UNIVERSITY FINANCIAL MODEL
UPDATE
DECEMBER 22, 2014
Chip German
[email protected]
1
UNIVERSITY FINANCIAL MODEL
Dollars from
Heaven
Personnel
Costs
Private
Gifts
Actual Tuition
Revenue
Direct
Expenditures
Costs of Central
Services
Endowment
Income
Costs of
Financial Aid
Research
Revenues
THE PAST: TRYING TO LOOK THROUGH DEEPLY TINTED GLASS
2
UNIVERSITY FINANCIAL MODEL
Supplemental
Operating Support
Personnel
Costs
Private
Gifts
Actual Tuition
Revenue
Direct
Expenditures
Complete Strategic
Perspective
Innovation and
Entrepreneurship
Endowment
Income
Research
Revenues
Costs of
Central
Services
Costs of
Financial
Aid
THE FUTURE: A COMPLETE FINANCIAL PICTURE
Responsibility
&
Accountability
3
UNIVERSITY FINANCIAL MODEL
USES
SOURCES
University
State
Funds
Private Gifts
/Endow. Inc.
Supplemental
Funding
Undergrad
Financial Aid
Central
Services
Tuition
Allocated Costs
Research
Funds
School
Portion of undergrad tuition that goes to
undergrad financial aid
Direct
Expenditures
TOWARD A MORE TRANSPARENT FINANCIAL SYSTEM
4
UNIVERSITY
FINANCIAL
MODEL
TERMS
CENTRAL SERVICES COST CATEGORIES
ACTIVITY CLUSTERS
5
UNIVERSITY FINANCIAL MODEL
ISSUES IN LARGER CONTEXT AWAITING RESOLUTION/CLARIFICATION:
• Impact of cuts in state appropriations for FY15-16 will affect the
availability of supplemental funding
• Model for Affordable Excellence will be considered by the Board of
Visitors for approval in February 2015
6
UNIVERSITY FINANCIAL MODEL
HOW DO WE ALLOCATE REVENUES?
• Undergraduate tuition (regular session): (net of financial aid and
blind to in-state vs. out-of-state proportions) will be allocated via a
blended formula that includes the credit hours degree-seeking
students (on-Grounds and off-Grounds) take within a school (75%
weight) and the schools with which students are affiliated (25%
weight). 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.
• Credit-hour counts are recorded at the end of October and the end of
March for the regular academic session
• The proportion of undergraduate financial aid that is funded by
undergraduate tuition is budgeted, and both the regular-session and
summer-session undergraduate tuition pools are reduced by the
relevant amount before allocation to the schools.
7
UNIVERSITY FINANCIAL MODEL
HOW DO WE ALLOCATE REVENUES?
• Undergraduate tuition (summer session): (net of financial aid and
blind to in-state vs. out-of-state proportions) will be allocated via a
blended formula that includes the credit hours students take within a
school (0.75 weight) and the schools with which students are
affiliated (0.25 weight). For summer session, all undergraduate
student credit hours are counted (not just degree-seeking) and the
summer session administrative costs of providing undergraduate
courses are deducted from the tuition pool before allocation.
8
UNIVERSITY FINANCIAL MODEL
HOW DO WE ALLOCATE REVENUES?
• Study Abroad: schools that sacrifice undergraduate tuition to
encourage study abroad by their students will receive special
consideration through supplemental funding, in accord with the
spirit of the Cornerstone Plan. Specific arrangements will be
included in agreements between deans and the relevant executive
vice presidents.
9
UNIVERSITY FINANCIAL MODEL
HOW DO WE ALLOCATE REVENUES?
• Graduate tuition has been allocated directly to the schools of
enrollment with the school responsible for financial aid allocations
since 2013-14. Both summer session graduate tuition and tuition
generated by enrollment in courses (at any time) in schools other
than the graduate school in which the student is registered are
subject to specific agreements between relevant entities.
• Grants and contracts will be allocated to the school or unit housing
the research activity.
• Facilities and administrative cost recoveries will be allocated to the
school or unit housing the research activity.
• Restricted endowment distribution will be allocated according to
the donor’s wishes.
10
UNIVERSITY FINANCIAL MODEL
HOW DO WE ALLOCATE REVENUES?
• The full 50-basis point endowment administration fee will be
allocated to the recipients of the previous 25-basis point distribution.
• Schools must make good-faith efforts to report available foundation
support (cash and in-kind) to the extent possible during the budget
process.
• 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.
11
UNIVERSITY FINANCIAL MODEL
HOW DO WE ALLOCATE REVENUES?
• 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
from a central pool to ensure that all schools and units sustain
excellence.
• To invest in the University’s highest priorities as identified by
the strategic planning process.
• Additional note: The University expects to provide supplemental funding in
FY15-16 sufficient to meet expectations from the previous model of
budgeting if adequate funding is available from all sources to provide it.
This has been known previously as “hold-harmless” funding.
12
UNIVERSITY FINANCIAL MODEL
HOW DO WE ALLOCATE CENTRAL SERVICE COSTS?
General Concepts
• Each central-cost category has its own usage-approximation formula
• All allocated costs are net (only include costs not covered by other
funding sources)
• Regular UFM cost and allocation methodology will apply to Agency
207 entities included in the new Health Affairs financial/management
framework (such as School of Medicine, School of Nursing, Claude
Moore Health Sciences Library)
• Central services will provide base levels of service to all entities in
the UFM as detailed in service-level specifications (currently under
development)
13
UNIVERSITY FINANCIAL MODEL
HOW DO WE ALLOCATE CENTRAL SERVICE COSTS?
Facilities Services:
• Costs for entities within scope of the University Financial Model
will computed as a general per-square-foot-occupied rate.
UFM entities will be allocated that cost based on their total of
assigned square feet and on their proportion of shared space
(such as hallways and bathrooms).
• Note that utilities will be directly billed in the future to
units/schools for space they occupy (currently viewable as
“memo” bills); until that billing is ready for implementation,
utility costs will be included in the general facilities services
allocations and allocated by the above formula.
14
UNIVERSITY FINANCIAL MODEL
HOW DO WE ALLOCATE CENTRAL SERVICE COSTS?
IT Services:
• Net costs allocated by this weighted-proportion formula:
weighted 0.75 for FTE salaried employees (excludes Facilities
and IT employees in step-down methodology) + weighted 0.25
for regular session FTE students
• Excludes Communication Services costs, which are recovered
through billing.
15
UNIVERSITY FINANCIAL MODEL
HOW DO WE ALLOCATE CENTRAL SERVICE COSTS?
HR Services:
• Net costs allocated by proportion of headcount salaried
employees
16
UNIVERSITY FINANCIAL MODEL
HOW DO WE ALLOCATE CENTRAL SERVICE COSTS?
Development (all University entities receiving gifts):
• 41.5 percent of net central costs allocated for FY14-15 by this
formula: proportion of school/unit-specific gifts greater than
$100K for last four years
• 58.5 percent of net central costs temporarily covered for FY14-15
by University grant
Alumni Engagement (schools only):
• 41.5 percent of net central costs allocated for FY14-15 by this
formula: proportion of contactable alumni for all schools
• 58.5 percent of net central costs temporarily covered for FY14-15
by University grant
Note: both of these costs will be fully allocated beginning in FY15-16
17
UNIVERSITY FINANCIAL MODEL
HOW DO WE ALLOCATE CENTRAL SERVICE COSTS?
Central Library Services:
• Net costs allocated by this formula: proportion of sum of annual FTE
regular session students + annual number of doctoral degrees + FTE
instructional/research faculty
18
UNIVERSITY FINANCIAL MODEL
HOW DO WE ALLOCATE CENTRAL SERVICE COSTS?
Research Support Services:
• Net costs allocated by this weighted-proportion formula: weighted
0.5 for total research dollars (in millions) + weighted 0.5 for total
awards
19
UNIVERSITY FINANCIAL MODEL
HOW DO WE ALLOCATE CENTRAL SERVICE COSTS?
Student Services:
• Net costs allocated by proportion of annual FTE regular session
students
20
UNIVERSITY FINANCIAL MODEL
HOW DO WE ALLOCATE CENTRAL SERVICE COSTS?
Undergraduate Admissions Services:
• Net costs allocated by proportion of annual FTE regular session
undergraduate students
21
UNIVERSITY FINANCIAL MODEL
HOW DO WE ALLOCATE CENTRAL SERVICE COSTS?
Academic Support Services:
• Net costs allocated by this formula: proportion of (annual FTE
instructional/research faculty + annual FTE regular session students)
22
UNIVERSITY FINANCIAL MODEL
HOW DO WE ALLOCATE CENTRAL SERVICE COSTS?
Executive/Managerial Services:
• Net costs allocated by proportion of annual direct school
expenditures
23
UNIVERSITY FINANCIAL MODEL
Additional information is available at:
http://www.virginia.edu/resourcingthemission
Original methodology outlines from Project Steering Committee
recommendations (December 2012) can be found at:
• Cost allocation: http://tinyurl.com/l5e3gxb
• Revenue allocation: http://tinyurl.com/namchsm
All primary recommendations were adopted by the President except:
• allocation of state unrestricted appropriations, which are withheld as
the majority portion of the supplemental operating-support pool.
There was no recommendation on allocation of fundraising/alumni
engagement costs, so the senior officers set an interim allocation
method pending further discussion.
24
UNIVERSITY FINANCIAL MODEL
Revenue and Expenditure Reporting Samples [Data from November 2014]
25
UNIVERSITY FINANCIAL MODEL
Revenue Reporting Samples [Data from November 2014]
26
UNIVERSITY FINANCIAL MODEL
Expenditure Reporting Samples [Data from November 2014]
27
UNIVERSITY FINANCIAL MODEL
Driver Data Reporting Samples [Data from November 2014]
28