Driving Institutional Success Through Analysis
By: Tiffany Motyka, EdD Senior Consultant, Financial Aid Service
Institutions of higher education are valuable in so many ways. The economic impact of higher education is hard to dispute. According to the report Predicting College Closures and Financial Distress, as an industry, American higher education directly:
- Enrolls nearly 25 million students
- Employs approximately 3 million employees
- Produces approximately $700 billion in expenditures
Despite this immense value, the same report identifies critical factors influencing institutional success, including federal metrics, enrollment trends, and the Financial Responsibility Composite Score (FRCS). The reality is that operational improvements, particularly in financial aid processes often make the difference between an institution thriving, surviving, or closing.
The Role of Financial Analysis in Institutional Stability
One way to position your institution for long-term success is by setting goals around operational improvements. In this case, it starts with taking an analysis of the financial aid operations which is a critical strategic lever of any higher education institution.
The FRCS was instituted in 1999 by the Department of Education. The score does not determine the long-term viability of an institution but measures its ability to complete the next academic year. Since the FRCS can vary year to year, there is always room for improvement.
FRCS ranges are as follows:
-1.00 – 0.99 Not financial responsible
1.00 – 1.49 Weak, but stable
1.50 – 3.00 Healthy institution
Strategies to Improve an Institution’s FRCS
According to the Federal Student Aid Handbook, a component of the Financial Responsibility score is the strength factor score. This score reflects a school’s relative strength or weakness in a fundamental element of financial health, as measured by the ratios. This metric provides a snapshot of an institution’s financial health and ability to sustain operations. Specifically, the strength factor scores reflect the extent to which a school has the financial resources to:
1) replace existing technology with newer technology;
2) replace physical capital that wears out over time;
3) recruit, retain, and retrain faculty and staff (human capital); and
4) develop new programs.
By improving financial aid processes, institutions can positively impact these indicators, ensuring stability and increasing the likelihood of long-term success.
Improving an institution’s FRCS requires targeted strategies, including:
- Returning Title IV Funds Promptly: Ensure unearned Title IV program funds are returned in compliance with 34 CFR 668.22 for students who withdraw.
- Maintaining Accurate Records: Designate a federal bank account and establish an auditable system of records to allocate and return funds correctly.
- Evaluating Title IV Administration: Review how Title IV programs are managed, considering past performance of the institution and affiliated individuals.
Map Out A Path to Success
A college or university can focus on improving the administration of Title IV programs and thus the FRCS score by understanding current processes and comparing them to the standards set by the Department of Education.
According to the Planning for Higher Education Journal, process mapping, and evaluation, or Value Stream Mapping, is a purposeful way to coordinate and integrate processes to support institutional performance. These tools are invaluable in the identification of inefficiencies, increased interdepartmental collaboration, and ultimately, the creation of new processes that eliminate service gaps.
Visual aids such as maps and flowcharts help make process management work visible. Improving how institutions process information about the work allows for greater visibility improves communication and provides a common framework for those involved in the day-to-day work. (Flores, Ortiz, 2023).
To optimize operations, institutions should review each major area of Title IV aid, state aid, and institutional aid administration, as well as technology utilization and customer service activities.
An institution’s policies and procedures documents can explain the steps needed to complete a process. They may even reference the regulations behind the process, but efficiency or proper staff and technology utilization may not be addressed. Technology optimization and staff efficiency are two areas that can be analyzed and improved. Starting small can lead to bigger successes for your institution.
Small Improvements for Significant Impact
Starting with minor improvements now will yield a significant impact later and help remove any unnecessary roadblocks in daily processing. This should be done well in advance of the new aid year FAFSAs being imported and new awards processed.
Begin by reviewing these questions in the process mapping steps:
- Is the process too manual?
- Does the process require too much time for the staff?
- Could we still carry out this process if a reduction in staff occurs?
- Do the options used result in issues later down the student life cycle?
FAS, Your Partners In Success
You don’t have to attack any of these strategies alone. Here’s what Morris College President, Said Sewell, Ph.D., had to say about leaning into a partnership with Financial Aid Services (FAS).
“The valuable work being carried out by FAS in clarifying and recalibrating our financial aid office’s processes and award procedures, as well as integrating our CRM and PowerFAIDS, cannot be overstated.”
