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Core Financial Ratios and Composite Financial Index Cover Letter
University of Maine System
The University of Maine System recognizes the importance of monitoring and understanding its financial health. Performing strategic financial analysis through the use of ratios is one tool that is used to inform university and System level management and our Board of Trustees. KPMG, a global professional services firm and the University of Maine System’s external auditor, is recognized for their work in ratio analysis in the higher education industry and has recently assisted the System with analyzing its financial health. This KPMG PowerPoint provides four core financial ratios and a resulting composite index for the University of Maine System compared to industry benchmarks.
The University System’s performance has deteriorated since FY07. In all cases, the University falls well short of its benchmark. Some recovery is occurring in the benchmarks for Net Operating Revenues and Change in Net Assets, which measure our ability to live within our means and our total economic return. Those improvements are the direct result of difficult decisions that reduced costs over the past couple of years, allowing us to focus resources on those activities core to our mission. However, much work remains.
The Composite Financial Index suggests we are in the “re-engineering” phase. A score of 1 represents very little financial health, while a score of 3 (the low benchmark) represents sufficient institutional resources to begin transformation. For FY08 the University System has a score of 1.5 and for FY09 a score of 1.6. This places us just above those institutions that are struggling to survive, but within reach of those that with focused effort can transform themselves into more viable institutions.
The New Challenges and New Directions initiative and resulting action plan will serve to strengthen our University System and we look forward to seeing the results in future financial analysis.
To view the KPMG analysis click here.