1. 1 N EW F INANCIAL M ODEL AT THE U NIVERSITY OF V IRGINIA

2. 2 N EW F INANCIAL M ODEL AT THE U NIVERSITY OF V IRGINIA Website: http://www.virginia.edu/resourcingthemission Chip German e-mail: cgerman@virginia.edu

3. Costs of Central Services 3 T HE P AST : T RYING TO LOOK THROUGH DEEPLY TINTED GLASS N EW F INANCIAL M ODEL AT THE U NIVERSITY OF V IRGINIA V ERSION 1.5 Personnel Costs Endowment Income Actual Tuition Revenue Costs of Financial Aid Dollars from Heaven Private Gifts Direct Expenditures

4. Complete Strategic Perspective Innovation and Entrepreneurship Responsibility&Accountability Costs of Central Services 4 T HE F UTURE : A COMPLETE FINANCIAL PICTURE N EW F INANCIAL M ODEL AT THE U NIVERSITY OF V IRGINIA Personnel Costs Endowment Income Actual Tuition Revenue Costs of Financial Aid Base and Strategic Operating Support Private Gifts Direct Expenditures

5. 5 N EW F INANCIAL M ODEL AT THE U NIVERSITY OF V IRGINIA University School StateFunds Private Gifts /Endow. Inc. Tuition Research Funds BaseOperatingSupport AdditionalStrategicSupport Central Services Allocated Costs Direct Expenditures S OURCES U SES T OWARD A MORE TRANSPARENT FINANCIAL SYSTEM Undergrad Financial Aid Portion of undergrad tuition that goes to undergrad financial aid

6. 6 N EW F INANCIAL M ODEL AT THE U NIVERSITY OF V IRGINIA C URRENT S TATUS : 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

7. 7 N EW F INANCIAL M ODEL AT THE U NIVERSITY OF V IRGINIA H OW D O W E A LLOCATE C ENTRAL S ERVICE C OSTS ? D EFINE S ERVICE C ATEGORIES 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)

8. 8 N EW F INANCIAL M ODEL AT THE U NIVERSITY OF V IRGINIA H OW D O W E A LLOCATE C ENTRAL S ERVICE C OSTS ? A PPLY A LLOCATION (U SAGE A PPROXIMATION ) A LGORITHMS 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

9. 9 N EW F INANCIAL M ODEL AT THE U NIVERSITY OF V IRGINIA H OW D O W E A LLOCATE C ENTRAL S ERVICE C OSTS ? A PPLY A LLOCATION (U SAGE A PPROXIMATION ) A LGORITHMS 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)

10. 10 N EW F INANCIAL M ODEL AT THE U NIVERSITY OF V IRGINIA H OW D O W E A LLOCATE C ENTRAL S ERVICE C OSTS ? A PPLY A LLOCATION (U SAGE A PPROXIMATION ) A LGORITHMS 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.

11. 11 N EW F INANCIAL M ODEL AT THE U NIVERSITY OF V IRGINIA H OW D O W E A LLOCATE C ENTRAL S ERVICE C OSTS ? A PPLY A LLOCATION (U SAGE A PPROXIMATION ) A LGORITHMS Employee Services: Total costs allocated by this formula: proportion of FTE employees

12. 12 N EW F INANCIAL M ODEL AT THE U NIVERSITY OF V IRGINIA H OW D O W E A LLOCATE C ENTRAL S ERVICE C OSTS ? A PPLY A LLOCATION (U SAGE A PPROXIMATION ) A LGORITHMS 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

13. 13 N EW F INANCIAL M ODEL AT THE U NIVERSITY OF V IRGINIA H OW D O W E A LLOCATE C ENTRAL S ERVICE C OSTS ? A PPLY A LLOCATION (U SAGE A PPROXIMATION ) A LGORITHMS 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

14. 14 N EW F INANCIAL M ODEL AT THE U NIVERSITY OF V IRGINIA H OW D O W E A LLOCATE C ENTRAL S ERVICE C OSTS ? A PPLY A LLOCATION (U SAGE A PPROXIMATION ) A LGORITHMS 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

15. 15 N EW F INANCIAL M ODEL AT THE U NIVERSITY OF V IRGINIA H OW D O W E A LLOCATE C ENTRAL S ERVICE C OSTS ? A PPLY A LLOCATION (U SAGE A PPROXIMATION ) A LGORITHMS Student Services: Total costs not covered by other funding sources allocated by this formula: proportion of annual FTE students

16. 16 N EW F INANCIAL M ODEL AT THE U NIVERSITY OF V IRGINIA H OW D O W E A LLOCATE C ENTRAL S ERVICE C OSTS ? A PPLY A LLOCATION (U SAGE A PPROXIMATION ) A LGORITHMS Academic Support Services: Total costs not covered by other funding sources allocated by this formula: proportion of (annual FTE Faculty + annual FTE students)

17. 17 N EW F INANCIAL M ODEL AT THE U NIVERSITY OF V IRGINIA H OW D O W E A LLOCATE C ENTRAL S ERVICE C OSTS ? A PPLY A LLOCATION (U SAGE A PPROXIMATION ) A LGORITHMS General Services (executive/managerial): Total costs not covered by other funding sources allocated by this formula: proportion of annual direct school expenditures

18. 18 N EW F INANCIAL M ODEL AT THE U NIVERSITY OF V IRGINIA H OW D O W E A LLOCATE R EVENUES ? I MPORTANT ISSUE FOR C ENTRAL S ERVICE P ROVIDERS : A RE 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.

19. 19 N EW F INANCIAL M ODEL AT THE U NIVERSITY OF V IRGINIA H OW D O W E A LLOCATE C ENTRAL S ERVICE C OSTS ? I MPORTANT ISSUE FOR C ENTRAL S ERVICE P ROVIDERS : A RE 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.

20. 20 N EW F INANCIAL M ODEL AT THE U NIVERSITY OF V IRGINIA H OW D O W E A LLOCATE R EVENUES ? I MPORTANT ISSUE FOR C ENTRAL S ERVICE P ROVIDERS : A RE 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.

21. 21 N EW F INANCIAL M ODEL AT THE U NIVERSITY OF V IRGINIA H OW D O W E A LLOCATE R EVENUES ? I MPORTANT ISSUE FOR C ENTRAL S ERVICE P ROVIDERS : A RE 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.

22. 22 N EW F INANCIAL M ODEL AT THE U NIVERSITY OF V IRGINIA BACKGROUND INFORMATION: T OTAL A CADEMIC D IVISION O PERATING E XPENDITURE B UDGET 2012-13 $1.36 B ILLION D OLLARS

23. 23 Sources

24. 24 Uses

25. 25 N EW F INANCIAL M ODEL AT THE U NIVERSITY OF V IRGINIA Website: http://www.virginia.edu/resourcingthemission Chip German e-mail: cgerman@virginia.edu