university of minnesota financial overview. university of minnesota financial management...
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UNIVERSITY OF MINNESOTAFinancial Overview
University of MinnesotaFinancial Management Organization
UNIVERSITY OF MINNESOTABOARD OF REGENTS
UNIVERSITY PRESIDENTRobert Bruininks
VICE PRESIDENT, CFO & TREASURERRichard Pfutzenreuter
Lincoln KallsenDirector of Financial Planning & Analysis
UNIVERSITY TAX DEPARTMENTKelly Farmer
Director
OFFICE OF ASSET MANAGEMENTStuart Mason
Assoc. VP & Chief Investment Officer
Carole FleckDirector of Debt Managment
OFFICE OF BUDGET & FINANCEJulie Tonneson
Director
OFFICE OF REAL ESTATESue Weinberg
Director
OFFICE OF THE CONTROLLERMike Volna
Assoc. VP & ControllerAccounting ServicesDisbursements/External SalesU of M Policy DevelopmentFinancial Systems Support
PurchasingSponsored Financial Reporting
Inventory ServicesRisk Management & Insurance
Inventory Services
Investment ManagementCash ManagementBursar Operations
Operating Budget DevelopmentCapital Budget DevelopmentBiennial Budget Development
Compact Process Support
OFFICE OF INSTITUTIONALRESEARCH & REPORTING
ASSOC. VP & DIRECTOR OF AUDITSGail Klatt
r. 2004-Sept-10
Fiscal Year 2007-08Total Operating Budget
What is the amount of the University’s annual budget?
Current Non-Sponsored Expenditures $2,515,519,819
& Mandatory Transfers
Current Sponsored Expenditures $ 534,000,000
Total Current Fund Operating Budget $3,049,519,819
All-Funds Budget Structure
Non-Sponsored Funds$2.5 Billion
Centrally Allocated & Attributed$1.462 Billion
Local Unit Generated Revenues$1.053 Billion
$795 MillionClinical Income
Restricted IncomeGrants & ContractsBusiness & Industry
Sales & ServicesFees
Endowment Income
State O & M/Other Misc.
State Specials
Indirect Cost Recovery
Central Reserves
Tuition
$258 MillionAuxiliary
Operations
University Fee
Sponsored Funds$534 Million
University of Minnesota Revenue Sources All Funds FY2007
Educational Sales/Contract Activity: 11%
Gifts: 4%
Federal/State/Other Grants and Contracts: 26%
Capital Grants/Gifts/Appropriations: 3%
State Appropriation: 26%
Auxiliary Enterprises: 11%
Tuition and Fees: 19%
Educational Sales/Contract Activity: 11%
Gifts: 4%
Federal/State/Other Grants and Contracts: 26%
Capital Grants/Gifts/Appropriations: 3%
State Appropriation: 26%
Auxiliary Enterprises: 11%
Tuition and Fees: 19%
University of Minnesota Revenue Sources All Funds FY 2007
FY 2007–08 Revenues: $1.2 billion
0
200
400
600
800
1000
1200
1400
Why Are These RevenuesSo Important?
Student Tuition
and Fees
StateAppro-
priations
• 70% of total spending on instruction
• 77% of total spending on student services
• 72% of total spending on faculty compensation
• 93% of the total budget of CLA
• 78% of the total budget of IT
• 75% of the total budget of CFANS
Two Budget Processes
• Biennial Budget Request to the State
- completed every two years
• Annual Budget Process
- conducted every year
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Where the Money GoesState of Minnesota General Fund Budget / $34.58 Billion2010-11 Biennium
Higher Education
9.1%
Public Safety5.4%Health &
Human Services
28.1%
K-12 Education
39.9%
All Other8.5%Property Tax
Aids9.0%
77% of State Budget • K-12 Education
• Property Tax Aids & Credits
• Health & Human Services
Legislative Outcome* 2007-08 2008-09
Request $58,900,000 $64,500,000
Actual $67,447,000 $14,310,000
Difference $ 8,547,000 ($50,190,000)
Biennial Math = Request $182,300,000Actual $149,204,000Difference ($ 33,096,000)
*Excludes $25,000,000 onetime U/Mayo Partnership
Current Non-Sponsored FundsFiscal Year 2006-07 Expenditures / $2.2 Billion
60%
4%
12%
11%
7%
2%4%
36%
2%
5%
18%
11%
12%
16%
By Object of Expenditure By Function
Consultants/Purchased Personnel
Equip. & Capital Assets
Utilities
Supplies &Services
All Other
Student Aid
Salaries &Fringe
InstructionAll Other
Op. &Maint.of Plant
InstitutionalSupport
Academic Support &Student Services
PublicService
Research
State of MinnesotaFinancial Context – FY2008/09 & FY2010/11
($3,000)($2,500)($2,000)($1,500)($1,000)
($500)$0
$500
2008/09 2010/11
Projected Balance Feb. 2008 ForecastActual Balance May 2008 End Session
Projected Balance 2010/2011 @ 2.0% InflationProject Balance 2010/2011 @ 3.3% Inflation
Historical Annual Incremental Investment Framework: $80.0 M
100%
0%
Safety and contractual obligations = $3.0M or 3%
Programmatic investments = $18.0M or 22%
Infrastructure investments and support = $7.0M or 9%
Student aid = $5.0M or 6%
Facility operations = $12.0M or 15%
Employee compensation = $35.0M or 45%
DRAFT FOR DISCUSSION ONLY2010-2011 Biennial BudgetConceptual Framework
Research Enhancement
Program
State Responsibility
Compensation75% State Share
Student Aid
University Responsibility
[Tuition and Internal Funds]
Educational & Instructional Programs
Core Academic Support(cost pools, etc.)
Compensation25% U of M Share
Biennial Budget Request:Increase over FY09 Increase over
FY102010-2011 Biennium
FY2010 FY2011 (Biennial Math)
State Request
Core Compensation
(State Share)
$36,500,000 $22,200,000 $95,200,000
Middle Income Scholarship
$8,000,000 $0 $16,000,000
Research Enhancement Fund
$10,000,000 $10,000,000 $30,000,000
New State Appropriation $54,500,000 $32,200,000 $141,200,000
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Biennial Budget Timeline
July August Sept. Oct. Nov.
EstablishConceptual Framework
FinishPrinciples,
Prel. Write Ups &Financial PlanFor SeptemberBOR Review
Present Biennial
Request toBoard of RegentsReview
Present Biennial
Request toBoard of RegentsApproval
CompleteEntry of Biennial Budget
Information into State System
DOF Budget
Instructions
BOR DocketDeadline 8-24-08
BOR DocketDeadline 9-28-08
UMD Meeting
Agency PlansDue to MNLegislature
Nov 30, 2008
PreliminaryCost
Estimates 17
Three critical economic issues
The University’s biennial request funds:1. Compensation for University faculty and staff.
2. Middle income scholarships for Minnesota students and their families.
3. Research enhancements to meet growing demand for capacity and evolving statewide needs.
Compensation for faculty and staff
Request
3% annual compensation pool increase = $95.2M for biennium
Rationale
Higher education is people-intensive and highly competitive.• Nearly two-thirds of the U’s annual operating budget is compensation.• Minnesotans have seen prices rise by 5.6% since July 2007.• Top faculty are highly sought-after — making them challenging to recruit
and retain.
Middle income scholarship program
Request
Middle-income scholarships to reduce tuition by 5% to 40% depending on income = $16M for biennium ($8M recurring)
Rationale
Many middle-income students receive little scholarship support.• Middle-class Minnesota families are struggling with rising costs.• Low-income students already attend the U with free tuition.• It’s time to provide ongoing scholarship support for middle-income
students.
Research enhancement program
Request
New investments to enhance research capacity = $30M for biennium
Rationale
The U creates new knowledge that fuels the economy.• Investment in research is critical to job creation and economic growth.• The U competes to win $600M+ in research funding each year.• Our research capacity is leveraged by the state, business and industry,
and other colleges and universities.
University-funded components
Funding sources
4.5% tuition increase per year
1% reallocation per year
University obligations
The U’s share of the compensation pool increase
Essential academic investment and support
Debt service, utilities, leases, new building operations, safety and contractual obligations
FY2010 – 2011 Biennial budget request
Increase over FY09
Increase over FY10
2010-2011 Biennium
FY2010 FY2011 (Biennial Math)
State Request
Core Compensation
(State Share)
$36,500,000 $22,200,000 $95,200,000
Middle Income Scholarship
$8,000,000 $0 $16,000,000
Research Enhancement Fund
$10,000,000 $10,000,000 $30,000,000
New State Appropriation
$54,500,000 $32,200,000 $141,200,000
Budget Development Activities
Pre IMG
“Infante” Phase Pre IMG
“Infante” Phase
IMG
“Install” Phase IMG
“Install” Phase
IMG“Shared
Responsibility”Or “Common Good”
Phase
IMG“Shared
Responsibility”Or “Common Good”
Phase
1992 ------1997 1998 ------1999 2000 ------ 2005
“Earned Income&
Full Cost Model”Phase
“Earned Income&
Full Cost Model”Phase
2006 ------ ????
Reforming Resource AllocationModels for Revenue Distribution
TuitionRevenue
Allocations toAcademic & Support Units
CentralFunds
Indirect CostRecovery
StateAppropriations
Previous Model Current Model
StateAppropriations
TuitionRevenue
Indirect CostRecovery
Allocations toAcademic Units
Allocations toSupport Units
50.5%
49.5% 100%
CentralFunds
Centrally Distributed Revenues
Local Unit Generated Revenues
The challenge of funding institutionalcommon goods andacademic priorities
Reforming Resource AllocationWhy Institutional Revenue Sharing?
IRS – recognition that all units should share in providing
resources for meeting institutionalneeds & budgetary responsibilities.
Institutional Revenue SharingFiscal Year 2004-05 Approved Budget
Academic Institutional Revenue Sharing = Total Revenues X 8.5%
Academic Institutional Revenue Sharing = Total Revenues X 8.5%
Part 1
Calculate revenue yield @ 3.75% of
“Sales & Services” Revenue*
* [Includes Central Support Units]
Part 1
Calculate revenue yield @ 3.75% of
“Sales & Services” Revenue*
* [Includes Central Support Units]
Part 2
Subtract “3.75% Sales & Services” Assessment from
8.5% IRS and collect remaining
assessment from collegiate/campus
units
Part 2
Subtract “3.75% Sales & Services” Assessment from
8.5% IRS and collect remaining
assessment from collegiate/campus
units
Estimated FY05 Yield = $11.9 m Estimated FY05 Yield = $87.3 m
Why Build Upon the IMG Model?IMG Largely A Success - However
NEED MORE
NEED LESS
TransparencySimplicity/Fewer LeversAll-Funds/All Costs AnalysisAccountability – Units & Leadership
Internal AssessmentBase + / - Methodology
Minnesota’s Budget Development Story
Earned Revenues
TuitionICRFeesGiftsSalesEtc.
Allocated StateAppropriation
AcademicUnits
Allocated Costs
UtilitiesFacilities OpsDebtLeasesLibrariesResearchTechnologyStudent Serv.ClassroomsAdministration
Earned Income-Full Cost
9 Cost Allocation Pools• Facilities – Operations & Maintenance
(ASF/Space Data Base/Twin Cities/Standard Service Levels)
• Utilities - (Consumption by Building/Buildings Metered/Monthly Bill)
• Debt & Leases - (Occupancy/General Purpose Classrooms)
• Office of Information Technology(Centrally Allocated/Unweighted Headcount/Tiered)
• Administrative Service Units - (Total Expenditures/Tiered)
• Research(Sponsored Services/3 Yr. Rolling Avg. Sponsored Expenditures)
• Libraries - (Weighted Student & Faculty Headcount/Law Library Nuance)
• Student Services(3 “buckets”/Primarily Student Headcounts/Aid Programs Included)
• General Purpose Classrooms(Student Course Registrations/Future Incentive Refinements)
Summary of Cost Allocation RecommendationsX = Primary “type” assignment
Utilities Facilities
O&M
Debt &
Leases
Tech Admn
Serv
Libraries Research Student
Serv
Gen.
Purpose
Class-rooms
Consumption
Based Cost
Allocation
X X
Cost-Driver
Based Cost
Allocation
X X X X X X
Common Good Based
Cost
Allocation
X
Utilities15%
Facilities15%
Debt/Leases9%
Libraries10%
Research Admin10%
Technology9%
Student Serv.3%
Admin. Serv.28%
Classrooms1%
Utilities18%
Facilities16%
Debt/Leases12%
Libraries10%
Research Admin3%
Technology10%
Student Serv.17%
Classrooms3%
Admin. Serv.11%
Medical School College of Biological Sciences
Utilities5%
Facilities10%
Debt/Leases4%
Libraries16%
Research Admin1%
Technology17%
Student Serv.32%
Classrooms5%
Admin. Serv.10%
College of Liberal ArtsUtilities
3%Facilities
9%
Debt/Leases0%
Libraries22%
Research Admin0%
Technology19%
Student Serv.23%
Classrooms6%
Admin. Serv.18%
Carlson School of Management
6-Year Capital Improvement Plan
Part One: May/JuneCapital Improvement Budget
Year 1
Part Two: Oct./Nov. Capital Improvement Plan
Years 2 - 6
Board of Regents Policy directs the administration to develop a capital budget with a “6 year time horizon, updated annually”
6-Year Capital Improvement Plan
Board of Regents
Review/Action/Discussion
Policy Background/context
Oversight Strategic positioning
Key ToolsState Biennial Request – even years
Annual Operating Budget – every yearState Capital Request – odd yearsSix Year Capital Plan – every yearAnnual Capital Budget – every year
Operating & Capital Budget DevelopmentC
omm
ittee
s
Wor
k se
ssio
ns
Board Meetings
Oversight & Approval
Contacts for Budget and Financial Information
Budget Office Web Site: www.budget.umn.edu
Budget Office Phone #: 612-626-4517
Controller’s Org Phone #:612-624-0874
Institutional Research & Reporting Web Site:www.irr.umn.edu
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