Coping with Financial Distress

Colleges and universities, like corporations and other nonprofit organizations, are subject to periodic fluctuations in the economy and public support. Thus, the question is not whether they will confront financial problems but rather when and how. This article describes how institutions and boards can detect budgets in crisis, provides principles for addressing the crisis through a process called "retrenchment," and outlines retrenchment stages--from minor budget shortfalls that require only a modest response to a full-blown emergency that requires significant actions to guarantee the institution's survival.