Oregon State University 4 th Quarter Operating Management Report

Transcription

1 Oregon State University 4 th Quarter Operating Management Report Oregon State University s 4 th Quarter FY 2014 Operating Management Report presents the final fiscal year operating results for the three operating fund groups; Education and General, Self- Support, and Restricted funds. The situation is unique in that the Board, moving forward, will see a separate quarterly report for each fiscal quarter of a fiscal year. This year, as a new Board of Trustees, the 4 th quarter report is the first and only report for this past year (FY 2014 July 1, 2013 through June 30, 2014). Overall, the Education and General funds ended very closely in line with the budget, with an operating reserve of 8.4% of revenues, or $42.7 million on total actual revenues of $508.1 million, as compared to the projected reserve of 8.6% of revenues, or $43.4 million on a budget of $506.3 million. The Self-Support funds ended the year with an operating loss but with strong operating reserves that approximate three months of operating expenditures. The Restricted Funds tracked similar to the prior year. The focus of this report is to discuss the variances between the year-end results and the annual budget (Column E in the attached report) for each operating fund group. The variances from the prior quarter projection highlighted in the report (Column G in the attached report) are intended to provide accountability with respect to the accuracy of projections made during the year. Brief explanations for the variances noted from the prior quarter s projection are included in the footnotes on the detail report. The breakdown and discussion of the variances in the annual results compared to budget for each major operating fund type is as follows: Education and General: Revenues, expenditures and transfers of the Education and General fund group tracked very closely with the budget and ended the year within 0.4% of budget. The State General Fund revenue of $140 million was within 1.1% of the budget. Tuition and fee revenue of $290 million was within 0.9% of the budget and other revenue of $77.4 million was $3.0 million or 4.0% higher than budgeted. Total expenses of $497 million were within 0.3% of the budget. Personnel services costs were $8.4 million or 2.2% higher than budgeted. The combined expenditures in services and supplies and capital outlay were $6.7 million or 6.1% lower than budget. Transfers-In of $3.1 million were $1.9 million over budget and Transfers-Out of $10.8 million were $2.7 million over budget, with the net effect being $800,000 under the net budgeted amounts. The budget anticipated an ending unrestricted net asset balance of $43.4 million, an increase of $3.6 million. The actual ending unrestricted net asset balance was $42.7 million, which is F&A Committee Page F-41.1 ACTION ITEMS

2 $3.0 million or 7.4% higher than the prior year. The net variance in the amount of the increase in unrestricted net assets of $657,000 is only 1.5% of the amount budgeted and only 0.1% of total budgeted revenues. Significant variances from budget noted in the report are discussed below. Personnel Services Personnel services costs were $394.8 million, which is $8.4 million or 2.2% higher than budgeted. Items that contributed to the $8.4 million increase over budget for the year were as follows: $4.9 million related to higher graduate fee remissions the number of graduate students employed increased 20% over what was originally expected. $1.1 million related to compensated absences this represents the increase in the accrued vacation pay liability balance from FY 2013 to FY $1.8 million related to higher than expected costs of new hires. Services and Supplies and Capital Outlay Services and Supplies and Capital Outlay costs were $102.6 million, which is $6.7 million or 6.2% lower than budgeted. Items that contributed to the $6.7 million decrease over budget for the year were as follows: $5.6 million due to lower capital outlay spending and reclassification of expenses to plant funds. $1.1 million higher internal sales Education and General internal sales are a reduction to expense. Please refer to the explanatory notes on the quarterly report for additional information. Self-Support: Total revenues were $182 million, which is within 1.1% of the budget. Enrollment fees of $32 million were within 0.1% of the budget. Sales and Services revenues were $117 million, or within 1.0% of the budget. Other revenue was $33 million or 3.0% lower than budgeted. Total expenses were $187 million, which was 7.9% higher than the budget. Transfers-In of $9.6 million were $2.7 million over budget and Transfers-Out of $3.0 million were $1.9 million over budget, with the net effect being $800,000 over the net budgeted amounts. Significant variances from budget noted in the report are discussed below. F&A Committee Page F-41.2 ACTION ITEMS

3 Personnel Services Personnel Services cost were $89 million, which is $4.3 million or 5.0% higher than budgeted. Items that contributed to the $4.3 million increase over budget for the year were as follows: $2.8 million related to Intercollegiate Athletics To properly account for the impact of a coaching change, Intercollegiate Athletics was required by accounting principles to recognize the full $4 million cost of the remaining contract years of a former coach. This cost was partially offset by salary savings from vacancies and unpaid bonuses. $2.3 million related to Designated Operating Funds An error in the projection of personnel services costs when developing the budget caused the budget to be understated. ($300,000) related to Student Centers Primarily due to savings from unfilled positions. ($500,000) related to Student Health Services Primarily due to savings from unfilled positions. Services and Supplies and Capital Outlay The combined expenditures in services and supplies and capital outlay were $98 million which is $9.5 million or 10.8% higher than budgeted. Items that contributed to the $9.5 million increase over budget for the year were as follows: $2.7 million related to Housing and Dining Managing the significant increase in occupancy rates from 83% in the prior year to 96% in the current year, due to the implementation of the new requirement to live on campus, required $1.2 million in furniture purchases and other costs to triple-up many double rooms. Additionally, $1.5 million in other costs associated with occupancy and price increases such as food costs, custodial, utilities, supplies, training, travel and other costs. $6.5 million related to Intercollegiate Athletics A shortfall in fundraising required that $2.0 million of costs budgeted to be charged to restricted funds had to be covered in the auxiliary enterprise fund. Additionally; costs associated with post-season participation, including a football bowl appearance, totaled $1.9 million; costs relative to rebranding to the new logo totaled $1.4 million; the cost of moving the basketball offices to the new facility totaled $500,000; and other costs were over budget by $700,000. $600,000 related to Student Centers The budgetary impact of start-up costs and interest expense relating to the new Student Experience Center, the MU renovation, and the Cultural Center projects was unknown at the time of budget development. $400,000 related to Student Health Services Higher than expected insurance premiums partially offset by lower than expected maintenance and repair and minor equipment spending were incurred. ($800,000) related to Designated Operating Funds The budget was based on historical trends which did not prove a reliable indicator and the budget was overstated. F&A Committee Page F-41.3 ACTION ITEMS

4 Transfers-In Transfers-In of $9.6 million were $2.7 million over budget. Items that contributed to the variance were as follows: $1.5 million related to Designated Operating funds The shift of $600,000 in funding from the Chancellor s Office to the University Shared Services Enterprise and $700,000 of E-Campus transfers. $270,000 related to Student Centers Transfers from Education and General funds. $700,000 related to Other Auxiliaries Transfers from closed-out plant funds. Transfers-Out Transfers-Out of $3.0 million were $1.9 million higher than the budget. Items that contributed to the variance were as follows: $400,000 related to Designated Operating Funds Transfer to Education and General funds. $1.5 million relating to Other Auxiliaries Transfers to plant funds. Additions/Deductions to Unrestricted Net Assets The Unrestricted Net Asset (working capital) balance is presented on this report in order to show the level of reserves available for operations. Additions/Deductions to Unrestricted Net Assets represent transactions that were included in income or expenditures that do not affect unrestricted net assets or transactions that affect unrestricted net assets but were not included in income or expenditures. Examples include; the movement of monies between the operating funds and their related building repair and equipment replacement funds, which were restricted by statute, and the purchase of capitalized fixed assets that do not run through budgeted expenditures. Deductions to Unrestricted Net Assets totaled $2.6 million which was $1.4 million lower than budgeted. Items that contributed to the $1.4 million variance from budget were as follows: $1.4 million related to Motor Pool - The move of monies by the Motor Pool service department from their building repair and equipment replacement funds to their operating funds was not budgeted. $800,000 additional included in the budget as a placeholder No other unplanned transactions occurred. ($540,000) related to the Memorial Union The move of monies by the Memorial Union from their operating funds to their related building repair and equipment replacement funds that was added to the projection in the fourth quarter. ($260,000) related to the Foundation Center The move of monies by the Foundation Center from their operating funds to their related building repair and equipment replacement funds that was added to the projection in the fourth quarter. The variances in operating units that were noted above do not in-and-of-themselves indicate financial stresses or conditions in those units that warrant attention. As an example, even though several of the variances related to Housing and Dining, their results for the year show a F&A Committee Page F-41.4 ACTION ITEMS

5 surplus from operations and transfers of $3.2 million and reserves of $10.3 million that represent 84 days of operating expenditures. Overall, the Unrestricted Net Assets related to the two FY 2014 budgeted funds (Education and General plus Self-Support Funds) grew from $95.98 million to $98.34 million, an increase of $2.36 million or 2.5%. Please refer to the explanatory notes on the quarterly report for additional information. Restricted Funds: Total restricted revenues were $292 million or 1.9% lower than Total restricted expenses were $294 million or 0.5% higher than the prior year. Ending restricted net assets were $12.5 million. When Oregon State University was a part of the Oregon University System (System), the System did not require that it submit a budget for System board approval or to report quarterly on the financial results of the restricted fund group. Accordingly, no budget is presented herein. The Oregon State University Board of Trustees approved a FY 2015 budget for the restricted fund group in July 2014, and management will be reporting the results of operations against that budget in its quarterly management reports for FY 2015 and into the future. Integrated Planning and Budgeting: In an effort to more fully integrate planning and budgeting for the operating units of the University, the Vice President for Finance and Administration established a Division of Finance and Administration Budget and Resource Planning Work Group in the spring to fully understand current budget development and monitoring processes and ultimately recommend best practices. As a result, budget development and monitoring is an area that is receiving a focused review. The variances in self-support activities in the last quarter illustrate areas that will benefit from improved budget management communications processes. In addition, the Vice President for Finance and Administration recently promoted the Associate Director of Financial Services to Director of Capital Budgeting and Self-Support Fund Budget and Resource Planning. This position will report to the Vice President for Finance and Administration and work directly with Self-Support operations leaders in order to enhance policies, long-term integrated planning, and budgeting processes for all University Self-Support units (auxiliary services, service centers and designated operations). Finally, the Chief Financial Officer (CFO) of Intercollegiate Athletics recently left OSU. The position has historically reported to the Director of Intercollegiate Athletics. The Athletics Department CFO now has a dual reporting relationship to the Director of Intercollegiate Athletics and the Vice President for Finance and Administration. Staff Recommendation to the F&A Committee: Staff recommends that the Committee accept the FY 2014 Quarterly Operating Management Report for June 30, F&A Committee Page F-41.5 ACTION ITEMS

6 Oregon State University Quarterly Management Report (Unaudited, For management purposes only) YTD Actual Budget & YE Projection A B C D E F G YTD as Prior YE a % of 7 yr. avg. Variance Projected Chg from prior Notes (in thousands except enrollment) YTD Budget YTD % Budget from Budget 6/30/2014 qtr. projection EDUCATION & GENERAL As of June 30, 2014 For the Fiscal Year Ended June 30, 2014 State General Fund $140, % n/a $138,812 $1,460 n/a ($55) Tuition & Resource Fees, net of Remissions 290,455 99% n/a 293,080 (2,625) n/a (42) Other 77, % n/a 74,403 2,985 n/a 3,556 (1) Total Revenues 508, % n/a 506,295 $1,820 n/a 3,459 Personnel Services (394,819) 102% n/a (386,386) (8,433) n/a (6,179) (2) Supplies & Services & Capital Outlay (102,632) 94% n/a (109,353) 6,721 n/a 4,271 (3) Total Expenditures (497,451) 100% n/a (495,739) (1,712) n/a (1,908) Net from Operations 10,664 10, ,551 Transfers In 3, % n/a 1,145 $1,924 n/a 532 Transfers Out (10,777) 133% n/a (8,088) (2,689) n/a (1,845) (4) Net from Operations and Transfers 2,956 3,613 (657) 238 Fund Additions/(Deductions) n/a 0 Change in Unrestricted Net Assets 2,956 3,613 (657) n/a 238 Beginning Unrestricted Net Assets 39,737 39,737 0 n/a 0 Ending Unrestricted Net Assets $42,693 $43,350 ($657) n/a $238 % Operating Revenues 8.4% 8.6% n/a Student FTE Enrollment-Summer thru spring terms 26, % n/a 26, n/a 11 (1) The main reasons for the variance is due to higher INTO revenues $1,800, F&A rate recovery $600 and FRL Harvest tax revenues $400. (2) Variance to the budget consists mainly of $4,900 higher graduate pay and remissions, $1,100 compensated absences adjustment, and $1,800 more than expected from new hires. The variance since prior quarter is mostly made up of $2,700 error in projection, $1,200 compensated absences adjustment and $2,200 redistribution from other funds. (3) Variance to the budget consists mainly of $5,600 lower capital outlay and $1,100 higher internal sales (a reduction in expense). The variance since prior quarter is mostly $1,400 higher internal sales, $1,500 delayed spending, $800 lower spending in information services and $500 Ecampus transferred to self-support funds. (4) Variance since prior quarter is mainly $700 Ecampus transfer of S&S expense to self-support, $270 to Student Centers to support Black Cultural Center and the Student Experience Center and $600 to OUS. F&A Committee Page F-41.6 ACTION ITEM

7 Oregon State University Quarterly Management Report (Unaudited, For management purposes only) As of June 30, 2014 For the Fiscal Year Ended June 30, 2014 YTD Actual Budget & YE Projection A B C D E F G YTD as Prior YE a % of 7 yr. avg. Variance Projected Chg from prior Notes (in thousands except enrollment) YTD Budget YTD % Budget from Budget 6/30/2014 qtr. projection SELF-SUPPORT - Auxiliaries, Designated Operations and Service Departments Enrollment Fees $32, % n/a $32,265 $22 n/a $27 Sales & Services 117,149 99% n/a 118,279 (1,130) n/a 593 Other 32,962 97% n/a 33,971 (1,009) n/a 107 Total Revenues 182,398 99% n/a 184,515 ($2,117) n/a 727 Personnel Services (89,209) 105% n/a (84,958) (4,251) n/a (3,761) (5) Supplies & Services & Capital Outlay (97,858) 111% n/a (88,353) (9,505) n/a (9,035) (6) Total Expenditures (187,067) 108% n/a (173,311) (13,756) n/a (12,796) Net from Operations (4,669) 11,204 (15,873) n/a (12,069) Transfers In 9, % n/a 6,888 $2,746 n/a 2,495 (7) Transfers Out (2,983) 283% n/a (1,053) (1,930) n/a (848) (8) Net from Operations and Transfers 1,982 17,039 (15,057) (10,422) Additions/(Deductions) to Unrestricted Net Assets (2,579) 64% (4,000) 1,421 n/a 2,221 (9) Change in Unrestricted Net Assets (597) 13,039 (13,636) n/a (8,201) Beginning Unrestricted Net Assets 56,245 56,245 0 n/a 0 Ending Unrestricted Net Assets $55,648 $69,284 ($13,636) n/a ($8,201) Total Unrestricted Net Assets $98,341 Days of Expenditures in Total Unrestricted Funds 52 (5) Variance for budget and since prior quarter is mainly due to accrual of costs associated with coaching changes and an error in the projection in designated operating funds. (6) Variance for budget is $6,500 in Athletics due to $2,000 budgeted to be charged to restricted funds reimbursement did not occur, $1,900 Bowl and other post season events, $1,400 rebranding of Logo, $500 for moving basketball offices, and other costs over budget of $700. In addition, UHDS had $2,700 of increased costs associated with higher occupancy, $400 in food costs due to high inflation and $300 in higher assessments. Variance since prior quarter is due mainly to the Athletics costs noted above and UHDS inadvertently removed principal payments from their projection. (7) Variance for budget and since prior quarter consists mostly of $700 Ecampus, $600 OUS for USSE, $700 plant fund terminations and $270 from E&G. (8) Variance for budget and since prior quarter consists mostly of transfers to plant funds. (9) Variance for budget consists mostly of $1,400 motor pool moving equipment replacement funds to operations, $800 budget placeholder for transfers to reserves not used offset by $800 transfers projected in the Q3 report. Variance since prior quarter is the $1,400 motor pool item and the budget placeholder items. F&A Committee Page F-41.7 ACTION ITEM

8 Oregon State University Quarterly Management Report (Unaudited, For management purposes only) As of June 30, 2014 For the Fiscal Year Ended June 30, 2014 YTD Actual Budget & YE Projection A B C D E F G YTD as Prior YE a % of 7 yr. avg. Variance Projected Chg from prior Notes (in thousands except enrollment) YTD Budget YTD % Budget from Budget 6/30/2014 qtr. projection RESTRICTED FUNDS Federal $198,517 n/a $0 n/a $0 State 14,519 n/a n/a 0 Other 78,792 n/a n/a 0 Total Revenues 291,828 n/a 0 n/a 0 Personnel Services (115,419) n/a n/a 0 Supplies & Services & Capital Outlay (179,075) n/a n/a 0 Total Expenditures (294,494) n/a 0 n/a 0 Net from Operations (2,666) 0 n/a 0 Transfers In 406 n/a n/a 0 Transfers Out (1,750) n/a n/a 0 Net from Operations and Transfers (4,010) Additions/(Deductions) to Restricted Net Assets 1 n/a 0 Change in Restricted Net Assets (4,009) 0 n/a 0 Beginning Restricted Net Assets 16,555 n/a 0 Ending Restricted Net Assets $12,546 $0 n/a $0 F&A Committee Page F-41.8 ACTION ITEM