Costs of Central Services 1 T HE P AST : T RYING TO LOOK THROUGH DEEPLY TINTED GLASS N EW F INANCIAL...

Costs of Central Services

1THE PAST: TRYING TO LOOK THROUGH DEEPLY

TINTED GLASS

NEW FINANCIAL MODELAT THE UNIVERSITY OF VIRGINIA

VERSION 1.5

School Planning View

Personnel Costs

Endowment Income

Actual Tuition Revenue

Costs of Financial Aid

Dollars from Heaven

Private Gifts

Direct Expenditures

Complete Strategic Perspective

Innovation and Entrepreneurship

Responsibility&

Accountability

Costs of Central Services

2THE FUTURE: A COMPLETE FINANCIAL

PICTURE


School Planning View

Personnel Costs

Endowment Income

Actual Tuition Revenue

Costs of Financial

Aid

Base and Strategic Operating Support

Private Gifts

Direct Expenditures

3


University

School

StateFunds

Private Gifts/Endow. Inc.

Tuition

Research Funds

Base OperatingSupport

AdditionalStrategic Support

Central Services

Allocated Costs

Direct Expenditures

SOURCES

USES

TOWARD A MORE TRANSPARENT FINANCIAL SYSTEM

UndergradFinancial Aid

Portion of undergrad tuition that goes to undergrad financial aid

4


CURRENT STATUS:

• Discussion of initial school scenarios between Provost, COO, and individual school deans (will conclude in late January)

• Focus is now shifting to parallel processes:• Budget building for FY14-15• Scenario and reporting refinement

• Improvement of accuracy and precision in underlying data

• Move of modeling platform from Excel to Hyperion “cost of education” with transparency of allocation methods and drill-down capabilities

• Parallel processes will converge near beginning of FY14-15 with translation of 14-15 budget into NFM terms and organization and new means of tracking

5


NEXT STEPS:

• Continue to refine and come to consensus on NIFM allocation methodologies

• Develop automated system for extracting NIFM data, developing scenarios, generating targets

• 2014-15 budget development will proceed as in years past:

• 2013-14 targets used to set 2014-15 targets

• Adjustments made to reflect unavoidable cost increases, salary increases, enrollment growth, and revenue assumptions related to graduate tuition

• Once targets are established, NIFM methodology will determine levels of base and strategic operating support for schools, and allocations for administrative units.

• These methodologies will be revisited and refined in 2014-15.

7


HOW DO WE ALLOCATE CENTRAL SERVICE COSTS?

STEP 1: DEFINE SERVICE CATEGORIES THAT ARE NOT METERED AND/OR DIRECTLY RECOVERED

• Facilities Services• IT Services• Employee Services• Development/Alumni-Engagement Services• Central Library Services• Research Support Services• Student Support Services

• Undergraduate Admissions Services• Academic Support Services• General Services (executive/managerial)

8



STEP 2: VERIFY COST DATA (ARE WE COUNTING THE RIGHT DOLLARS?)

• Historical Operating Costs (including personnel) net of any recoveries

• Is there a need to cover recurring costs that do not occur on an annual cycle (i.e., every two or three years)?

• How consistent are your regular expenditures year to year?• In the New Financial Model, do you understand how you

will finance major one-time expenditures?• Note Darden and Law requirement to accumulate funding for

maintenance

• Reserves (we do not count them in the model, but good sense requires that you have them (potential policy matter))

9



STEP 2: VERIFY COST DATA (ARE WE COUNTING THE RIGHT DOLLARS?)

• Is model dealing properly with cross-funding and transfers in your area? Requires detailed review.

• Various opportunities to review data and discuss these issues will occur in the next six months.

10



STEP 3: APPLY ALLOCATION (USAGE APPROXIMATION) ALGORITHMS

• Each central-cost category has its own• Developed by planning committees over years prior to 2013• Proposed by New Financial Model steering committee to

President, EVP/COO and EVP/Provost in December 2012; adopted in spring 2013

11




Facilities Services:

• Total cost is allocated by proportion of square feet occupied by all entities (includes proportional share of “general” space in shared buildings)

• Note that utilities will be directly billed to units/schools for space they occupy (currently viewable as “memo” bills)

12




IT Services:

• Total costs allocated by this formula: weighted 0.75 x proportion of serviced employees (excludes Facilities and IT employees) + weighted 0.25 x proportion of annual FTE students

• Excludes Communication Services costs, which are recovered through billing.

13




Employee Services:

• Total costs allocated by this formula: proportion of FTE employees

14




Development (all University entities receiving gifts):• 41.5 percent of total central costs allocated by this

formula: proportion of school/unit-specific gifts greater than $100K for last four years

• 58.5 percent of total central costs temporarily covered by University grant

Alumni Engagement (schools only):• 41.5 percent of total central costs allocated by this

formula: proportion of living alumni for all schools• 58.5 percent of total central costs temporarily covered

by University grant

15




Central Library Services:

• Total costs not covered by other funding sources allocated by this formula: proportion of sum of annual headcount students + annual number of doctoral degrees + FTE instructional/research faculty

16




Research Support Services:

• Total costs not covered by other funding sources allocated by this formula: weighted 0.5 x proportion of total research dollars + weighted 0.5 x proportion of total awards

17




Student Services:

• Total costs not covered by other funding sources allocated by this formula: proportion of annual FTE students

18




Academic Support Services:

• Total costs not covered by other funding sources allocated by this formula: proportion of (annual FTE Faculty + annual FTE students)

19




General Services (executive/managerial):

• Total costs not covered by other funding sources allocated by this formula: proportion of annual direct school expenditures

20


HOW DO WE ALLOCATE REVENUES?

IMPORTANT ISSUE FOR CENTRAL SERVICE PROVIDERS: ARE YOU AFFECTED BY CHANGES IN ALLOCATIONS OF REVENUE?

• Undergraduate tuition (net of financial aid and blind to in-state vs. out-of-state proportions) will be allocated via a blended formula that considers includes the credit hours students take within a school (75%) and the schools with which students are affiliated (25%). 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. Tuition revenues fees from summer session will be allocated directly to schools through a methodology currently in development.

21




• Graduate tuition will be allocated directly to the schools of enrollment (and includes both financial aid and any out-of-state differential); implemented for 2013-14. Graduate tuition revenues and school-specific fees from summer session will be allocated directly to schools through a methodology currently in development.

• Grants and contracts will be allocated to the unit holding the grant or contract.

• Facilities and administrative cost recoveries will be allocated to the unit holding the research grant.

• Restricted endowment distribution will be allocated according to the donor’s wishes.

22




• The 50-basis point endowment administration fee will be allocated to the endowment owner.

• Foundation support in cash and other forms (including in-kind) must be reported as a source by each school.

• 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.

23




• 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 in such forms as short-term strategic support or longer-term base operating support from a central pool to ensure that all schools sustain excellence.

• To invest in the University’s highest priorities as identified by the strategic planning process.

24


TOTAL ACADEMIC DIVISION OPERATING EXPENDITURE BUDGET

2012-13

$1.36 BILLION DOLLARS

25

Sources

26

Uses

Costs of Central Services 1 T HE P AST : T RYING TO LOOK THROUGH DEEPLY TINTED GLASS N EW F INANCIAL...

Documents

Transcript of Costs of Central Services 1 T HE P AST : T RYING TO LOOK THROUGH DEEPLY TINTED GLASS N EW F INANCIAL...