Presentation on theme: "BUDGET DEVELOPMENT AND MANAGEMENT"— Presentation transcript:
1 BUDGET DEVELOPMENT AND MANAGEMENT Frank Goldberg, PhDVice Provost for Resource Planning & ManagementHeather J. Haberaecker, PhDExecutive Assistant Vice President for Business & Finance
2 Health Care Tuition GRF Research Innovation GRF GRF ICR Funds Flow at UICHealth CareTuitionGRFResearchInnovationFrank Goldberg, Vice Provost for Resource Planning and Management 11/19/2012GRFGRFICR
3 FY 2013UIC’s budget is comprised of various funding sources that differ across units. Except for the Administration and Academic Support units, the amount of State Appropriation (in RED) is relatively small, and has been continuously declining, across the campus.
4 Budget Decision Principles: Ensure fiscal integrity – decentralized responsibility and decentralized accountabilityEnsure good decision making – assign decision making authority to appropriate entityMaximize use of resources – include financial, physical and human resourcesBalance priorities – balance support for instructional, research, patient care, economic development and service missions of the CampusMaintain quality – reduce and redirect budgets in a manner that best preserves qualityHaving consistent and sound budget principles allows the campus to be strategic in managing its financial resources.
5 Funds flow diagram: ICR 2012 BRINGING ADMINISTRATORS TOGETHER CONFERENCEFunds flow diagram: ICRGRANTAWARDPROJECTS12.5%INDIRECT COSTSCOLLEGE47.5%RESEARCHGOALSCOSTSVCR7.7%CAMPUSRESEARCHGOALSOTHER32.3%CAMPUSRESEARCHCOSTS$1.00DIRECTCOSTSIn 2004, the campus used a formulaic approach to distribute ICR in which 30% flowed to the colleges and the remainder to the campus. In 2005, the amount distributed to the colleges increased to 36.5% and then to 50% in The amount distributed to the colleges was further modified to 47.5% in 2012 to provide additional resources to the Vice Chancellor for Research.DIRECTRESEARCHEXPENDITURES
6 FY 2005 ICR Formulaic Allocations & Commitments (Shown as a percentage of the College’s total F&A earnings)$ in Millions55.4%Note:· In FY 2005 each college was provided a formulaic allocation (in BLUE) based on 36.5% of the amount of F&A that they were projected to generate.· Campus commitments represent additional F&A allocations (in RED).· The percent noted on each bar is the percent of the total F&A earnings of that college, i.e. Medicine’s base allocation of 36.5% plus campus commitments of 18.9% total 55.4% of the College’s total F&A earnings.70.8%46.0%65.9%N/A116.2%53.9%55.8%36.5%55.6%36.5%57.4%36.8%
7 Changes in ICR Allocations FY 2005 – FY 2013 When the campus began to distribute the additional 13.5% (50%-36.5%) of ICR to the colleges, some colleges were instantly rewarded (those that had not been receiving any campus commitments). Because of Frank’s 1st Law: You can only spend a dollar one time, previous campus commitments of ICR to a college were netted against the additional ICR until such time as the commitment was fulfilled.ICR earnings increased from $63.2M in FY 2005 to $76M in FY 2013.Source: the Budget Summary for Operations (Orange Books) FY 2005 and FY 2013.
8 How the Funds Flow ICR FY 2013 While currently 12.5% of ICR flows back to the Provost, most of those dollars are ultimately redirected back to the colleges in the form of special allocations to multi college activities and special projects, such as:Cancer Center and CCTSJoint Department of BioengineeringUnder-represented Faculty Recruitment ProgramNote: Other Units” include the ACCC, Library, and Graduate College.
9 Salary Program (Admin) Strategic Initiatives UIC Budget ModelGRFTuition RevenueReallocationUICBudgetModelBudget UnitsTuition DistributionSalary Program (Admin)Strategic InitiativesHold HarmlessSpace EconomySpace CostsThe UIC Budget Model directs resources to the colleges and to support central services and strategic decisions. The items highlighted in blue on this slide are important components that affect the flows in and out of the distribution model.State Budget ReductionsUA Central Costs
10 Funds flow diagram: Tuition 2012 BRINGING ADMINISTRATORS TOGETHER CONFERENCEFunds flow diagram: Tuition60% BY CREDITS15% BY HEADCOUNT15% TO PROVOST10% TO FIN AIDUNDER-GRADUATETUITIONDIFFERENTIAL75% TO COLLEGES25% TO PROVOST75% TO COLLEGEGRADUATETUITIONDIFFERENTIAL75% TO COLLEGESBy Headcount25% TO PROVOST85% TO COLLEGE15% TO PROVOSTThe tuition distribution model incorporates Frank’s 2nd Law: If we don’t collect it, we can’t distribute it.The tuition distribution model implements the campus policy of allocating most of the earned tuition to colleges to cover instructional costs. When first developed, this allocation methodology assumed annual modest GRF increases, an expectation not realized.PROFESSIONALTUITION85% TO COLLEGESBy Headcount15% TO PROVOST
11 Comparison of State Appropriations and Tuition Revenue FY 2007FY 2013As the model was intended to do, tuition revenue is distributed based on earnings; as a result each college has seen a change in budget relative to price increase and enrollment change.
12 How Tuition is Distributed A vast majority of the college budgets are comprised of tuition revenue while the other units are expected to rely on State Appropriation dollars (GRF) which continues to be diminished.When the tuition distribution model was instituted, a decision was made to accept the existing distribution of GRF, which was based on a series of historic decisions. As a consequence, the admonition in Frank’s 3rd Law: Thou shalt not covert thy neighbor’s GRF.
13 Total budgets have grown since FY 2002, and due to distribution models, the college budgets have increased while the academic support and administrative unit budgets have declined, primarily as a result of declining state support.There was no financial aid cost in FY 2002 since MAP and PELL was sufficient to cover tuition.FY 2013 Centrally-Budgeted Costs (in Millions)Facility Support $30.0 (38%)Instructional Budgets (Summer Session/Con Ed/Global Campus) $11.1 (14%)Employee Benefits & Grad Student Support (includes Workers Comp and Medicare) $12.4 (16%)General Campus Commitments $11.6 (15%)Presidents Award Program $2.5Faculty Awards (incl the Under-represented Faculty Recruitment Pgm) $2.0Cluster Hires $2.5Cancer Center / CCTS $2.2Diversity Initiatives $1.0OTM (Royalties) $2.0Campus-wide expenses $0.9
14 Adjusting the previous slide for inflation, both college and academic support and administrative unit budgets have declined since FY 2002; this despite the fact that total student enrollment has grown by about 3,000 students during the same timeframe.
15 ACCOUNTING FOR YOUR FUNDS What is a C-FOAP?It is a 25 digit number used to identify transactions for your department (similar to how one would use a bank account number).We are going to focus on the 3 most important – the C – F - OC – Chart is a one digit code for a campus (Chicago = 2)1 digit #6 digit #3 or 6 digit #6 digit #6 digit #CHARTCFUNDFORGANIZATIONOACCOUNTAPROGRAMPAll Fund segment codes are determined by the University.For grants, the C-FOAPAL Fund segment represents the grant number as grant Operating Ledger (OPAL) transactions are tracked in Funds. OBFS Grants & Contracts sets up Funds for grants. Grant ledger activity can be tracked by the grant code or by the Fund code.As a general rule (but not always), one can recognize the first digit of the Fund code as the following funding sources:1- State2- ICR and other types of unrestricted Funds3- Auxiliary Funds, Self-Supporting Services, Departmental Activities,Storeroom4- Grants (Federal)5- Grants (State, Local, and Private)6- Gifts, Endowments, Federal Ag Grants, Service Plans (Medical,Nursing, Dental)7- Plant Funds8- Loan and Endowment Funds9- Agency Funds15
16 ACCOUNTING FOR YOUR FUNDS (cont..) A Fund provides a cumulative record of the sources and uses of monies.Examples of Funds (types are designated by the first digit of the 6-digit fund number):1 = State 2 = ICR and other types of unrestricted funds 3 = Self-supporting activities 4 = Grants (federal) 5 = Grants (state, local and private) 6 = Gifts, endowments, service plans (medical, nursing, dental)Your organization code is 6 digits of which the first 3 digits are your department codeYour department code is the most frequently used number
17 DISTRIBUTION OF INDIRECT COST RECOVERY (ICR) Indirect Cost Recovery (ICR) Revenue (also referred to as Facilities & Administrative (F&A) Revenue) refers to funds generated from the recovery of general infrastructure and other costs that cannot be directly charged when performing extramurally funded research.Typical Standard ICR DistributionColleges47.5%*Campus44.8%VC for Research7.7%Total100.0%30% of the 47.5% is governed by the Sponsored Programs Proposal Approval Form (PAF) with a standard 10% college and 20% department split. The 30% may be shared with other departments and colleges based on the contributions of multiple researchers. The other 17.5% is distributed to the college administering the grant.
18 UIC DEFICIT REDUCTION POLICY Deficits are a serious drain on the campus’ financial flexibility and should be avoided.A usage charge is assessed on all non-state funds (excluding grants and contracts) with a deficit of $10,000 or greaterFinancial reports are sent to Deans and College Academic Fiscal Officers (AFO’s) at the end of 2nd and 3rd quarters and the month of May to allow departments to review and initiate actions to address any potential reportable deficits
19 UIC DEFICIT REDUCTION POLICY (cont.) If a deficit remains at the end of fiscal year you will need to submit a deficit reduction plan as follows:$10,000 - $149,999 – Completion of a simple form outlining the cause and planned resolution of the deficit$150,000 - $499,999 - Completion of a three year action plan for resolution of the deficit$500,000 and above - Completion of a five year plan and a meeting to discuss the proposed planAll plans will be reviewed and ultimately approved/disapproved by the Provost. If the plan is not approved, the unit will be assessed a higher usage charge (currently 3% versus 1% for a deficit with an approved deficit reduction plan).
20 MONTHLY FINANCIAL REPORTS There are three monthly financial reports you should review with your respective business manager to make sure you do not have any deficits:Detail Operating Ledger StatementOperating Ledger Transaction Statement Chart 2 Payroll Labor Distribution Report
21 IMPORTANT BUDGET MANAGEMENT PRINCIPLES TO REMEMBER Avoid deficitsReview your department’s financial status monthlyAllocate salaries to grants as soon as they are received so your monthly fund balances are accurateAllocate faculty and staff salaries to C-FOP’s based on the person’s effort (grants, service plans, self-supporting, etc.)Recover the full costs of providing departmental goods or services on self-supporting funds.Charge expenses to the correct C-FOP (e.g. only related charges on a specific grant fund)