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Budget Overview
• Current Budget & Methodology
• New Internal Financial Model
• Capital Budget
• Questions
UVa’s 2011-12 Operating Budget(in millions)
Academic Division $ 1,344.6
Medical Center $ 1,108.1
College at Wise $ 34.3
Total $ 2,487.0
Academic Division 54.0%
Medical Cen-ter
44.6%
Wise 1.4%
2011-12 Major Funding Sources Academic Division - $1.36 Billion
Tuition & Fees,32.6%
State Appropria-tions,9.5%Sponsored Programs,
24.0%
Auxiliary Revenues,
13.5%
Endowment Distribution,
10.4%
Expendable Gifts, 7.3%
Operating Balances1.2%
Sales & Other1.5%
2011-12 Major Spending AreasAcademic Division - $1.34 Billion
In-struction; 25.3%
Re-search & Pub-
lic Serv.
; 23.0%
Academic Support; 9.6%
Stu-dent Ser-
vices; 3.1%
General Ad-min, 5.1%
O&M, 8.2%
Fi-nancial Aid; 11.6%
Aux-il-
iaries;
14.1%
By Activity
Fac-ulty Com
p.31.3%
Staff Com
p. 21.9%
Wages 4.1%
GTA/GRA 2.1%
Other40.6%
By Expenditure Category
6
Current Budget Methodology
A Hybrid of Three Approaches:
• Targeted Budgets
• Sales and Services Budgets
• Summary Budgets
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
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
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
Budget Overview
• Current Budget & Methodology
• New Internal Financial Model
• Capital Budget
• Questions
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
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: http://www.virginia.edu/resourcingthemission/
New Internal Financial ModelSteering 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, Lead Bob Pianta, Lead Bob Bruner, Lead Paul Mahoney, Lead Kim Tanzer, Lead
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 2012 - Jun 2013 FY2013-14Communication, Change Mgmt, &
Transition Planning
Education / Change Management / ImplementationMonitor & Adjust
System Architecture, Reporting Assessment / Re-quirements, & Training Plan
Short Term: System Architecture Changes & Report
Development
Test Train / Implement
Monitor & Adjust
Revenue Modeling:Revenue Attribution, Bench-marking, Tuition allocation,
Revenue IncentivesTest Train /
Implement
Current Policy Inventory Create / Revise Policies Approve Policies Train /
ImplementMonitor & Adjust
Cost Modeling:Cost allocations, Level of costs for services, Benchmarking, Strategy
for ReservesExpense Incentives
Long Term: System Architecture Changes & Report
Development
Monitor & Adjust
Input from Phase 11. Reconciled Actual
to Budget Data2. Design Principles DRAFT
Major Steering Committee Report Outs
Development
Implementation Monitor
Design Principles & Decision Mapping
15
Resources on Budget Model TransitionsWebsites of Peer Institutions• University of Florida – Responsibility Center Management, http://www.hr.ufl.edu/training/rcm/index.html• Indiana University – Responsibility Center Management, http://weathertop.bry.indiana.edu/mas/rcm/• University of Iowa – Task Force on Strategic Budgeting, http://provost.uiowa.edu/work/strategic-initiatives/tf-budget.htm• Iowa State University – Resource Management Model,
http://www.public.iastate.edu/~budgetmodel/overview/background.shtml• University of Michigan – University Budget Model, http://www.provost.umich.edu/budgeting/ub_model.pdf• University of New Hampshire – Responsibility Center Management, http://www.unh.edu/rcm/rcmmanual/manualtoc.htm• University of Pennsylvania – Responsibility Center Management, http://www.budget.upenn.edu/rcm/index.shtml• Ohio State, Resource – Centered Budgeting, http://www.rpia.ohio-state.edu/br/archive.html• Syracuse University – Responsibility Center Management, http://budplan.syr.edu/BudPlan/display.cfm?content_ID=%
23%28%28%2D%2C%0A
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 http://www.nacubo.org/Business_Officer_Magazine/Magazine_Archives/April_2009/The_Case_for_Decentralized_Financial__Management.html
Budget Overview
• Current Budget & Methodology
• New Internal Financial Model
• Capital Budget
• Questions
Major Capital Projects ProgramCurrently Approved – by Status
(in 000s) (updated Jun 2011)
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
Academic Division Medical Center College at WiseTo be completed by 12/31/2011 Under Construction In Planning On Hold
$2,093,315
$461,304
$182,752
19
Major Capital Projects ProgramNear Term Proposed Through 2014 - By Funding
(in 000s) (updated Jun 2011)
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
Academic Division Medical Center College at WiseState General Fund Debt Gifts Other NGF
$493,190
$25,460$51,400
21
Major Capital Projects Program Long Term Proposed (2015 - 2022) - By Funding
(in 000s) (updated Jun 2011)
$0
$250,000
$500,000
$750,000
$1,000,000
Academic Division Medical Center College at Wise
State General Fund Debt Gifts Other NGF
$935,216
$36,800None
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
Size of the University’s Endowment(in millions)
$1,328 R&V’s Acad Div True Restricted Endow
$ 6 R&V’s Acad Div True Unrestricted Endow
$ 652 R&V’s Acad Div Quasi Restricted Endow
$ 728 R&V’s Acad Div Quasi Unrestricted Endow
$ 403 R&V’s Medical Center Endow
$ 41 R&V’s Wise Endow
$1,112 Affiliated foundations’ funds at UVIMCO
$ 168 Other affiliated foundations’ funds
$4,438
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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