Financial Indicators Tool (FIT)

Based on KPMG’s Composite Financial Index (CFI), CIC's Financial Indicators Tool (FIT) provides an easily understood assessment of an institution’s financial performance that can be tracked over time and benchmarked against similar institutions. In the FIT, four financial ratios—measuring resource sufficiency, operating results, financial assets, and debt management—are presented individually and combined into a single index score indicating the financial health of the institution, tracked over a six-year period.​
 

 About the FIT Dataset

 
​CIC’s Financial Indicators Tool (FIT) is distinctive in two ways. First, it utilizes publicly available data from the U.S. Department of Education’s Integrated Postsecondary Education Data System (IPEDS), as well as IRS Form 990s obtained from GuideStar. The use of these public sources precludes the necessity of requiring each CIC member institution to submit six years of audited financial statements.
 
Second, the FIT provides nationally normed comparisons similar to those in CIC’s Key Indicators Tool (KIT). CIC’s FIT is the first financial benchmarking tool to provide national comparisons for any group of American colleges and universities. The FIT is prepared by the Austen Group and provided to CIC member institutions free of charge, thanks to the generous support of TIAA-CREF.

Note: Both current and previous FIT reports are available through the "Download FIT Report" feature.

View a cover story on the FIT in the April 2009 issue of NACUBO's Business Officer magazine.
 

 Composite Financial Index (CFI) Information and Methodology

 
The Composite Financial Index (CFI) provides a more complex picture of the financial health of the institution at a point in time than is possible by simply comparing multiple indicators. Examining the trend of an institution’s CFI score over an extended period offers a more stable long-term view of an institution’s financial performance, given fluctuations in institutional conditions, and external circumstances, such as market performance.

The CFI Methodology: This method was developed by KPMG, Prager, Sealy & Co., LLC, and Bearing Point, Inc. (see Prager, F. J., Cowen, C. J., Beare, J., Mezzina, L., Salluzzo, R. E., Lipnick, J. & Tahey, P. (2005). Strategic Financial Analysis for Higher Education. (6th ed.): KPMG, Prager, Sealy & Co., LLC, and BearingPoint, Inc.). The CFI includes four commonly used financial ratios:

 

  • Primary Reserve Ratio – A measure of the level of financial flexibility
  • Net Operating Revenues Ratio – A measure of the operating performance
  • Return on Net Assets Ratio – A measure of overall asset return and performance
  • Viability Ratio – A measure of the ability to cover debt with available resources

Once each of the four ratios is calculated, the relative strength of the score, or strength factor, and its importance in the mix of creating a composite score, or weight, are computed. The result is one weighted score for each indicator that when added together produces the Composite Financial Index. The strength factors and CFI score are standardized scores that fall along a scale of -4 to 10. A CFI score of 3 is the threshold of institutional financial health. A score of less than 3 indicates a need for serious attention to the institution’s financial condition. A score of greater than 3 indicates an opportunity for strategic investment of institutional resources to optimize the achievement of institutional mission.

 

 Federal Test of Financial Responsibility

 
The US Department of Education's Test of Financial Responsibility should not be confused with the Composite Financial Index used in CIC's FIT. The Financial Responsibility Test uses a composite score based upon three ratios, two of which are ratios also used in the CFI, the primary reserve ratio and the net operating revenues ratio (formerly called the net income ratio). The third ratio in the Department of Education's methodology is the equity ratio, which is a measure of an institution's ability to borrow.

This composite index was developed for the Department of Education by KPMG to determine eligibility for Title IV funds. Its purpose is primarily to identify institutions that are at financial risk (using a scale of -1 to 3). The CFI presents a more complete picture of an institution's financial strengths and weaknesses (using a scale of -4 to 10) and is a useful strategic indicator for institutions at various levels of financial health. A spreadsheet developed by the Austen Group allows institutions to calculate and compare CFI ratios and scores with those for the US Department of Education's Test of Financial Responsibility.
 

 Contact Information

 
​For questions about the FIT, please contact CIC Director of Research Projects Jesse Rine at jrine@cic.nche.edu or (202) 466-7230.
 

 FIT Sample Report

 
 

 CIC Benchmarking Services

 
 

 Generous Support

 
 
Special thanks to TIAA-CREF for its generous support of the FIT.