1 n ew f inancial m odel at the u niversity of v irginia
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NEW FINANCIAL MODELAT THE UNIVERSITY OF VIRGINIA
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NEW FINANCIAL MODELAT THE UNIVERSITY OF VIRGINIA
Website:http://www.virginia.edu/resourcingthemission
Chip German e-mail:[email protected]
Costs of Central Services
3THE PAST: TRYING TO LOOK THROUGH DEEPLY
TINTED GLASS
NEW FINANCIAL MODELAT THE UNIVERSITY OF VIRGINIA
VERSION 1.5
School Planning View
Personnel Costs
Endowment Income
Actual Tuition Revenue
Costs of Financial Aid
Dollars from Heaven
Private Gifts
Direct Expenditures
Complete Strategic Perspective
Innovation and Entrepreneurship
Responsibility&
Accountability
Costs of Central Services
4THE FUTURE: A COMPLETE FINANCIAL
PICTURE
NEW FINANCIAL MODELAT THE UNIVERSITY OF VIRGINIA
School Planning View
Personnel Costs
Endowment Income
Actual Tuition Revenue
Costs of Financial
Aid
Base and Strategic Operating Support
Private Gifts
Direct Expenditures
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NEW FINANCIAL MODELAT THE UNIVERSITY OF VIRGINIA
University
School
StateFunds
Private Gifts/Endow. Inc.
Tuition
Research Funds
Base OperatingSupport
AdditionalStrategic Support
Central Services
Allocated Costs
Direct Expenditures
SOURCES
USES
TOWARD A MORE TRANSPARENT FINANCIAL SYSTEM
UndergradFinancial Aid
Portion of undergrad tuition that goes to undergrad financial aid
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NEW FINANCIAL MODELAT THE UNIVERSITY OF VIRGINIA
CURRENT STATUS:
• Discussion of initial school scenarios between Provost, COO, and individual school deans has just concluded
• Focus is now shifting to parallel processes:• Budget building for FY14-15• Scenario and reporting refinement
• Improvement of accuracy and precision in underlying data
• Move of modeling platform from Excel to Hyperion “cost of education” with transparency of allocation methods and drill-down capabilities
• Parallel processes will converge near beginning of FY14-15 with translation of 14-15 budget into NFM terms and organization and new means of tracking
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NEW FINANCIAL MODELAT THE UNIVERSITY OF VIRGINIA
HOW DO WE ALLOCATE CENTRAL SERVICE COSTS?
DEFINE SERVICE CATEGORIES THAT ARE NOT METERED AND/OR DIRECTLY RECOVERED
• Facilities Services• IT Services• Employee Services• Development/Alumni-Engagement Services• Central Library Services• Research Support Services• Student Support Services
• Undergraduate Admissions Services• Academic Support Services• General Services (executive/managerial)
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NEW FINANCIAL MODELAT THE UNIVERSITY OF VIRGINIA
HOW DO WE ALLOCATE CENTRAL SERVICE COSTS?
APPLY ALLOCATION (USAGE APPROXIMATION) ALGORITHMS
• Each central-cost category has its own• Developed by planning committees over years prior to 2013• Proposed by New Financial Model steering committee to
President, EVP/COO and EVP/Provost in December 2012; adopted in spring 2013
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NEW FINANCIAL MODELAT THE UNIVERSITY OF VIRGINIA
HOW DO WE ALLOCATE CENTRAL SERVICE COSTS?
APPLY ALLOCATION (USAGE APPROXIMATION) ALGORITHMS
Facilities Services:
• Total cost is allocated by proportion of square feet occupied by all entities (includes proportional share of “general” space in shared buildings)
• Note that utilities will be directly billed to units/schools for space they occupy (currently viewable as “memo” bills)
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NEW FINANCIAL MODELAT THE UNIVERSITY OF VIRGINIA
HOW DO WE ALLOCATE CENTRAL SERVICE COSTS?
APPLY ALLOCATION (USAGE APPROXIMATION) ALGORITHMS
IT Services:
• Total costs allocated by this formula: weighted 0.75 x proportion of serviced employees (excludes Facilities and IT employees) + weighted 0.25 x proportion of annual FTE students
• Excludes Communication Services costs, which are recovered through billing.
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NEW FINANCIAL MODELAT THE UNIVERSITY OF VIRGINIA
HOW DO WE ALLOCATE CENTRAL SERVICE COSTS?
APPLY ALLOCATION (USAGE APPROXIMATION) ALGORITHMS
Employee Services:
• Total costs allocated by this formula: proportion of FTE employees
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NEW FINANCIAL MODELAT THE UNIVERSITY OF VIRGINIA
HOW DO WE ALLOCATE CENTRAL SERVICE COSTS?
APPLY ALLOCATION (USAGE APPROXIMATION) ALGORITHMS
Development (all University entities receiving gifts):• 41.5 percent of total central costs allocated by this
formula: proportion of school/unit-specific gifts greater than $100K for last four years
• 58.5 percent of total central costs temporarily covered by University grant
Alumni Engagement (schools only):• 41.5 percent of total central costs allocated by this
formula: proportion of living alumni for all schools• 58.5 percent of total central costs temporarily covered
by University grant
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NEW FINANCIAL MODELAT THE UNIVERSITY OF VIRGINIA
HOW DO WE ALLOCATE CENTRAL SERVICE COSTS?
APPLY ALLOCATION (USAGE APPROXIMATION) ALGORITHMS
Central Library Services:
• Total costs not covered by other funding sources allocated by this formula: proportion of sum of annual headcount students + annual number of doctoral degrees + FTE instructional/research faculty
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NEW FINANCIAL MODELAT THE UNIVERSITY OF VIRGINIA
HOW DO WE ALLOCATE CENTRAL SERVICE COSTS?
APPLY ALLOCATION (USAGE APPROXIMATION) ALGORITHMS
Research Support Services:
• Total costs not covered by other funding sources allocated by this formula: weighted 0.5 x proportion of total research dollars + weighted 0.5 x proportion of total awards
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NEW FINANCIAL MODELAT THE UNIVERSITY OF VIRGINIA
HOW DO WE ALLOCATE CENTRAL SERVICE COSTS?
APPLY ALLOCATION (USAGE APPROXIMATION) ALGORITHMS
Student Services:
• Total costs not covered by other funding sources allocated by this formula: proportion of annual FTE students
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NEW FINANCIAL MODELAT THE UNIVERSITY OF VIRGINIA
HOW DO WE ALLOCATE CENTRAL SERVICE COSTS?
APPLY ALLOCATION (USAGE APPROXIMATION) ALGORITHMS
Academic Support Services:
• Total costs not covered by other funding sources allocated by this formula: proportion of (annual FTE Faculty + annual FTE students)
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NEW FINANCIAL MODELAT THE UNIVERSITY OF VIRGINIA
HOW DO WE ALLOCATE CENTRAL SERVICE COSTS?
APPLY ALLOCATION (USAGE APPROXIMATION) ALGORITHMS
General Services (executive/managerial):
• Total costs not covered by other funding sources allocated by this formula: proportion of annual direct school expenditures
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NEW FINANCIAL MODELAT THE UNIVERSITY OF VIRGINIA
HOW DO WE ALLOCATE REVENUES?
IMPORTANT ISSUE FOR CENTRAL SERVICE PROVIDERS: ARE YOU AFFECTED BY CHANGES IN ALLOCATIONS OF REVENUE?
• Undergraduate tuition (net of financial aid and blind to in-state vs. out-of-state proportions) will be allocated via a blended formula that considers includes the credit hours students take within a school (75%) and the schools with which students are affiliated (25%). Those undergraduate schools with differential tuitions or school-specific fees will receive that tuition (net of financial aid) or fee revenue directly, not through an allocation formula. Tuition revenues fees from summer session will be allocated directly to schools through a methodology currently in development.
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NEW FINANCIAL MODELAT THE UNIVERSITY OF VIRGINIA
HOW DO WE ALLOCATE CENTRAL SERVICE COSTS?
IMPORTANT ISSUE FOR CENTRAL SERVICE PROVIDERS: ARE YOU AFFECTED BY CHANGES IN ALLOCATIONS OF REVENUE?
• Graduate tuition will be allocated directly to the schools of enrollment (and includes both financial aid and any out-of-state differential); implemented for 2013-14. Graduate tuition revenues and school-specific fees from summer session will be allocated directly to schools through a methodology currently in development.
• Grants and contracts will be allocated to the unit holding the grant or contract.
• Facilities and administrative cost recoveries will be allocated to the unit holding the research grant.
• Restricted endowment distribution will be allocated according to the donor’s wishes.
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NEW FINANCIAL MODELAT THE UNIVERSITY OF VIRGINIA
HOW DO WE ALLOCATE REVENUES?
IMPORTANT ISSUE FOR CENTRAL SERVICE PROVIDERS: ARE YOU AFFECTED BY CHANGES IN ALLOCATIONS OF REVENUE?
• The 50-basis point endowment administration fee will be allocated to the endowment owner.
• Foundation support in cash and other forms (including in-kind) must be reported as a source by each school.
• Other revenue (gifts, sales, services, transfers, etc.) is allocated to the school that receives it.
• ETF credits equal to direct expenditures in the same category are included in school revenue totals.
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NEW FINANCIAL MODELAT THE UNIVERSITY OF VIRGINIA
HOW DO WE ALLOCATE REVENUES?
IMPORTANT ISSUE FOR CENTRAL SERVICE PROVIDERS: ARE YOU AFFECTED BY CHANGES IN ALLOCATIONS OF REVENUE?
• Unrestricted state funding, unrestricted gifts and unrestricted endowment distribution will be retained by the President and deployed in ways that include the following:• To maintain a program that will provide supplemental
funding in such forms as short-term strategic support or longer-term base operating support from a central pool to ensure that all schools sustain excellence.
• To invest in the University’s highest priorities as identified by the strategic planning process.
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NEW FINANCIAL MODELAT THE UNIVERSITY OF VIRGINIA
BACKGROUND INFORMATION:TOTAL ACADEMIC DIVISION OPERATING
EXPENDITURE BUDGET2012-13
$1.36 BILLION DOLLARS
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Sources
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Uses
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NEW FINANCIAL MODELAT THE UNIVERSITY OF VIRGINIA
Website:http://www.virginia.edu/resourcingthemission
Chip German e-mail:[email protected]