Warning signs that an institution is in a downward financial spiral: Opinion

April 24, 2020

“Clearly, many people have a picture of the kind of institution that might be in trouble right now: small, underendowed, rurally situated colleges with substantial tuition discounting and a high reliance on international students,” write Scott Carlson and James F Galbally Jr. In this piece, the authors describe the financial warning signs that could indicate an institution is or will be in trouble: failure to assess institutional cost of operation; heavy reliance on a range of third-party contracts; uncertainty around when the institution will hit its inflection point; a heavy dependence on a line of credit in the summer; and the liquidation of parts of a school’s endowments. The authors note that no single characteristic or action indicates that an institution is at risk, but that several warning signs should prompt the campus community to act proactively by engaging in aggressive examination and cutting of costs, and communicating with external and internal stakeholders. Chronicle of Higher Ed (International)