Meeting of the Finance Committee September 14, 2012 Colette Sheehy: Glad to be with you today to present the Finance Committee agenda items, along with several of my colleagues whom I will introduce shortly.

New Internal Financial Model Objectives Provide tools that will allow the University to operate more efficiently in a future constrained by limited resources. Emphasize transparent decision-making, incentive-based allocations and prudent stewardship of University resources. Empower the individual academic units to be innovative and cost efficient. Build incentives into the system to encourage entrepreneurism among our deans, administrative leaders, faculty and staff. Enable us to align our resources more precisely with our core mission areas of education, research, patient care and service. Colette Sheehy: The New Internal Financial model represents a movement toward activity-based budgeting; where revenues flow to the activities that generate them. We are working to develop a model that will Provide tools that will allow the University to operate more efficiently in a future constrained by limited resources. Emphasize transparent decision-making, incentive-based allocations and prudent stewardship of University resources. Empower the individual academic units to be innovative and cost efficient. Build incentives into the system to encourage entrepreneurism among our deans, administrative leaders, faculty and staff. Enable us to align our resources more precisely with our core mission areas of education, research, patient care and service.

New Internal Financial Model Accomplishments President’s statement of purpose Researched peer financial models Conducted financial reporting needs analysis Reconciled common data set for modeling Began revision of budget process to transition to new model Supported change preparedness assessment – academic & service Charged Steering Committee Task Forces: Financial reporting, system preparedness, and training Communications and change management Revenue and incentives Cost and service level architecture Decision-making, governance and policy making What we accomplished over the last year: President’s statement of purpose Researched peer financial models Conducted financial reporting needs analysis Reconciled common data set for modeling Began revision of budget process to transition to new model Revised 2012-13 budget process to begin the transition to a new model. Broader cross-functional participation Greater collaboration between administrative leadership and deans EVP-COO and EVP-Provost participated in joint budget meetings for all major areas (Schools, VPs) 2. Greater transparency of information President Sullivan met with deans and VPs to discuss the final outcome of the budget process Information requested as part of the budget submission included reallocation and efficiency efforts 3. Centered around the academic enterprise Revenue from undergraduate enrollment growth flows to the schools that generate it, aligning incentives as the University grows New funding provided in the 2012-2013 budget is clearly tied to the University’s strategic priorities Supported change preparedness assessment – academic & service Charged Steering Committee Task Forces: Financial reporting, system preparedness, and training Communications and change management Revenue and incentives Cost and service level architecture Decision-making, governance and policy making The strong modeling work over the summer and the reports from the task forces put the Steering Committee in a good position to make recommendations to the President for her ultimate decision on a model for implementation.

New Internal Financial Model Timeline The University will transition to the new financial model in conjunction with budget development cycles Here Launched May 18, 2011 By President Sullivan Conceptual Study Design Phase 1 Implement Phase 1 Monitor Phase 1 Design Phase 2 Implement Phase 2 May 2011-July 2012 Aug. 2012 – Dec. 2012 Jan. 2013 – June 2013 July 2013 – Dec. 2013 Jan. 2014 – June 2014 Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Design Phase 1: August 2012 – December 2012 August – October/November: Planning and Modeling team will test revenue and cost alternatives and provide the Steering Committee with data on which to base decisions. September - December: Steering Committee to review and approve revenue and cost recommendations. President Sullivan to ratify approved Steering Committee recommendations. Review and approve recommendations of the Steering Committee task forces. Financial reporting, System Preparedness and Training Identify short and long term data and reporting solutions. Communication and Change Management Develop speakers program to cascade decisions and information regarding the new financial model throughout the University. Develop education program for personnel impacted by new financial model Decision-making, Governance and Policy making Identify the need to create or revise current governing, decision-making and financial policies and processes. Determine phasing, hold harmless, and subvention guidelines. Determine implementation strategy for NIFM changes for budget cycle FY2013-14. Begin design and execution of task force recommendations. You will see some changes exhibited in our discussion of budget assumptions in November. Implement Phase 1: January 2013 – June 2013 Implement in conjunction with FY2013-14 budget development cycle. Finalize process, policies, reporting and system solutions. Train impacted personnel according to training plan. Run new financial model according to phasing, hold harmless and subvention guidelines. Examples of what would fall under the model for the next year: Graduate tuition & F&A Monitor Phase 1 / Design Phase 2: July 2013 – December 2013 Monitor Phase 1 implementation and make adjustments as required. Model and design Phase 2 cost, revenue and reporting improvements. Revise financial process and policies as required for Phase 2 changes. Implement Phase 2: January 2014 – June 2014 Implement in conjunction with FY2014-15 budget development cycle. By the time we implement the 13-14 budget, we will have a system for attributing the revenue and SOME of the costs. We expect the tax will be broad at the beginning and we will work over the next year to lessen the tax. The schools would see greater linkages between revenue and activity. Budget Development Cycle FY2013-14 Budget Development Cycle FY2014-15 Budget Development Cycle