Utilizing the Composite Financial Index as Strategic Financial Analysis for Measuring Financial Health and Student Success Rates among Iowa Community Colleges

The phrase ―survival of the fittest‖ is coming to fruition in higher education today. Less than strategic financial moves have no place in post-secondary education. Facing the realities of our current economy is dictating major changes in how colleges are ―doing business.‖ These changes present enormous challenges to community college administrators. Two of these challenges are meeting the demands of faculty associations and ever-increasing budgets for remedial education. A trend of waning state support is also exacerbating these challenges while major changes occurring at the legislative level have also intensified the need for extremely competent leaders—leaders with a much more diverse set of skills than in the past. One such skill necessary for effective leadership in the community college lies in the area of strategic financial analysis. Annual reporting procedures for the Higher Learning Commission require some ratio analyses. However, the data should be analyzed and evaluated for strategic decision making by each community college and not merely reported for compliance purposes. The purpose of this study is to analyze the financial statements for Iowa‘s community colleges and compare the results of this analysis to the success rates of first-time, full-time students who transfer to a four-year institution or graduate with a degree, diploma, or certificate within 150 percent of normal time to complete or three years. The composite financial index conceptual framework was utilized to calculate the overall financial health for Iowa‘s community colleges for the fiscal years 2001-2010.