI -- Accept Final Model
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Why Strategic Financial Forecasting?
Why PFM Consulting Services?
• Better decision making
Comprehensive and integrated analysis
Prospective analysis (beyond immediate and impending budget year)
• Better capital budgeting
Considers timing, cost, funding on integrated multi-year basis
Better assessment of affordability
Better allocation of scarce resources
• Better communication
Within the institution
With Trustees
With outside stakeholders (e.g., accreditation bodies, rating agencies, investors)
• Better oversight and control
Proactive management
• More transparency
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Questions & Answers
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Thank You!
Brett Matteo
The PFM Group
[email protected]
(215)557-1491