CU continues assessment of market downturn on strategic plan accelerations

A team of campus and system chief financial officers, representatives of the CU treasury and others is continuing its work to determine the impact of the financial market downturn and disconnects in information provided by the CU treasury on planned accelerations to the systemwide strategic plan, as reported in last week’s CU Connections.

What is clear is that many of the accelerations, planned last fiscal year and supported by one-time funds from the then-strong financial markets, will have to be delayed, paused or stopped. In addition to the adjustments, the finance team is also identifying what revenue is available to put toward the planned accelerations, said system Vice President and Chief Financial Officer Chad Marturano.

While a number of factors make arriving at the precise amount of funding available complicated, Marturano said the team’s best estimate is that a total of about $120 million for the strategic plan accelerations will be paused, delayed or stopped this year. The finance team is still dissecting what revenues are available and what planned accelerations need to be adjusted. When it completes its work, more campus-specific information will be provided.

In a letter to the CU community, President Todd Saliman said that while the news is unfortunate, readjusting is necessary.

“While it’s painful to not fund anticipated new expenses, it would be worse to carry on with spending plans for which the source of funding has declined. We must live within our means. When revenues decline, we must spend less,” Saliman wrote. “This is disappointing. I was looking forward to working with the campuses to make progress on the plan’s priorities.”

Saliman met with the Faculty Council Budget Committee on Thursday to provide information and answer questions about the issue. He plans to meet with other university groups in the near future.

The effects do not impact core university or campus budgets, only strategic plan accelerations across the four campuses. Many of the efforts had not started. Some funding from early market gains, about $140 million, has been spent.

Marturano said the team is taking a painstaking approach to determine how to adjust. “The market downturn and compounding challenges in the treasury means we will have less than expected to accelerate implementation of the strategic plan,” he said. He stressed that the university’s treasury is secure and can support the ongoing operations of campuses.

The challenge was exacerbated by a disconnect between information the former CU treasurer (who resigned from CU) provided the system administration that affected the university’s ability to respond to the market downturn and intervene in a timely way. The disconnect involved overestimating the amount of funds that should have been made available to campuses, detail about liquid assets, how funds were realized and reinvested, and inaccurate assurances about funds available once markets began to decline).

After the treasurer resigned from the university, the Board of Regents appointed retired CU Treasurer Dan Wilson to serve in the interim position. While the market downturn did not threaten the principal in CU’s treasury pool (due to built-in buffers) Wilson has been looking at all of the university’s investment revenue streams to determine the extent of the impact on strategic plan accelerations. “The team in the CU Treasury, along with the CFOs and others, is diligently working on the issue,” Marturano said.

Additionally, the university is taking steps to ensure a similar scenario does not happen again. University officials are in the process of engaging an independent external firm to level set its market return spending plans going forward and to validate its assumptions. Additionally, an independent review will also determine what added measures need to be put in place to ensure appropriate controls in the treasury operation.