1. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Indiana Trustee Academy August 30, 2010 Rick Staisloff, Vice President for Finance And Administration, College of Notre Dame of Maryland

2. Association of Governing Boards of Universities and Colleges. All Rights Reserved. And as a result……… 2 ……….not much change

3. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Why Are We Here? In the world of higher education, we must learn to live within a changed internal and external environment –Commissions, Boards, Presidents and senior staff are uniquely positioned to help the institution operate at this juncture BUT….. –Do we need to reevaluate our roles? –Are we asking the right questions? –How do we break down the divide between the mission and market sides of the house? –What tools do we need?

4. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Philosophy Corner Bump in the road or changed landscape No one is going to rescue us (and they don’t need to) Focus on what we can control

5. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Strategic finance is aligning resources with the institution's mission and strategic plan. What is Strategic Finance?

6. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Magic Formula Mission + Market + Margin = Success

7. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Mission, Market and MarginMission What are you passionate about? Market What can you be best at in the world? Margin What drives your economic engine? Adopted from Good To Great, Jim Collins 7

8. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Mission, Market and Margin Living at the Intersection of Mission, Market and Margin: Three Questions What are we good at? (Mission) What do people want? (Market) How do we bring these together in a way that is true to our mission and generates resources? (Margin)

9. Association of Governing Boards of Universities and Colleges. All Rights Reserved. “Tried and True” Reporting Financial Budget to Actual Financial Statements Audit Metrics Ratio Analysis Strategic Indicators/Dashboards Focus must be on what the numbers mean, more than on the numbers themselves

10. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Why Bring This Analysis to the Table? Importance of looking at the “scary squiggly things under the rocks” Need data before you tackle the hard choices One of the most important jobs of a leader is to clearly define where you are.

11. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Is This a Strategic Finance View? Importance of the “Reality Check” – Where are we right now? However, these tools are backward looking New tools are needed for us to look forward and to act strategically Shift from input focus to output focus

12. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Top 12 programs account for 89% of credit hours What Drives Activity? Nursing Biology Religious Studies Religious Studies Pharmacy Education Business Communication Arts English Modern Foreign Language Philosophy Psychology Math 1,903 904 786 813 1,227 1,330 873 6,991 861 799 798 667 4% 35% 4% 3% 9% 4% 7% 6% 4% CHM HISCST ARTPHY MUSPOLHSV PED Anchor 4 Programs = 57% Core 8 Programs = 32% Other 9 Programs = 11% Each 2% or < 12

13. Association of Governing Boards of Universities and Colleges. All Rights Reserved. What Drives Net Revenue? Net Revenue Modeling - By Division UGPT UGAcceleratedGraduateEng Lang InstTotal Revenue15,686,4862,481,4463,999,99410,266,637464,20732,898,770 Tuition Discounting5,656,57740,0260876,15806,572,761 Discounted Revenue10,029,9092,441,4203,999,9949,390,479464,20726,326,009 Total Discount %36.06%1.61%0.00%8.53%0.00%19.98% UGPT UGAcceleratedGraduateEng Lang InstTotal Discounted Revenue10,029,9092,441,4203,999,9949,390,479464,20726,326,009 Direct Costs8,284,3161,277,6691,554,4352,874,851347,93314,339,204 Net Revenue1,745,5931,163,7512,445,5596,515,628116,27411,986,805 Net Revenue %17%48%61%69%25%46% Percentage of Total Revenue Base UGPT UGAcceleratedGraduateEng Lang InstTotal Discounted Revenue10,029,9092,441,4203,999,9949,390,479464,20726,326,009 Total Direct and Allocated Cost9,954,5832,366,8283,149,6687,858,580347,93323,677,592 Net Revenue75,32674,592850,3261,531,899116,2742,648,417 Net Revenue % - FY 20080.8%3.1%21.3%16.3%10.1% Net Revenue % - FY 20072.1%18.8%28.8%25.0%16.5% Net Revenue % - FY 20065.5%23.0%20.0%25.0%16.0%

14. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Reducing Costs Direct Instructional Expenditure per FTE Student National Norm FY 2008 +$12,000 +$10,000 + $8,000 +$6,000 +$4,000 +$2,000 -$2,000 -$4,000 -$6,000 -$8,000 -$10,000 -$12,000 BioBio BusBus EDUEDU NursingNursing PsychPsych CommComm ChemChem EnglishEnglish MusicMusic HistoryHistory ForeignLangForeignLang Rel Study StudyRel PhilosPhilos ComputerComputer Health Phy Ed Health More efficient than market standard Less efficient than market standard MathMath Source: CND Delaware Instructional Cost Study 14 Source: Delaware Instructional Cost Study

15. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Increasing Productivity Student Credit Hours per FTE Faculty National Norm FY 2008 + 45 +30 +15 -20 -50 -80 -110 -140 -170 BioBio BusBus EduEdu NursingNursing PsychPsych CommComm ChemChem EnglishEnglish MusicMusic Comp Sci HistoryHistory ForeignLangForeignLang MathMathRel Study StudyRel PhilosPhilos ArtsArts Health Phy Ed Health Source: Delaware Instructional Cost Study 15 More efficient than market standard Less efficient than market standard

16. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Grow We will evaluate, dialogue then organize decisions into four buckets SunsetRedesign Maintain/ Manage Cost 16 MissionDemandConversionContributionEfficiencyNet Revenue ProgramMission# ProspectsYieldCredit HoursStudent Cr Hr/FTE Faculty Direct and Indirect AllocatedCost Model A Yes> 5,000>33%> 1,000Above BenchmarkPositive B Yes< 1,000< 33%> 500At BenchmarkPositive C Yes> 1,000< 33%> 500Below Benchmark Negative D No< 1,000< 33%< 500Below Benchmark Negative How will we make decisions about the academic portfolio?

17. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Cost Reductions – What’s Working/What’s Not? Outsourcing Strategic Sourcing Benefit Cost Shifting IT – Standardizing hardware and software Consolidating course sections Reducing high cost/low demand programs - Takes time but has big payback Early Retirement Incentives proving difficult

18. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Examples of Productivity Improvements Increase in Student Credit Hours per Full Time Equivalent Faculty Increase in student retention and graduation Reduce excess credits for the degree Increase distance-based learning programs

19. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Roles and Responsibilities State Commission –Resource Allocation – Where should the State invest? –Discovery and Sharing of Best Practices Trustees –Oversight - Implementation of cost reductions and productivity improvements –Ensuring development of appropriate data and metrics 19

20. Association of Governing Boards of Universities and Colleges. All Rights Reserved. Asking the Right Questions Are state and university strategic goals –Clearly stated? –Clearly – and frequently – communicated? Is performance considered in the resource allocation process –Are resources targeted to mission/market/margin opportunities? –Are faculty and staff allocated to the highest priorities? –Are there programs or services that should be eliminated? –Are there opportunities for collaboration that would yield better results at less cost? Are metrics for measuring performance and achievement of goals in place? –SCH/FTE faculty