Exeter Leadership Weekend - Managing the Academy's Finances
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Tony Downer '75, Exeter Trustee and chair of the finance committee, and Justin Merrill, acting CFO, presented on Exeter's finances at Exeter Leadership Weekend. The presentation covered Exeter's income, budget and fiscal management policies.
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Exeter Leadership Weekend - Managing the Academy's Finances
- 1. PEA LEADERSHIP WEEKEND - 2013 Managing The Academy’s Finances Justin Merrill, Acting Chief Financial Officer Tony Downer ‘75, Trustee
- 3. PRESENTATION OVERVIEW • Resources • Trends
- 4. PRESENTATION OVERVIEW • Resources • Trends • Guiding Principles
- 5. PRESENTATION OVERVIEW • Resources • Trends • Guiding Principles • Key Trustee Decisions
- 6. PRESENTATION OVERVIEW • Resources • Trends • Guiding Principles • Key Trustee Decisions • Challenges & Strengths
- 7. PEA RESOURCES • Our People 210 Faculty, 432 Staff • Our Campus 131 Buildings, 1.5mm Square Feet 670 acres • Our Endowment $1.08 billion (preliminary 6/30/13) $50mm in debt
- 8. PEA Revenues: FY 2014 - $91.1mm Endowment Draw 52% Annual Giving & Current Gifts 9% Net Tuition & Fees 31% Other 8% 2013-14 Revenue
- 9. PEA Expenses: FY 2014 - $91.0mm Comp & Benefits 57% Plant & Tech 19% Dept Expenses 14% Other 10% 2013-14 Expenses
- 10. PEA TRENDS - I • Tuition FY 2004: $30k, FY 2014: $46k CAGR – 4.4% • Endowment 6/30/03: $557.4mm, 6/30/13: $1.08 billion CAGR – 6.8% • Financial Aid FY 2004: $8.9mm, FY 2014: $20.3mm CAGR – 8.6% Percentage receiving aid: 36% / 47%
- 11. PEA TRENDS - II • Benefits Eligible Headcount FY 2005: 521, FY 2013: 534 CAGR – 0.3% • Compensation & Benefits FY 2004: $33.9mm, FY 2014: $52.1mm CAGR – 4.4% • Plant and Technology FY 2004: $6.8mm, FY 2014: $17.1mm CAGR – 9.7%
- 12. Guiding Principles • Accessibility, Affordability, Diversity • A commitment to compensate our faculty and staff • Manage our financial and our physical resources with a long-term perspective – Intergenerational Equity • Plan, spend, and invest conservatively in order to minimize programmatic and community disruptions • Budget and manage to an annual break-even outcome
- 13. Key Trustee Decisions - I • Set tuition Keen sensitivity to affordability/accessibility Impact on financial aid census Positioning relative to our peer schools • Determine compensation increases Above, below or equal to CPI
- 14. Key Trustee Decisions - II • Set financial aid policies Families with incomes under $75k free • Set financial aid census targets Financial aid largely funded from endowment with additional support from the Exeter Fund and current gifts
- 15. Key Trustee Decisions - III • Determine endowment draw Yale formula Recent increase in the target spend rate from 4.5% to 5% Sustainability of endowment value
- 16. Key Trustee Decisions - IV • Allocate surpluses Plant reserve, technology reserve, faculty housing, quasi endowment • Approve new positions • Ensure high discipline in expense management • Approve new buildings/new projects/new initiatives Deferred maintenance catch-up Capital Projects Funding Policy Performing arts center/second turf field/cage replacement
- 17. Our Challenges • Reduction in projected endowment returns • Restraining the increase in tuition • Compensating our people/controlling our costs • Maintaining our facilities • Funding initiatives
- 18. Our Strengths • An unmatched endowment – absolute & per pupil Level of endowed financial aid permits unmatched accessibility • Faculty compensation at top of peer group • A well maintained plant • A supportive alumni/alumnae base • An extremely robust and qualified applicant pool • Sound guiding principles
- 19. PEA FINANCIAL CONDITION • We are extraordinarily fortunate. • Our community is NEVER complacent, NEVER satisfied • Driven to do more • Determined to be the best
Editor's Notes
- The Academy’s full and part-time people include 210 faculty and 432 staff supporting every aspect of the student experience at ExeterThe campus includes 130 buildings, covering 1.5mm square feet of space2012-13 was a good year for endowment returns, resulting in a market value as of June 30, 2013 of just under $1.1 billionThe Academy has $50 million of debt on the balance sheet and S&P recently affirmed the Academy’s AAA credit rating
- The Endowment Draw makes up slightly over 52% of the 2013-14 operating budget of $91 million. This has implications for how we run the endowment. We are protective and willing to sacrifice up market performance in order to outperform in down marketsNote that a very substantial portion (between 35% and 40%) of that endowment draw goes to supporting the Academy’s $20mm Financial Aid budgetExeter Fund and Current gifts add almost 9% of revenueI want to pause for a moment and highlight the importance of philanthropy to Exeter’s operating modelThe Endowment Draw, Exeter Fund and other current gifts will provide 61% of the revenue needed to run the Academy this yearAs I have often heard my colleague Ted Probert point out, if Exeter were run just on tuition the school year would be over by December!Net Tuition, or Tuition after financial aid, makes up another 31% of the operating budget.and Other (summer & auxiliary) rounds things out with just under 8%.
- Shifting to the expense side, supporting our people is by far our biggest expense areaCompensation and Benefits together will make up 57% of our expense base in 2013-14Plant & Technology is another area of major investment. Department Expenses make up just under 14% of expenditures. This category includes non-personnel related expenses for the Academy’s departments from the food in the dining halls ($2mm) to IT services and professional development for our faculty and staff.And Other expenses (e.g. Utilities, Debt Service, Insurance, Summer Programs, Auxiliaries)
- For those of you who were here last year, these numbers are all similar to what you saw last year.I would highlight two pointsFirst, the endowment has grown at almost 7% after spending, which is a testament to the ongoing generosity of Exeter’s alumni and the stewardship of the Academy’s Investment Committee through a period that has not been without challenges. Second, the growth in financial aid is truly remarkable, which combined with a tuition level that is at or near the bottom of our peer schools, enables 47% of our students to attend the Academy on Financial Aid.
- Again, these trends will look very similar to what was presented last year. I would note that the three year initiative that the Trustees undertook to increase ongoing funding level for physical plant renewal is now complete and increases from here are likely to be more measured and more inline with inflation.