Endicott College

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Project Prioritization and Funding in Synario


In the middle of 2019, Endicott College’s new president, Dr. Steven DiSalvo, and his board began formulating a plan to resolve the housing and parking issues on campus. Endicott’s steady enrollment growth over the past decade had exhausted the College’s existing residential and parking capacity, while growing student revenues exposed the technological limitations of the then current administrative systems.

Dr. DiSalvo and his board knew that to maintain the growth of their institution, they needed to make simultaneous internal IT improvements and infrastructure updates. The college’s various needs meant balancing multiple competing capital-intensive projects. President DiSalvo and the Executive Committee brought the issue to Endicott’s Vice President of Finance and Chief Financial Officer, Anthony Ferullo, and challenged him with finding the best trajectory for the College.

Ferullo looked to Synario to model the competing projects and explore the impact of different prioritizations and funding strategies on the college’s overall financial standing.

Setting Up The Financial Model

Ferullo understood that he was dealing with five projects totaling approximately $100M*, specifically:

  • Dorm Remodel

    An existing residence hall needed renovations to support additional students and alleviate overcrowding.

  • Town Home Development

    A new take on student living, Endicott’s board wanted to offer contem-porary living arrangements for on-campus students. This development replaced modular homes that were meant to be temporary.

  • Parking Deck

    A new parking deck to resolve the college’s parking limitations.

  • New Residence Hall

    This is the largest capital project for the college. The residence hall in-cludes both dormitories and food service for students. The new residence hall is set to also generate additional room and board revenue.

  • ERP Implementation

    Endicott is looking to implement a new ERP system between 2020 and 2024. This is a required internal initiative that is designed to support fu-ture growth by updating and streamlining administrative activities across the College.

To begin setting up his financial model, Ferullo uploaded Endicott’s latest financial data into Synario and updated the college’s baseline financial model.

By updating the baseline projection with the colleges latest data, Ferullo was able to create the most accurate model of Endicott’s financial future. He then made sure to leave a baseline scenario in the financial model to show what the college would look like in the long-term if the board decided not to pursue any of the capital projects proposed.

Debt and Project Prioritization

The challenge Ferullo and his team faced was determining the overall feasibility, prioritization, and funding structure for the projects, both individually and as a group. If the project was feasible, Ferullo needed to find the best funding structure that supported the college in the long-term based on its existing debt covenants.

At the time that these projects were proposed, yields in the US bond market were near all-time lows. Ferullo saw an opportunity to capitalize on the low rates and began exploring debt funding options for every initiative. He knew the president wanted to make aggressive changes to the College, so Ferullo used Synario to model the long-term financial ramifications of various debt-funding structures.

Endicott needed to maintain a specific minimum debt service coverage ratio as well as minimum liquidity ratio, and Ferullo set out to explore a variety of funding strategies within Synario with those ratios in mind.

Exploring Funding Options

Extreme Scenario #1 – Fully Financed By Endicott

First, Ferullo and his team set up a scenario where every project in the list was financed and completed without issuing any debt. The college had the financial reserves to completely fund every initiative, however, the finance team needed to understand how that strategy would impact Endicott over a ten-year period.

After constructing the described funding scenario and layering it on top of the college’s existing financial data, Ferullo saw that this strategy was not feasible. Endicott’s operating margin remained healthy throughout the ten-year timeframe while the debt service ratio and liquidity ratio dropped dramatically. When Ferullo looked closer at the liquidity ratio, he saw that the college had a low margin of error inside the three- to five-year period. Any unforeseen expenses during those two to three years could have significant financial ramifications for the college.

The low margin of error meant that the College would lack financial reserves and overarching maneuverability in the short term. Given current economic conditions, policy changes, and declining industry enrollment numbers, Endicott’s finance team decided that this was not a viable option as it presented too much risk and did not keep the college in good financial standing.

The above Synario outputs show that, although the College can maintain acceptable operating margin and minimum liquidity ratio, Endicott College cannot maintain an acceptable level of Debt Service Coverage when institutionally financing every project.

Values are for explanatory purposes only and do not represent Endicott College’s actual financial standing.

Extreme Scenario #2 – Fully Debt Funded

Ferullo then modeled the financial outcome of fully funding each project through a debt issuance. Unlike funding using Endicott’s financial reserves, issuing debt caused the college’s operating margin to drop while liquidity remained healthy. Worst of all, the college’s debt service ratio plummeted, resulting in values well below acceptable thresholds.

The debt service ratio is critical to the college as it shows their ability to not only pay back existing debt covenants, but also significantly affects the college’s credit rating for future debt issuances. With low operating margins and poor debt service coverage, Ferullo and his team determined that the projects could not be completely funded through debt.

Once Ferullo modeled both extreme scenarios, he saw that the college could not pursue either strategy. Instead, he would need to identify the ideal mix of both debt issuance and cash funding. Although this finding seemed self-evident, it was vitally important to have these scenarios built and outcomes concluded for President DiSalvo to see the financial ramifications of these two directions.

The above Synario outputs show that, although the College can maintain acceptable operating margin and minimum liquidity ratio, Endicott College cannot maintain an acceptable level of Debt Service Coverage when institutionally financing every project.

Values are for explanatory purposes only and do not represent Endicott College’s actual financial standing.

Scenario #3 – Mixing Debt and Cash

Through his own analysis and conversations with PFM Financial Advisors, Ferullo determined that the college could take on roughly 40%* of the total cost of all projects as debt issuance and cover the remainder of the total cost of the projects through its financial reserves. He entered these values as a new scenario into Endicott’s financial model and quickly determined that this approach was also not feasible.

Even with the mix of debt issuance and cash payments, the college’s debt service ratio remained below the acceptable value. Endicott’s liquidity and operating margin remained in healthy standing over the ten-year timespan with this funding approach and project timeline, however, the debt service coverage ratio would likely fall below its target value.

Through this final scenario analysis, Ferullo determined that the college could not sustainably pursue every initiative. This scenario was pivotal in understanding that Endicott needed to eliminate some of the projects in order to achieve its over-arching long-term goals.

Even with the mix of cash and debt funding, Endicott College could not sustainably afford to fund all the capital projects and initiatives they originally projected.

Values are for explanatory purposes only and do not represent Endicott College’s actual financial standing.

Project Prioritization Through Financial Modeling

Ideally, Endicott stakeholders wanted to implement every project, but unavoidable financial consequences meant that some projects had to be deprioritized or eliminated entirely. Using Synario, Ferullo modeled the effects of removing the dorm remodel project and the townhome project from the overall project list.

Removing the two capital projects while funding the remaining initiatives with a mix of debt and cash allowed Endicott to remain in good financial standing for operating margin, liquidity ratio, and debt service coverage ratio. Endicott’s strategic vision could be accomplished in the long-term while the finance department remained in compliance with its existing covenants.

However, by removing the two housing initiatives, the College was stunting enrollment growth by placing a short-term strain on available residences for students.To resolve this issue, Endicott’s leadership looked outside of their campus to an available leasing opportunity close by; a local apartment building could be leased and renovated to house students.

The option to lease a dorm building in the short-term lifted a financial burden off the college and allowed Endicott to accommodate continued enrollment growth.

Updated Scenario #3 – Final Analysis

By offloading the housing project to a leased apartment complex, Endicott College was able to meet both its required debt service coverage and liquidity ratio while maintianing a stable operating margin.

Values are for explanatory purposes only and do not represent Endicott College’s actual financial standing.

Stress Testing to Build Confidence

Ferullo presented this solution, as well as the previous scenarios, to President DiSalvo and his leadership team. He was quickly able to show the need to remove the two housing initiatives from the project list as well as offer a financially feasible short-term solution to the student housing issue.

President DiSalvo and his team immediately began querying the model, asking what-if questions about enrollment, headcount, faculty, and other uncertain variables. The president specifically asked Ferullo to show enrollment decline scenarios to better understand the risks they faced if a decrease were to occur. If an enrollment decline scenario occurred, Ferullo showed that other costs could be removed from the model, which led to additional savings for the College.

Although these questions were asked impromptu, Ferullo was able to pivot the model to show the effects of the various what-if questions on the spot. He adapted the Synario model to incorporate various expense reductions (when compared to baseline) and then turned on his enrollment decline scenario, which he had already built into the model. President DiSalvo and his team were able to determine that Endicott would need to find additional revenue sources or cut costs if enrollment dropped by 10% or more. However, the model showed that even in this worst-case scenario, Endicott’s leadership would have four years to solve the issue if it arose.

They saw what the funding gap would be over the various scenarios – giving them confidence they could steer the institution through any potential troubled times. Through Synario, Endicott had a viable plan for growth and the leadership team was confident in the school’s ability to cope with any unexpected downturns.

Adapting the Financial Model to COVID-19

Using the live Synario model, Ferullo presented the final viable project list and funding structure to Endicott’s Finance Committee, as well as the alternative scenarios that led to the workable solution. The Finance Committee signed off on the plan, and, at a separate meeting, the Board of Directors approved the plan as well.

As Endicott College began to formulate a detailed plan to execute each capital project, COVID-19 struck the United States. Campus closures and drastic economic changes caused Endicott to pause all spending until the College fully understood the impacts of the pandemic on its long-term financial outlook. Ferullo pivoted his existing Synario model to account for the myriad changes the College was experiencing, including campus closures, auxiliary revenue reductions, shifting to online learning, and closure of the campus hotel and conference center.

With the ability to use the same financial model, Ferullo did not have to waste time creating different versions of older models or deleting previous work to make room for new initiatives. By turning off the capital project scenarios he was previously working with and incorporating new initiatives to reflect the pandemic impacts, Ferullo quickly adapted the model to reflect Endicott College’s new financial reality. Ferullo presented the new financial model to the College’s leadership team and other institutional stakeholders to build awareness and consensus around the new environment and what steps the College could take to pursue its best financial outlook.


The Coronavirus has put the entire higher education industry in an uncertain flux as each institution waits to see how various revenue streams will be impacted during the fall semester and beyond. Endicott College is no exception, and the College’s leadership continues to adapt its Synario financial model to reflect the changing environment.

As of now, their original capital project plans are on hold until the College’s President, finance team, and board can fully forecast and understand the changes their institution will face in the coming months.

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