Board of Trustees Financial Workshop December 2, 2013

Page 1 introduction

UNCW Guiding Principles Page 2 UNCW Guiding Principles We are committed to the university’s financial integrity by providing quality, efficient service to the students, faculty and staff. Our mission is to record, report and safeguard the fiscal assets of the university. Maintaining an effective system of internal controls and compliance mechanisms is accomplished through comprehensive policies, procedures, campus-wide training and supporting a knowledgeable and skilled staff.

UNCW Environmental Scan/Overview Page 3 UNCW Environmental Scan/Overview Strengths & Opportunities Diverse & growing revenue sources Distance Ed Auxiliaries MARBIONC Healthy liquidity Membership in UNC system & history of state support Well-managed and growing endowment Strong controls & planning processes Solid student demand & enrollment trends Commitment to innovation Exceptional compliance record & unqualified audit opinions Weaknesses & Challenges Continuous need to grow revenues Endowment Federal contracts & grants Relatively high level of debt Dependence on state funding Legislative mandates Tuition sensitivity Financial aid resources Aging plant (~11 years) & potential future capital/maintenance needs

Agenda Financials Budgeting Funding Page 4 Agenda Financials Budgeting Funding Credit Rating Agencies & Debt Management Higher Education Financial Statements Budget Process Enrollment Growth Funding Appropriations, Tuition & Student Fees

Credit rating Agencies and Debt Management Page 5 Financials Budgeting Funding Credit rating Agencies and Debt Management

Page 6 Rating Process Most rating agencies follow standard criteria and are required to provide this information publicly. Criteria is required to be transparent so that an experienced analyst could come within a category of the rating. Many will also share financial ratios and other qualitative information with prospective rated institutions. The ratios are updated each year. Moody’s issues ratios with a higher degree of rating specificity (by specific rating) than S&P (which prepares ratios by rating category) Different rating agencies do not always assign the same ratings to the same institutions. Ratings are generally assigned to securities rather than institutions, especially for public universities. Moody’s publishes a quantitative scorecard to increase the transparency of the methodology. S&P is less formulaic but still focuses on the same factors and uses similar ratios. However, each rating agency may place different weights on the factors and ratings are not always the same.

Moody’s Higher Education Scorecard Page 7 Moody’s Higher Education Scorecard Areas of Emphasis Demand or Market Position enrollment, selectivity, student quality, yield, competitive position, student charges, and geographic diversity Management governing structure, ability to respond to change, strategic plans, debt policies, and budgeting practices Finance revenue diversity, operating performance, financial resources (largely through unrestricted net position, endowment spending policies, operational liquidity, and coverage of variable rate debt from liquidity) Debt annual debt burden, maximum debt burden, debt structure, repayment method

Top Causes of Rating Changes Page 8 Top Causes of Rating Changes Upgrade Drivers Steady improvement in demand, increasing selectivity, matriculation rates, student quality & geographic diversity Ability to raise tuition & fees Consistently strong financial performance New schools or programs Major, transformational gifts Long history of operating surpluses Clear ability to manage with surprises & maintain strategic plans and budgets Downgrade Drivers Sharp increase in debt Operating deficits High endowment spending levels (>8%) Significant debt structure risks Management concerns Declines in net tuition revenue or sense that tuition revenue growth is impaired Steep reduction in applicants or new freshmen Drop in expendable resources or unrestricted net position compared with operating expenses or debt Sharp drop-off in state appropriations - not offset by reduced operating expenses or revenue increases in other areas Limited cash/liquidity compared with accounts payable & near-term debt payments Fewer than 700 students & accreditation issues New debt with no visible source of payment

S&P 2013 COPs Rating Rationale Page 9 S&P 2013 COPs Rating Rationale Strengths Solid debt service coverage (DSC) Strong housing system demand and occupancy Managerial/financial commitment to student housing Favorable overall student demand trends Operating support from State of North Carolina Challenges Below average financial resources in terms of net position relative to operating expenses and outstanding debt Above-average total debt burden Relatively small endowment Factors that could make the rating go Up/Down Up: Continued strong student & housing demand trends; improved financial resources; increasing housing system DSC Down: Reduced state support; Additional debt inconsistent with financial resource growth or revenues; decreasing housing system DSC

Moody’s December University Rating Review Page 10 Moody’s December University Rating Review 2010 Rating Rationale Strengths Solid student demand and growing enrollment trends UNC System membership Healthy liquidity profile Solid regional market position / Strong student demand Challenges High leverage State funding cuts Factors that could make the rating go Up/Down Up: Growth in financial resources, improvements in scope of research activities & student market position; cash flow improvement Down: Reduced state support; Decline in student market position; Weakened Debt Service Coverage

Page 11 Moody’s 2012 Ratings Best

Page 12 Debt Profile

Debt Analysis Improving Trends Page 13 * Moody’s Calculation except FY13.

Higher Education Financial Statements Page 14 Financials Budgeting Funding Higher Education Financial Statements Source: Adapted from UNC Campus Financials 101, Sept. 12, 2013. Charlie Perusse, Stathis Poulos, Rick Niswander and Mary Peloquin-Dodd.

Primary Campus Uses of the Consolidated Financial Statements Page 15 Primary Campus Uses of the Consolidated Financial Statements The consolidated UNCW financial statements are mainly used for: State of North Carolina Consolidated Financial Reporting Rating Agencies Lenders, Bond Trustees Providing “factoids” Looking at trends from the 40,000-foot level Regulatory Disclosures NC Office of State Controller NC Office of State Budget Management NC Office of State Treasurer NC General Statutes NC Government NC Auditor Internal Revenue Service NC Department of Revenue NCAA

Page 16 Limited Flexibility Unlike many business entities, university dollars are not fungible. Legal, regulatory & good business practices prevent movement between categories Revenues, expenses and other sources of funds are tracked for defined purposes Examples Donors make gifts that can only be used to fulfill the intent of the donor Housing receipts should not be used to pay for Administration Assistants in the English Department State Appropriations cannot be used to pay for housing Tuition supports student instruction Parking receipts fund reserves to repave lots and construct decks Federal or state scholarship funds can only be used for that purpose by law State R&R funds can only be used for that purpose Bond proceeds used for intended purpose Mandatory fees support stated purpose (athletic fee for athletic department) Summer school revenue for summer school expenses

Limited Flexibility Diverse Set of Business Lines Page 17 Limited Flexibility Diverse Set of Business Lines Profit-motivated components, educational components, research components, community services Significant legal and operational restrictions on how business is conducted Debt restrictions GASB accounting (vestiges and real) Detailed compliance reporting to multiple state and federal agencies Multiple approval levels Special duties to students, parents and donors Business runs on the cash basis, not accrual basis Twelve month budget cycle – timing is critical, e.g. spend it or lose it Unexpended carryover of State Funds limited to 2.5% of operating funds Cash requirements requisitioned from State Treasurer, not managed locally

Key GASB Higher Ed Accounting Practices Page 18 Key GASB Higher Ed Accounting Practices Management Discussion & Analysis Precedes the basic financial statement and is required to include certain information prescribed by GASB, dual column comparison of year over year Basic Financial Statements – Industry nomenclature and single column Balance Sheet – Statement of Net Position (formerly Statement of Net Assets) Assets, Liabilities, & Net Position Income Statement – Statement of Revenues, Expenses and Changes in Net Position Revenue, Expenses, Other Changes/Adjustments Statements of Cash Flows Cash flows are required to be summarized by operating, investing, capital and related financing, and noncapital financing uses Discreetly Presented Component Units Most University affiliated foundations are presented in the financial statements Notes to Financial Statements Deposit and investment risks disclosures (credit risk, concentration risk, interest rate risk) including the organization’s policies regarding such risks, are required

Key GASB Higher Ed Accounting Practices (Income Statement) Page 19 Key GASB Higher Ed Accounting Practices (Income Statement) UNCW Year Ended June 30, 2012 Statement of Revenues, Expenses & Changes in Net Position (SRECNP) Equivalent to the “income statement” for a for-profit entity Expenses can be presented in either the natural or functional presentation There are no prescribed expense allocations Net investment income and realized gains/losses are required to be presented as a single non-operating financial statement account on the statement of activities. Gifts are recognized when received and eligibility requirements have been met (not when gift is pledged by donor) No requirement to use restricted funds first

Page 20 Sources of Revenues

Top Sources of Revenues Page 21 Top Sources of Revenues

Page 22 Research Revenue State Passthrough is the amount of non-capital state grants that offset certain educational scholarship awards such as the NC Education Lottery Scholarship Program and UNC Need Based Aid.

Research Revenue Facilities & Administrative Indirect Costs Page 23 Page 23 Research Revenue Facilities & Administrative Indirect Costs

Page 24 UNCW Expenses

UNCW Statement of Revenues, Expenses & Changes in Net Position Page 25 UNCW Statement of Revenues, Expenses & Changes in Net Position (Dollars in Thousands)

Key GASB Higher Ed Accounting Practices (Balance Sheet) Page 26 Key GASB Higher Ed Accounting Practices (Balance Sheet) UNCW Year Ended June 30, 2012 Statement of Net Position: Equivalent to the “balance sheet” for a for-profit entity Current and noncurrent classifications are required Consider notes to the financial statements (i.e. receivables, capital assets, long-term liabilities, etc.) Assets Capital Assets Intangible assets are required to be presented within capital assets When significant, non-depreciable capital assets are to be presented separately Federal Perkins Loan amounts due from borrowers are recognized as notes receivables Liabilities Amounts payable from restricted assets are generally separately disclosed Federal portion of Federal Perkins Loans is recognized as a liability Gifts received before all eligibility requirements have been fully met are recognized as a liability

Key GASB Higher Ed Accounting Practices Page 27 Key GASB Higher Ed Accounting Practices UNCW June 30, 2012 Statement of Net Position (cont.): Net Position Focus on unrestricted net position Unrestricted net position designated for specific use are not permitted to be presented separately from undesignated unrestricted net position

UNCW Statement of Net Position Page 28 UNCW Statement of Net Position formerly Statement of Net Assets (Dollars in Thousands)

Page 29 Net Position

Unrestricted Net Position Defined Page 30 Unrestricted Net Position Defined Net Position that is not subject to externally imposed stipulations Externally imposed stipulations include stipulations made by: Root Source of Funds (creditors, grantors, contributors) Laws or regulations of other governments Imposed by law through constitutional provisions or enabling legislation Includes net position that has been internally designated (defined on next slide) Unrestricted net position is generally derived from (not all inclusive): student tuition and fees, auxiliary enterprises, gifts, interest income, and royalties.

Unrestricted Net Position Considerations Page 31 Unrestricted Net Position Considerations Internally Designated Net Position – Defined The designation is required to be expressed by (1) the institution itself or (2) a body (e.g., a budget or finance committee) or official to which the institution has delegated the authority to assign amounts to be used for specific purposes The designated funds represent planned actions and not actual commitments The designation can be subsequently modified or removed As universities have numerous programs and initiatives to accomplish their missions to educate the public, they tend to have more types of internally designated net position than other organizations to meet the objectives of each program and initiative. Examples include: Academic programs Research programs Institutional advancement Student housing Health system Administration Capital projects Athletics programs Human resources Information technology Recreational programs Libraries Art programs Alumni relations Student relations Patient relations Marketing Trademarks and Patents Royalties Fundraising Legal matters Accreditation matters Federal, state and other compliance

Unrestricted Net Position Page 32 Unrestricted Net Position Unrestricted Net Position does not equal “Cash” Operationally a collection of Semi-Autonomous Business Units “Each boat floats on its own bottom”

Unrestricted Net Position Moody’s 2012 Data Page 33 Unrestricted Net Position Moody’s 2012 Data Moody’s Medians Aa3 - 0.48x A1 - 0.42x Aa3 - 0.27x A1 - 0.28x

UNCW Environmental Scan/Overview Page 34 UNCW Environmental Scan/Overview Strengths & Opportunities Diverse & growing revenue sources Distance Ed Auxiliaries MARBIONC Healthy liquidity Membership in UNC system & history of state support Well-managed and growing endowment Strong controls & planning processes Solid student demand & enrollment trends Commitment to innovation Exceptional compliance record & unqualified audit opinions Weaknesses & Challenges Continuous need to grow revenues Endowment Federal contracts & grants Relatively high level of debt Dependence on state funding Legislative mandates Tuition sensitivity Financial aid resources Aging plant (~11 years) & potential future capital/maintenance needs

Page 35 Financials Budgeting Funding Budget Process

Background Page 36 UNCW operates on the State of North Carolina biennial budget cycle The university conducts “budget calls” for eight (8) different budget cycles Externally managed: Office of State Budget and Management (OSBM) UNC General Administration Internally Managed: University Budget Office constant external budget compliance and reporting responsibilities designed around these external requirements

Background Internal Budget Cycles External Budget Cycles Page 37 Internal Budget Cycles University Annual Allocation Budget Special Funds Budgets Faculty and EPA Legislative Salary Increases SPA Legislative Salary Increases Facilities & Administration Receipts (Overhead) External Budget Cycles Biennial Continuation Budget Biennial Expansion Budget Biennial Capital Budget Supplemental Budget (mid term submission) Campus Initiative Tuition Increases (CITI) Mandatory & Non-Mandatory Student Fees Summer School Rate Increases Enrollment Projections

Background Page 38 The campus community submits budget requests appropriate for each budget call Multiple processes restrict our ability to link comprehensive allocation decisions to any one program initiative The fragmented nature limits our creativity and collaboration among departments, schools and divisions

Unified Budget Process Page 39 Unified Budget Process A unified budget process, responsive to university strategic initiatives, promotes our shared values and encourages collaboration and creativity NOTE: None of our external compliance and reporting responsibilities will go away. Align our work to accommodate our internal plans while still meeting all of our external obligations

University Planning, Programming & Budget Calendar Year 1 of Budget Development Cycle Year 2 of Budget Development Cycle  FY 15 - 17 Biennial Budget FY 2013-14 FY 2014-15 Calendar year 2013 Calendar year 2014 Calendar year 2015 JULY AUG SEPT OCT NOV DEC JAN FEB MARCH APRIL MAY JUNE University Planning - identifies strategic priorities for biennium   Budgetary Programming - works w/campus to identify programs to meet strategic direction UIC proposes new initiatives that support strategic priorities Budgetary programs reviewed / analyzed by Budget Office / UBC - finalize program budgets University Analytics team provides analysis to support discussions Budget Office / UBC identify alternative sources of revenue to meet decisions Cabinet / Chancellor review / prioritize budget requirements Enrollment Management Committee develops enrollment projections Cabinet / Chancellor approve enrollment projections Annual Allocations (Permanent + One-Time Funding) Biennal Budgets (Continuation, Expansion, Capital) Enrollment Growth Projections Campus-Initiated Tuition Increases Student Fees Special Funds (Receipt-supported) Budgets Summer School Increases Supplemental Budget (2nd Year of Biennial Cycle) Mid-Year Adjustments < One-Time Allocations > Page 40 Ready to implement by 7/1/13

Page 41 Strategic Planning Campus identifies strategic priorities for biennium. Ongoing initiatives are evaluated. University Analytics team provides analysis to support discussions and quantify the goals Budgetary Programming Working directly with deans and division directors Sets out to identify those programs necessary to meet the strategic priorities Budget Analysis Budget Office / University Budget Committee (UBC) Analysis and Review of those programs identified by Budgetary Programming office. Finalize budgets for each program. Analyze and identify all funding sources available for each program. Evaluate Approve External Compliance DEFINITION: “a budget in which the resources and services are identified by programs or function and not by the organizational units involved in performing all or part of the program and/or “functions” No more going through divisions for data

Strategic Action Planning Workgroup – Initial Objectives (FY 2015-17) Page 42 Strategic Action Planning Workgroup – Initial Objectives (FY 2015-17) Journey of Learning Objective 1 – Meet or exceed all institutional goals in the UNC performance funding measures. Graduation Rates of NCCCS Transfer Students Degrees Awarded in STEM and Health Disciplines Undergraduate Students graduating with University Honors Energy Efficiency Annual Giving 6-Year Graduation Retention Degree efficiency Degrees awarded to Pell recipients Financial integrity index (UNC FIT) Objective 2 -Ensure that all undergraduates have an applied learning experience (in research/discovery, internships/application, service learning/regional engagement, and/or study abroad/exploration away) that achieves a set of established learning objectives.   

Strategic Action Planning Workgroup – Initial Objectives (FY 2015-17) Page 43 Strategic Action Planning Workgroup – Initial Objectives (FY 2015-17) Love of Place Objective 3 – Design and develop proposals for advanced health professional degree programs responsive to health industry needs. Objective 4 – Conceptualize, design and fund an industry-linked film production facility consistent with the addition of a graduate program in Film Studies.   Power of Ideas and Innovation Objective 5 – Develop and implement the CREST (Millennial Campus) model with initial emphasis on meeting MARBIONC partnership targets. Objective 6 – Enhance the regional entrepreneurial community through the launch of the Center for Innovation and Entrepreneurship and related programs.

Enrollment Growth Funding Page 44 Financials Budgeting Funding Enrollment Growth Funding Source: Adapted from UNC Enrollment 101 BOG Policy Discussion, Sept. 12, 2013.

Enrollment = Admissions + Retention Page 45 Page 45 Enrollment = Admissions + Retention Enrollment increases by: Bringing in more students; and Retaining more of the existing students BOG and UNCW policies regarding Satisfactory Academic Progress affect enrollment.

Enrollment Trends Since 2009 Actual Fundable Headcount – Regular Term Page 46 Page 46 Enrollment Trends Since 2009 Actual Fundable Headcount – Regular Term

Enrollment Trends Since 2009 Actual Fundable SCHs – Regular Term Page 47 Page 47 Enrollment Trends Since 2009 Actual Fundable SCHs – Regular Term

Enrollment Trends Since 2009 Actual Fundable SCHs – Distance Education Page 48 Page 48 Enrollment Trends Since 2009 Actual Fundable SCHs – Distance Education

Events Leading to Student Credit Hour (SCH) Funding Model Page 49 Page 49 Events Leading to Student Credit Hour (SCH) Funding Model Prior to the SCH Funding Model Enrollment funding based on percentage change in full-time equivalent (FTE) enrollment Percentage increase in enrollment applied to budget 1995 Session Consider alternative approaches to funding University Enrollment, including SCH funding Review opportunities for off-campus degree programs and summer school 1997 Session Examine funding required for increasing enrollment in distance education instruction

Student Credit Hour Funding Model for Enrollment Changes Page 50 Page 50 Student Credit Hour Funding Model for Enrollment Changes Following the 1997 Session, UNC developed and implemented an SCH enrollment-change funding model Initially used for 1998-99 enrollment change Distance education funded using comparable model beginning FY 1998-99 Recognizes program costs and degree level differences to request funding for enrollment changes

UNCW SCH Regular Term Enrollment Model Page 51 Page 51 SCH Enrollment - Change Funding Model FY 2014-15 Regular Term Request Change to SCHs SCH per Instructional Position Instructional Positions Required U/G Masters Doctoral Cat 1 (2,362) 125 708.64 169.52 115.56 -3.333 0.737 0.000 Cat 2 5,722 (464) 213 535.74 303.93 110.16 10.681 -1.527 1.934 Cat 3 2,777 (303) (91) 406.24 186.23 109.86 6.836 -1.627 -0.828 Cat 4 (730) 586 232.25 90.17 80.91 -3.143 6.499 Totals 5,407 (56) 122 11.040 4.083 1.105 Total SCH Change   5,473 Campus U/G Cost Factor (5%) Total Positions Required 16.228 Average Teaching Salary $ 78,630 Instructional Salary Amount $ 1,275,996 Other Academic Costs (44.89%) $ 572,864 Total Academic Requirements $ 1,848,860 Library Rate 11.48% $ 212,336 Gen Inst Spt 54.05% $ 999,309 Neg. Adjust Factor: 50.00% $ - Total Requirements $ 3,060,504 Calculation of Appropriation Request Tuition Total Revenue: FTE Rate FTE x Rate In-State U/G FTEs 197 $ 4,026 $ 793,122 Out-State U/G FTEs -13 $ 16,163 $ (210,115) Res per GS-116-143.6 U/G FTEs In-State Grad FTEs -7 $ 4,163 $ (29,139) Out-State Grad FTEs 11 $ 16,098 $ 177,080 Total FTEs 188 Total Expected Revenue $ 730,947 Appropriation Request $ 2,329,557

UNCW SCH Distance Ed Enrollment Model Page 52 Page 52 SCH Enrollment - Change Funding Model FY 2014-15 Distance Education Request Change to SCHs SCH per Instructional Position Instructional Positions Required U/G Masters Doctoral Cat 1 1,271 70 708.64 169.52 115.56 1.794 0.413 0.000 Cat 2 (392) 1,003 328 535.74 303.93 110.16 -0.732 3.300 2.977 Cat 3 2,395 (139) 406.24 186.23 109.86 5.896 -0.746 Cat 4 3,046 42 232.25 90.17 80.91 13.115 0.466 Totals 6,320 976 20.073 3.432 Total SCH Change   7,624 Campus U/G Cost Factor (5%) Total Positions Required 26.483 Average Teaching Salary $ 78,630 Instructional Salary Amount $ 2,082,319 Other Academic Costs (44.89%) $ 934,866 Total Academic Requirements $ 3,017,185 Library Rate 11.48% $ 346,515 Gen Inst Spt 54.05% $ 1,630,788 Neg. Adjust Factor: 50.00% $ - Total Requirements $ 4,994,488 Calculation of Appropriation Request Tuition Total Revenue: SCH Rate SCH x Rate In-State U/G SChs 5,512 $ 136 $ 749,687 Out-State U/G SCHs 808 $ 546 $ 441,200 Res per GS-116-143.6 U/G SCHs In-State Grad SCHs 1,310 $ 204 $ 267,319 Out-State Grad SCHs (6) $ 789 $ (4,735) Total SCHs Total Expected Revenue $ 1,453,471 Appropriation Request $ 3,541,017

Page 53 Page 53 Categories of Instruction Based on National Study of Instructional Cost and Productivity (Delaware Data) Category III Agricultural Business & Production Agricultural Science Natural Resources & Conservation Architecture and Related Programs Public Administration & Social Service Professions Physical Sciences Biological & Biomedical Sciences Visual & Performing Arts Allied Health Computer & Information Sciences Library Science Engineering – Related Technologies Science Technologies Student Teaching courses Category I Communications & Journalism Psychology Social Sciences Mathematics & Statistics English Language & Literature Philosophy & Related Studies Security & Protective Services History Other Category II Education (not Student Teaching) Area, Ethnic, Cultural & Gender Studies Multi/Interdisciplinary Studies Business Management, Marketing, & Related Services Liberal Arts & Sciences, General Studies, & Humanities Parks, Recr., Leisure & Fitness Family & Consumer Sciences/ Human Sciences Foreign Languages & Literature Category IV Engineering Nursing

Change to SCHs Enrollment change is based on campus SCH projections. Page 54 Page 54 Enrollment change is based on campus SCH projections. Input the incremental number of future SCHs of instruction that are above or below the number of hours of instruction budgeted for the prior fiscal year. SCHs are projected separately for: Undergraduate, masters, and doctoral instruction (horizontally across) Within four levels of program costs, from low to high (vertically down)

SCH per Instructional Position Page 55 Page 55 Number of SCHs delivered by a faculty member in each category and level Same numbers are used for all campuses Based on two data sets: National Study of Instructional Cost and Productivity (developed and maintained by the University of Delaware, Office of Institutional Research) UNC-specific data on average class sizes

Instructional Positions Required Page 56 Page 56 Number of Instructional positions required to meet change in SCH Can be positive or negative based on category SCH change Calculations = Change to SCHs/ SCH per Instructional Position

Undergraduate Cost Factors Page 57 Page 57 Two cost factors identified by the Board of Governors to recognize special circumstances Eligibility is reviewed every year Apply only to undergraduate enrollment growth Low-income students More than 1/3 of resident undergraduate students receive Pell Grants Diseconomies of scale Headcount enrollment less than 6,000 students Neither apply to UNCW

Calculating Costs Instructional Salary Rate of Campus Page 58 Page 58 Instructional Salary Rate of Campus Campus-specific rate, calculated by dividing General Fund teaching salaries by number of budgeted FTE teaching positions ($64,433,808 / 819.46 FTE = $78,630) Instructional Salary Amount Total Positions Required x Instructional Salary Rate Other Academic Costs Covers the faculty personnel benefits, academic supplies, equipment and other instructional costs Based on the relationship of these costs to faculty salaries Total Academic Requirements Instructional Salary Amount + Other Academic Costs

Calculating Costs Library Rate General Institutional Support Rate Page 59 Page 59 Library Rate Covers library costs Based on the relationship of Library Costs to Total Academic Requirements General Institutional Support Rate Covers costs such as student services, academic advising, registrars, student counseling, financial aid personnel, campus management/maintenance, accounting, internal controls, financial compliance, legal, institutional research, facilities management, human resources, physical plant, campus safety and security Based on the relationship of General Institutional Support costs to Total Academic Requirements

Calculating Funding Request Page 60 Page 60 Total Requirements = Total Cost Funds needed for delivery of new SCHs Total Requirements = Instructional Salary amount + Other Academic Costs + Library amount + General Institutional Support amount

Calculating Funding Request Page 61 Page 61 Calculation of Appropriation Request These new students will cover some of the costs through paying tuition Tuition Revenue = New FTEs x Tuition Rates Appropriation Request = Total Requirements (cost) less Total Tuition Revenue

Timeline for Enrollment Projections Page 62 Page 62 Timeline for Enrollment Projections Biennium Budget YEAR ONE Enrollment Memo instructions (early fall) Campus process takes place Initial campus submission Analysis and Review by internal GA team Dialogue with campus Final submission to OSBM and FRD YEAR TWO Enrollment Memo instructions (later fall) Campus process revises prior year submission

Year End Appropriations Page 63 Page 63 Year End Appropriations (Budget versus Actual) -5.68% Note: Federal stimulus funds replaced appropriations (FY09-10 $7.2M) (FY10-11 $7.5M)

Comparison of Resident to Non-Resident SCH Page 64 Page 64 Comparison of Resident to Non-Resident SCH SCH Enrollment - Change Funding Model FY 2014-15 Regular Term Request Change to SCH's SCH per Instructional Position Instructional Positions Required U/G Masters Doctoral Cat 1 708.64 169.52 115.56 0.000 Cat 2 100 535.74 303.93 110.16 0.187 Cat 3 406.24 186.23 109.86 Cat 4   232.25 90.17 80.91 Totals Total SCH Change Campus U/G Cost Factor (5%) Total Positions Required Average Teaching Salary $ 78,630 Instructional Salary Amount $ 14,677 Other Academic Costs (44.89%) $ 6,589 Total Academic Requirements $ 21,266 Library Rate 11.48% $ 2,442 Gen Inst Spt 54.05% $ 11,494 Neg. Adjust Factor: 50.00% $ - Total Requirements $ 35,203 Calculation of Appropriation Request Tuition Total Revenue: FTE Rate FTE x Rate In-State U/G FTE's 3 $ 4,026 $ 13,601 Out-State U/G FTE's $ 16,163 Res per GS-116-143.6 U/G FTE's In-State Grad FTE's $ 4,163 Out-State Grad FTE's $ 16,098 Total FTE's Total Expected Revenue Appropriation Request $ 21,602 SCH Enrollment - Change Funding Model FY 2014-15 Regular Term Request Change to SCH's SCH per Instructional Position Instructional Positions Required U/G Masters Doctoral Cat 1 708.64 169.52 115.56 0.000 Cat 2 100 535.74 303.93 110.16 0.187 Cat 3 406.24 186.23 109.86 Cat 4   232.25 90.17 80.91 Totals Total SCH Change Campus U/G Cost Factor (5%) Total Positions Required Average Teaching Salary $ 78,630 Instructional Salary Amount $ 14,677 Other Academic Costs (44.89%) $ 6,589 Total Academic Requirements $ 21,266 Library Rate 11.48% $ 2,442 Gen Inst Spt 54.05% $ 11,494 Neg. Adjust Factor: 50.00% $ - Total Requirements $ 35,203 Calculation of Appropriation Request Tuition Total Revenue: FTE Rate FTE x Rate In-State U/G FTE's $ 4,026 Out-State U/G FTE's 3 $ 16,163 $ 54,604 Res per GS-116-143.6 U/G FTE's In-State Grad FTE's $ 4,163 Out-State Grad FTE's $ 16,098 Total FTE's Total Expected Revenue Appropriation Request $ (19,401)

Comparison of Resident to Non-Resident SCH Page 65 Page 65 Comparison of Resident to Non-Resident SCH Mandated increase in out- of-state tuition results in no change in funding

Fundable SCHs (FY 07-08 thru FY 13-14) Page 66 Page 66 Fundable SCHs (FY 07-08 thru FY 13-14) Regular Term FY 2007-08 FY 2008-09 FY 2009-10 FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14 Projected UG-Resident 240,752 246,692 249,376 250,189 256,103 268,685 270,089 UG-Non Resident 48,721 47,659 49,244 52,422 52,496 54,661 51,446 Grad - Resident 13,082 14,449 14,723 14,393 13,422 13,505 13,902 Grad - Non Resident 2,039 2,375 2,625 2,618 2,250 2,589 2,648 S/T - RTI 304,594 311,175 315,968 319,622 324,271 339,440 338,085 Distance Education 8,401 10,573 12,624 15,451 15,903 11,326 20,661 240 325 343 597 741 644 1,555 694 1,179 1,168 1,374 1,708 1,921 3,867 48 51 67 164 207 126 260 S/T - DE 9,383 12,128 14,202 17,586 18,559 14,017 26,343 Total - All Fundable SCHs 313,977 323,303 330,170 337,208 342,830 353,457 364,428 Total Increase 50,451 % Increase 16.1%

Appropriations, Tuition & Student Fees Page 67 Financials Budgeting Funding Appropriations, Tuition & Student Fees

Student Tuition – Resident Students FY 07-08 thru FY 13-14 Page 68 Page 68 Student Tuition – Resident Students FY 07-08 thru FY 13-14 6.3% 6.5% 16.0% 6.5% 8.6% 1.9%   Cumulative Increase Average Increase UG-Res 66.8% 11.1% Grad-Res 53.4% 8.9% MBA-Res 54.6% 9.1% MSA-Res 47.5% 7.9% Note: In FY 2010-11, CITI increase was 2%, coupled with $411 supplemental tuition increase to meet legislative reductions. In FY 2012-13, CITI increases included 6.5% , coupled with year-1 “catch-up” of $308.00.

Student Tuition – Non-Resident Students FY 07-08 thru FY 13-14 Page 69 Page 69 Student Tuition – Non-Resident Students FY 07-08 thru FY 13-14 6.5% 4.9% 6.3% 5.0%   Cumulative Increase Average Increase UG-NRes 30.3% 5.1% Grad-NRes 27.7% 4.6% MBA/MSA-NRes 27.0% 4.5% 6.5% 2.0% 1.8% Note: In FY 2010-11, CITI increase was 2%, coupled with $412 supplemental tuition increase to meet legislative reductions. In FY 2012-13, CITI increase was 3.3%, coupled with $300.00 year -1 “catch-up” for undergraduate non-resident students.

What Tuition Means to UNCW FY14 Projected Page 70 Page 70 What Tuition Means to UNCW FY14 Projected Tuition Revenues Regular Term Instruction Resident Students $38,559,022 Non-Resident Students 28,124,167 Subtotal – Regular Term $66,683,189 Distance Education (includes RN to BSN AP program) Resident Students $3,337,875 Non-Resident Students 765,499 Subtotal – Distance Education $4,103,374 Total Tuition Revenue $70,786,563

Year End Appropriations Page 71 Page 71 Year End Appropriations (Budget versus Actual) -5.68% Note: Federal stimulus funds replaced appropriations (FY09-10 $7.2M) (FY10-11 $7.5M)

FY 2013-14 UNCW Mandatory Student Fees Page 72 FY 2013-14 UNCW Mandatory Student Fees Mandatory Fee Allocation Annual Amount Student Services $24.00 Athletics 538.55 Health 190.50 Media 12.50 SGA 53.00 Student Union 129.00 Recreation & Intramurals 253.00 Postal 15.00 Athletic Facilities Operating 107.50 Cultural Events - Academic Affairs 30.15 Cultural Events - Student Affairs 10.00 Union Debt 0.00 Union Expansion Debt 212.00 Westside Expansion Debt 20.00 Recreation Debt Recreation Expansion Debt 216.40 Leadership 21.00 ID/Debit Card 9.00 Education & Technology 398.50 Subtotal – General & Debt Fees $2,240.10 Transportation 76.00 Association of Student Gov't 1.00 Subtotal – Miscellaneous Fees $77.00 Total Mandatory Fees $2,317.10

FY 2013-14 Total Mandatory Student Fees (General Fees + Debt) Page 73 FY 2013-14 Total Mandatory Student Fees (General Fees + Debt) Appalachian State University $2,604.00 UNC Charlotte $2,487.00 UNC Asheville $2,445.00 Western Carolina University $2,427.00 UNC Greensboro $2,390.00 UNC Wilmington $2,240.70 Winston-Salem State University $2,233.16 East Carolina University $2,125.00 North Carolina A&T State University $2,044.50 North Carolina State University $2,017.15 North Carolina Central University $1,989.09 UNC Pembroke $1,852.00 Fayetteville State University $1,837.00 UNC Chapel Hill $1,699.98 Elizabeth City State University $1,651.65 Does not include Miscellaneous Fees

Mandatory Student Fees FY 07-08 thru FY 13-14 Page 74 Page 74 Mandatory Student Fees FY 07-08 thru FY 13-14 4.2% 2.4%   Cumulative Increase Average Increase Mandatory Fees 16.7% 2.8%

Summary of Changes to State Budget Page 75 Page 75 Summary of Changes to State Budget

UNCW Environmental Scan/Overview Page 76 UNCW Environmental Scan/Overview Strengths & Opportunities Diverse & growing revenue sources Distance Ed Auxiliaries MARBIONC Healthy liquidity Membership in UNC system & history of state support Well-managed and growing endowment Strong controls & planning processes Solid student demand & enrollment trends Commitment to innovation Exceptional compliance record & unqualified audit opinions Weaknesses & Challenges Continuous need to grow revenues Endowment Federal contracts & grants Relatively high level of debt Dependence on state funding Legislative mandates Tuition sensitivity Financial aid resources Aging plant (~11 years) & potential future capital/maintenance needs