Endowment Returns and Annual Giving – In-Person vs. Remote Mega-Analysis

In-Person vs. Remote Mega Analysis:
Endowment Returns and Annual Giving

3m Video

Modeling Changes to Endowment Returns, Utilization, and Annual Giving

The fourth video in Synario’s in-person vs. remote mega-analysis series, this video layers in alternative projections for endowment returns and utilization rates, as well as decreases in annual giving associated with the financial impacts of COVID-19 in 2020 and 2021.

A reliable financial model means that both internal and external changes are updated regularly. In our previous videos, we covered a variety of internal changes including student and enrollment changes, housing and dining changes, and faculty and staff changes. In this video, we visualize changes to endowment returns, utilization rates, and gifts in isolation, then incorporate our internal changes to create a comprehensive financial projection.

Why Does an In-Person vs. Remote Scenario Analysis Matter to Higher Education?

This is the biggest question facing higher education right now. Many financial leaders are asking themselves, “how would an in-person teaching scenario affect our financials versus moving to remote semesters for 2021 and 2022?"

Through this analysis series, we are hoping to help college and university decision-makers analyze and understand how the various impacts associated with these two scenarios can be modeled.

The Synario financial modeling software is ideal for this type of analysis, as it can layer in each micro-scenario and initiative independently, allowing finance professionals to explore their outlook faster than any other modeling software.

Video Transcript

Welcome to the fourth video of our in-person vs. remote mega-analysis, where we examine how higher education institutions could model the various aspects of in-person vs remote teaching scenarios.

In this video, we’ll show how Synario can model changes to endowment returns and annual giving, then layer in the student, auxiliary, and personnel impacts from our previous videos.

– Alternative Scenario –

Just like our previous videos, we start by looking at our baseline projection, showing what our operating margin would look like without the impacts of COVID-19.

You can see around my operating margin graph that I have six different value charts. The two value charts to the right of the operating margin graph deal with endowment returns, whereas the four value charts at the bottom of the screen deal with different types of restricted and non-restricted gifts.

Many institutions saw a decline in endowment returns for 2020, while COVID-19 caused most colleges and universities to increase their endowment utilization. To model these types of changes to endowment we can set our alternative assumption for long-term investment returns to decline for 2020 and then rise above the expected 8% for 2021. We can also update the alternative assumption associated with our endowment utilization rate to increase for fiscal years 2020 and 2021.

By turning on the Alternative assumption in our operating margin graph, we can see that the increased utilization rate increases the operating margin over the baseline for fiscal years 2020 and 2021. However, due to the decreased returns and extra utilization for those two years, our operating margin dips below the baseline for the remainder of our ten-year projection.

Many colleges and universities are also seeing a decline in restricted and non-restricted gifts. In this example, gift revenues will decline between 20 and 30 percent for fiscal years 2020 and 2021. We can see each gift type decline in our value chart editors at the bottom of the screen by selecting its alternative value.

To turn on the alternative gift assumptions and see the changes in our operating graph, we can select the appropriate drop down from our Alternative macro-scenario. 

– In-Person Scenario –

Now that we know how the changes to endowment returns and gifts will impact our operating margin in isolation, lets layer in the in-person student, auxiliary, and personnel impacts from our previous three videos.

By selecting the in-person macro-scenario, we can turn on the initiatives and assumptions associated with our in-person scenario, then turn on our new endowment and gift alternative assumptions.

Once that is saved, we can select the in-person scenario inside of our operating margin graph and see a comprehensive financial outlook for that scenario.

– Remote Scenario –

Alternatively, to see an updated remote scenario, we can make sure each assumption and initiative is turned on in the macro-scenario, then select the remote scenario from the drop-down in the operating margin graph.

In this scenario, we can see our operating margin has a much larger decline for fiscal years 2021 and 2022. To offset that, we can select a higher endowment utilization rate for those two years and watch the operating margin update automatically.

That’s it for this video. Stay tuned for our next video where we will layer in new federal funding associated with the American Rescue Plan to give us a complete and comprehensive financial projection.

As usual, if you would like us to cover a different topic, reach out to us by emailing info@synario.com.