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COO Employee Council February 16, 2012 Budget Overview.

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Presentation on theme: "COO Employee Council February 16, 2012 Budget Overview."— Presentation transcript:

1 COO Employee Council February 16, 2012 Budget Overview

2 Current Budget & Methodology New Internal Financial Model Capital Budget Questions

3 UVa’s Operating Budget (in millions) Academic Division$ 1,344.6 Medical Center $ 1,108.1 College at Wise $ 34.3 Total $ 2,487.0

4 Major Funding Sources Academic Division - $1.36 Billion

5 Major Spending Areas Academic Division - $1.34 Billion By Activity By Expenditure Category

6 6 Current Budget Methodology A Hybrid of Three Approaches: Targeted Budgets Sales and Services Budgets Summary Budgets

7 7 Targeted Budgets State general (SG), state restricted (SR), local general (LG), F&A institutional (FI), endowment institutional (EI), and gift institutional (DI) University Budget Office (UBO) provides budget target and modifies it for salary increases, fringe benefit changes, addenda, and budget reductions Central covers costs for facilities and central administration Unit manages internal allocation of budget, hiring, carryforward, and operational decisions Central oversight is by UBO, managed on a year-to-date basis Required to be funded and budgeted in the Integrated System (IS)

8 8 Sales & Services Budgets State sales and services (SS), state auxiliaries (SA), local sales and services (LS), local auxiliaries (LA), and local other (LO) Revenue-generating, self-supporting unit approach Unit manages revenues and direct expenses (salary and fringe changes) Cost for facilities and central administration responsibility varies: –100% facilities and indirect costs paid by auxiliaries –100% facilities and 10% revenue tax assessed to self-sufficient –10%-15% revenue tax assessed to some self-supporting units –No facilities or indirect costs assessed to other sales and services units Central oversight is by UBO; managed on a year-to-date basis Required to be funded and budgeted in the IS

9 9 Summary Budgets Endowments (ER, EU, EF), gifts (DR, DU), F&A (FA), grants (G*, Z*), and intellectual property (IP) Unit manages direct expenses (salary and fringe changes) Central covers cost of facilities and central administration, with the exception of grants (reimbursed by federal gov’t) Allocations and central oversight are by Comptroller’s Office, Gift Accounting, Sponsored Programs, and the VP for Research; managed on a project-to-date basis; not required to be funded and budgeted in the Integrated System Summary budgets are submitted to the UBO for purposes of developing a total budget, but they are not uploaded to the IS

10 Budget Overview Current Budget & Methodology New Internal Financial Model Capital Budget Questions

11 11 Identified Concerns with Current Model Historically based, with minimal re-alignment for activity changes Absence of incentives for innovation, creativity, and revenue generation Does not consider all available funds Does not link resources and uses; inconsistent allocation of revenue and expenses Desire by deans for a more open decision-making process Difficulty in developing multi-year budgets to align with programmatic planning

12 12 Work to Date Collected and reviewed data from peers; developed potential schematic and identified possible methods of allocating revenues and central expenses Drafted a sources and uses report to represent operational cash flows by major revenue center Reviewed funding across units to consider a more consistent approach to record resource-sharing Developed a Statement of Purpose and preliminary timeline Identified Executive Co-Chairs and engaged senior administration in Steering Committee Conducted a needs analysis survey for financial reporting in academic and administrative units Completed preliminary groundwork to understand major revenue and service centers Launched a website:

13 New Internal Financial Model Steering Committee Co-Chairs: John Simon, Michael Strine Steering Committee Task Forces Financial Reporting, System Preparedness and Training Communi- cation and Change Management Ensure that systems support new model and that people can make the most of new methodologies System architecture, assessment, and recommendations Reporting requirements Report development Design, develop, and test Implementation Plan Training plan / schedule Monitor operations Ensure that University community is prepared for the new model and that change process is well managed Roles & Responsibilities Redesign budget process Communication Change management Transition planning Implementation preparedness Monitoring outcomes Develop methodologies for revenue flows and for incentivizing innovation and increased productivity Revenue attribution Tuition allocation Alternatives for other funding (IFP, F&A, general funds, etc.) Build model Incentives for productivity Incentives for growing revenue and innovation Develop methodologies for cost allocations, service levels and cost containment Cost Allocations Categories for expenditures Level of costs for central services Benchmarking Strategy for reserves Build model Incentives for effective, efficient, quality service Incentives for stewardship of University resources Ensure that policies support the new model and ongoing governance & stewardship of University mission and resources Inventory current policies Create/revise policies as necessary Monitor outcomes Adjust model and/or policies to ensure proper stewardship of University mission & resources Revenue & Incentives Cost and Service Level Architecture Governance, Policy Review and Oversight James Hilton, LeadBob Pianta, LeadBob Bruner, LeadPaul Mahoney, LeadKim Tanzer, Lead

14 High Level Task Force Timeline Communication & Change Mgmt Financial Reporting, System Preparedness & Training Revenue & Incentives Cost & Service Level Architecture Governance, Policy Review and Oversight Jan-Feb-Mar Apr-May-Jun-Jul-Aug-Sept Oct Jun 2013 FY Communication, Change Mgmt, & Transition Planning Education / Change Management / Implementation Monitor & Adjust System Architecture, Reporting Assessment / Re- quirements, & Training Plan Short Term: System Architecture Changes & Report Development Short Term: System Architecture Changes & Report Development Test Train / Implement Monitor & Adjust Revenue Modeling: Revenue Attribution, Bench- marking, Tuition allocation, Revenue Incentives Revenue Modeling: Revenue Attribution, Bench- marking, Tuition allocation, Revenue Incentives Test Train / Implement Current Policy Inventory Create / Revise Policies Approve Policies Train / Implement Monitor & Adjust Cost Modeling: Cost allocations, Level of costs for services, Benchmarking, Strategy for Reserves Expense Incentives Cost Modeling: Cost allocations, Level of costs for services, Benchmarking, Strategy for Reserves Expense Incentives Long Term: System Architecture Changes & Report Development Long Term: System Architecture Changes & Report Development Monitor & Adjust Input from Phase 1 1. Reconciled Actual to Budget Data 2. Design Principles DRAFTDRAFT Major Steering Committee Report Outs Development Implementation Monitor Design Principles & Decision Mapping

15 15 Resources on Budget Model Transitions Websites of Peer Institutions University of Florida – Responsibility Center Management, Indiana University – Responsibility Center Management, University of Iowa – Task Force on Strategic Budgeting, Iowa State University – Resource Management Model, University of Michigan – University Budget Model, University of New Hampshire – Responsibility Center Management, University of Pennsylvania – Responsibility Center Management, Ohio State, Resource – Centered Budgeting, Syracuse University – Responsibility Center Management, Books Responsibility Center Budgeting – An Approach to Decentralized Management for Institutions of Higher Education, by Edward Whalen. Responsibility Center Management – Lessons from 25 years of Decentralized Management, by Jon C. Strauss and John R. Curry Articles NACUBO Business Officer, April 2009: The Case for Decentralized Financial Management by Scott Scarborough, at

16 Budget Overview Current Budget & Methodology New Internal Financial Model Capital Budget Questions

17 Major Capital Projects Program Currently Approved – by Status (in 000s) (updated Jun 2011) 19

18 Major Capital Projects Program Near Term Proposed Through By Funding (in 000s) (updated Jun 2011) 21

19 Major Capital Projects Program Long Term Proposed ( ) - By Funding (in 000s) (updated Jun 2011)

20 Questions?

21 Types of Endowments  True restricted endowment – written donor agreement establishes original gift as an endowment and restrict how distribution can be spent  True unrestricted endowment - written donor agreement establishes original gift as an endowment but does not restrict spending  Quasi restricted endowment – funds are designated (or undesignated) as an endowment by the Board; written donor agreement establishes spending restrictions  Quasi unrestricted endowment - funds are designated (or undesignated) as an endowment by the Board; there are no spending restrictions

22 Size of the University’s Endowment (in millions) $1,328R&V’s Acad Div True Restricted Endow $ 6R&V’s Acad Div True Unrestricted Endow $ 652R&V’s Acad Div Quasi Restricted Endow $ 728R&V’s Acad Div Quasi Unrestricted Endow $ 403R&V’s Medical Center Endow $ 41R&V’s Wise Endow $1,112Affiliated foundations’ funds at UVIMCO $ 168Other affiliated foundations’ funds $4,438

23 Distribution Policy Spending policy has two objectives: ⁻ to provide reliable, predictable distributions to support programs ⁻ to preserve purchasing power of endowment principal to fund programs in perpetuity ⁻ Differing methods are employed; the Board revisits its approach every few years. ⁻ In general, goal is to spend between 4% and 6% of the market value.


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