UW-Platteville Pioneer Budget Model

Transcription

1 UW-Platteville Pioneer Budget Model This document is intended to provide a comprehensive overview of the UW-Platteville s budget model. Specifically, this document will cover the following topics: Model development background Model structure Allocation methodology Budget development process Operations and model management Additional support This document will be maintained by the University Budget Office to serve as the official source of information and training related to the model. Model Development Background UW-Platteville first considered redesigning its budget model following its strategic planning effort. One of the priorities named in the University s new strategic plan was the need to control our own destiny, and leadership identified the budget model as a primary tool for realizing this goal. University leadership felt the budget model needed to better align resources with the investment areas highlighted in the strategic plan and decided to assess the current budget process with the intent of identifying and adopting a model that met University needs and formal guiding principles. The incremental model used prior had not been assessed and no principles or objectives had been established for it as an organizational process. To guide its budget redesign process, the University sought a consulting partner by releasing a Request for Proposals (RFP). As a result of the RFP process, the University selected Huron Consulting Group to provide subject matter expertise and project management support to assess the current model and develop potential model alternatives. A Steering Committee was established to guide the assessment and development of the new budget model. The Steering Committee, representative of both academic and administrative interests, was charged with identifying guiding principles for an ideal budget model. Their principles included the following: Encourage integrated planning that aligns resource allocation with the University s mission, values, and strategic priorities. Allocate resources by considering both long-term and short-term needs through a process that incorporates feedback across University constituents. Promote responsibility and accountability through enhanced visibility and planning, both locally and university-wide. Incentivize performance and effective management of revenues and expenses. Page 1 of 15

2 Provide reliable, trusted, and timely data for effective decision-making over time. Create a budgeting process that is simple and transparent. Using the guiding principles as criteria, Huron shared the results of an analysis that evaluated the alignment of current funds flows, financial incentives, processes and timelines, and management reporting with the Steering Committee s identified optimal state. The analysis identified a series of gaps between the current state and the principles and recommended that the University explore alternatives for resource allocation that better aligned with the principles. The Steering Committee shared the proposed guiding principles and assessment outcomes with the Chancellor and received his approval at the end of From December 2014 March 2015, the Steering Committee worked together to draft a new model methodology for allocating revenues and central costs. After the Steering Committee evaluated alternatives and reached consensus on a new allocation methodology over several working sessions, Huron Consulting, the Budget Office, and Deans engaged others on campus to review the proposed allocation methodology and collect feedback. From July 2015 June 2016, the University developed infrastructure to support the model. This included layering additional data periods, building templates, conducting budget office training, and creating documentation. As of spring 2016, July 1, 2017 is denoted as the Chancellor approved go-live date for the University to fully operate under the new model. In June 2016, UWP s Chancellor approved the model. Model Structure The new model presents University-wide operations in an income statement view. Across the top of the model (from left to right) are the University s primary units, including 1) Academic Units, 2) Auxiliary Units, and 3) Central Units. From top to bottom of the model (left-hand side) are the University s grouped accounts, including 1) Revenues, 2) Direct Expenses, 3) Indirect Expense Allocations, and 4) University Resource Distribution. Page 2 of 15

3 The Budget Office can provide the model s chart of accounts as a resource for further detail on both model unit and model account groupings. The chart of accounts shows how departments roll up to the level represented in model units, and the revenues and expense detail behind model account groupings. Model Units Academic Units. The Academic Units section of the model represents each college (plus Alternate Delivery Systems) at a summary level. Within the model, Academic Units receive formula allocations of tuition and state GPR funds, as well as allocations of central costs. The Steering Committee decided it was important for allocations to stop at the college summary level rather than flow directly to departments for two main reasons. First, summarizing at the college level allows the model to be simpler to understand at an executive level, particularly when assessing resources in a University-wide view. Second, and more importantly, representing units at the summary level empowers deans to make strategic resource allocations within their units. If resource allocations were made directly to the departments (i.e., pushed down), deans would not have the authority to redirect resources based on the college s or University s priorities. With this rationale, the Steering Committee agreed to represent the following Academic Units in the model: College of BILSA College of EMS College of LAE Alternate Delivery Systems (ADS) Auxiliary Units. Auxiliary Units represented in the model include operations that are primarily selffunding. These units do not participate in formula allocations of tuition and GPR funds, and also are not allocated central costs within the model (except for any central recharges that they are directly Page 3 of 15

4 assessed). Instead, Auxiliary Units operate as stand-alone units within the model. The following units are represented as Auxiliary Units within the model: Athletics Auxiliary Operations (Residence Life, Dining, Parking, etc.) Central Units. The Central Units section of the model represents all units not categorized as an academic or auxiliary unit. These units may generate some revenues, but their primary mission should be to provide support services for Academic and Auxiliary Units. Central Units are not expected to cover their full costs and are ultimately supported by the Academic Units in the model through cost allocations. The model groups Central Units into categories to focus how much data is provided. Units represented in the model are listed by category below: Academic Support o Advising and Retention, Academic Projects and Teaching Excellence (including the Library), Graduate School, Research and Sponsored Programs, Registrar, Textbook Center, Enrollment Management, International Study Operations, and Provost Advancement o Advancement Operations, Alumni Services, Trust Funds Facilities Management o Physical Plant, University-Wide Debt Service Student Services o Health and Counseling Services, Student Affairs University Infrastructure o Human Resources, Financial Services, Vice Chancellor of Administrative Services, Chancellor s Office, Mail & Duplicating, Public Relations, Publications Operations University-Wide Support o Police, Diversity & Inclusion, Information Technology Services University-Wide* (not an actual department; represents university-wide expenses like the budgeted GPR fringes, central one-time carryover funded budget, insurance loss accounts, unallocated base funds at the time of budget entry and budget control accounts to balance to the Fund 131 tuition authority) Model Accounts Revenues. The Revenues section of the model includes both formula-allocated revenues as well as direct revenues. Formula-allocated revenues are tuition and state GPR funds. These are allocated based on each Academic Unit s share of a select variable driver that is detailed in the allocation methodology section of this document. Direct revenues are those that are not allocated using a calculation and instead flow directly to the generating unit as captured within the financial system. Revenues in the model are summarized into the following accounts (formula-allocated accounts denoted with a *): Undergraduate Resident Tuition* Undergraduate Non-Resident Tuition* Page 4 of 15

5 Graduate Resident Tuition* Graduate Non-Resident Tuition* TSI Tuition* Other Tuition (e.g., Continuing Ed, Differential, Online) Student Aid (Contra-Revenue) Student Fees Segregated Fees State GPR funds* Grants and Contracts Indirect Cost Recovery (100% as generated) Sales and Services Sales Credits Gifts and Donations Investment Earnings Other Operating Revenue Direct Expenses. The Direct Expenses section of the model represents expenses that flow directly to the incurring unit. This section of the model does not incorporate formula allocations; it is a reflection of how expenses are captured within the financial system. Direct expenses are summarized into the following accounts within the model: Salary Fringe Benefits Salary (TSI)* Fringe Benefits (TSI)* Contract Services and Utilities Insurance Expense Maintenance & Repairs * TSI denotation applies to only FY2016 and prior. Miscellaneous Services & Support Rental/Lease Expense Training-Tuition & Fees Travel Expense Capital Debt Service/Special Purpose Indirect Expense Allocations. Following the Direct Expense section of the model, Central Unit costs are allocated as indirect costs to Academic Units. These allocations do not represent gross Central Unit expenses. Instead, they are Central Unit s projected net expenses (i.e., expenses not covered by selfgenerated revenues). The total net expenses for each Central Unit group are formulaically allocated across the Academic Units based on their percentage of a specific variable (detailed in the allocation methodology section of this document). The following categories make up the Indirect Expense Allocation section of the model (see unit organization above to locate what departments fall within each group): Academic Support Advancement Facilities Management Student Services University Infrastructure University-Wide Support University-Wide Page 5 of 15

6 University Revenues Fund. In the last section of the model, Academic Units are asked to contribute financial resources to the University Revenues Fund. These resources are reallocated within the model by the Vice Chancellor for Administrative Service, based on final approvals of the Chancellor. University Revenues are intended to provide the university with two opportunities: 1) to support Academic and Auxiliary units operating in deficit, and 2) to redirect resources for investment in strategic priorities. Executive leadership s use of the University Revenues Fund is a critical component of the model, as it allows leadership to align resources with the strategic plan and guiding principles of the budget model. Currently, Academic Units are asked to contribute into the University Revenues Fund at a rate of 20% of their total revenues excluding revenues from segregated fees, grants and contracts, indirect cost recovery, gifts and donations, and investment income. The lines in this section of the income statement are as follows: University Revenue Pool Participation o Academic Units contribution to University Revenues University Revenue Distribution Support o Distribution of resources by executive leadership to support units in deficit University Revenue Strategic Investment o Distribution of resources by executive leadership to support strategic priorities Allocation Methodology The allocation methodology refers to how resources are allocated to units in the model. There are two types of allocations within the model: formula-allocations and direct allocations. Formula allocations distribute resources across Academic Units based on their share of a specific variable or variables. Direct allocations distribute resources as generated (i.e., without use of a formula). This section will focus on the model s formula-driven allocations. Revenues Formula allocated revenues within the model include: Formula-Allocated Revenue Undergraduate Resident Tuition & Undergraduate Non-Resident Tuition Allocation Methodology 70% of revenues are allocated based on each academic unit s percentage of UG credit hours following the college of course offering 30% of revenues allocated base on each academic unit s percentage of UG Credit Hours following the college of student major Narrative 70% incentive for instruction; 30% incentive for academic support UG credit hours are twoyears in the arrears (e.g. Fiscal Year budget development utilizes Fiscal Year actual UG credit hours) Page 6 of 15

7 Graduate Resident Tuition & Graduate Non- Resident Tuition 70% of revenues are allocated based on each academic unit s percentage of graduate credit hours following the college of course offering 30% of revenues allocated base on each academic unit s percentage of graduate Credit Hours following student majors TSI Tuition 70% of revenues are allocated based on each academic unit s percentage of TSI credit hours following the college of course offering 30% of revenues allocated base on each academic unit s percentage of TSI Credit Hours following the college of student major GPR Funds Earmarks for utilities and debt service are allocated directly to units for those purposes 70% of remainder is allocated based on each academic unit s percentage of total credit hours following the college of course offering 70% incentive for instruction; 30% incentive for academic support Graduate credit hours are two-years in the arrears (e.g. Fiscal Year budget development utilizes Fiscal Year actual graduate credit hours) 70% incentive for instruction; 30% incentive for academic support TSI credit hours are twoyears in the arrears (e.g. Fiscal Year budget development utilizes Fiscal Year actual TSI credit hours) 70% incentive for instruction; 30% incentive for academic support Methodology follows tuition allocation incentive; additional performance metrics were evaluated Note that: 30% of remainder base on each academic unit s percentage of total Credit Hours consumed by its following the college of student major Credit hours are two-years in the arrears (e.g. Fiscal Year budget development utilizes Fiscal Year actual credit hours) 1. Double revenue Allocation variables do not count for formulaic allocation purposes if unit receives revenue directly for that same variable. 2. Cross-listed courses the credit hours by instruction are only counting the credit in one college based on the specific course in which the student is registered. 3. Double majors the college(s) in which the student is majoring receive the credit hour. All other revenues, not listed within the table above, are allocated directly to the generating unit as represented in the University s financial data. One exception, however, is Indirect Cost Recovery, which is allocated 100% to the generating unit. Page 7 of 15

8 Direct Expenses All direct expenses in the second section of the model income statement are allocated directly to the incurring unit as recorded in the financial data. There are no formula-driven allocations in the Direct Expense section. The model column representing Central Units expenses is intentionally left blank so as to not double count expenses within the overall university income statement. Indirect Expense Allocations Formula allocated central (indirect) costs within the model include: Formula-Allocated Allocation Methodology Central Cost Group Academic Support Net expenses allocated to Academic Units based on their % of total student headcount Data is two years in the arrears. (e.g. FY18 budget utilizes FY16 data) Advancement Net expenses allocated to Academic Units based on their % of direct expenses Data is two years in the arrears. (e.g. FY18 budget utilizes FY16 data) Facilities Management Net expenses allocated to Academic Units based on their % of square footage Variable is adjusted to exclude classroom spaces Data is two years in the arrears. (e.g. FY18 budget utilizes FY16 data) Student Services Net expenses allocated to Academic Units based on their % of student headcount Data is two years in the arrears. (e.g. FY18 budget utilizes FY16 data) University Infrastructure Net expenses allocated to Academic Units based on their % of direct expenses Data is two years in the arrears. (e.g. FY18 budget utilizes FY16 data) University-Wide Support Net expenses allocated to Academic Units based on their % of total headcount (employee + student) Data is one year in the arrears. (e.g. FY18 budget utilizes FY17 data) University-Wide Net expenses allocated to Academic Units based on their % of direct expenses Data is two years in the arrears. (e.g. FY18 budget utilizes FY16 data) Refer to Model Units section for all departments of cost groups in table above. Page 8 of 15

9 University Revenues The following lines make up the University Revenues section of the model University Revenues Line University Revenues Pool Participation Allocation Methodology 20% of total Academic Unit revenues, excluding segregated fees, grants and contracts, indirect cost recovery, gifts and donations, and investment income Narrative Resources for executive leadership reallocation; select revenues are excluded from reallocation University Revenue Distribution Support University Revenue Strategic Investment Executive Leadership Discretion Opportunity for executive leadership to support units in need of subsidy Executive Leadership Discretion Opportunity for executive leadership to support strategic priorities Model Inputs The budget model inputs are summarized in the chart below. Depending on the time in the budget cycle, variables may be estimated or fixed. Once fixed, a variable is set for the remainder of the current fiscal year and a new value(s) will be provided for the following cycle. Model Development Process Model Page 9 of 15

10 Budget Development Process Development Milestones The budget development cycle occurs annually based on the schedule below. This aligns to the Board of Regents and UW System annual budget development schedule and to the strategic planning schedule. Process Purpose Participants Collect Data & Develop Assumptions Develop Cost Allocations Develop Budget Requests Finalize Funding Decisions Forecast and allocate University revenues; collect allocation variable data Review administrative support budgets and allocate costs Collect funding requests from academic and auxiliary units Review funding requests and set University budget Budget Office, IR Office, Model Management Committees (space) Model Management Committees (central units), Admin. Support Units Academic and Auxiliary Units Exec. Leadership, Model Management Committees (budget advisory) System Budget Review Formally approve University-wide budget UW Board of Regents Updates Throughout Fiscal Year Revise budget based on updated forecasts and data Budget Office, Executive Leadership Budget development under the new model will incorporate the following key milestones: Revenue Allocations. The first milestone of the budget development process involves estimating university-wide tuition and GPR funds and calculating their allocation across Academic Units. When this milestone is complete, the budget office will populate the formula-allocated revenue lines of each Academic Units budget template. Activities involved in achieving this milestone include the following: Forecast Revenues and Select Fixed Expenses o Project university-wide net tuition revenues based on enrollment, pricing, and discounting o Project state GPR funds based on state funding trends o Project known fixed costs (e.g., UW-system charges) Collect and Validate Data o Collect data to populate variables used in allocation calculations o Review data for reasonableness Calculate Select Allocations o Calculate revenue allocations using forecasts and data collected Central Unit Budget Proposals (Cost Allocations). Before Academic Units can develop their comprehensive budget proposals for the upcoming year, they will need to account for their cost Page 10 of 15

11 allocations from Central Units. Setting cost allocations on an annual basis will involve a review of central service needs, and the costs of providing these services. Central Units will present their budget proposals at this point in the process highlighting services and costs and costs will be allocated to the Academic Units based on central unit allocation committee recommendations. Review Central Unit Services o Collect stakeholder input on central service levels and needs for upcoming fiscal year. Develop Budget Proposals (Central Units) o Develop funding requests in new budget templates provided by the Budget Office, highlighting changes relative to the prior year Present Budget Proposals to Central Unit Allocation Committee o Present funding requests for review in format provided by the Budget Office Make Funding Recommendations o Communicate model management s recommendation on funding levels to executive leadership Confirm Funding Decisions o Communicate recommendations for/to Central Units Calculate Allocations o Calculate cost allocations using approved funding levels and data collected Academic and Auxiliary Unit Budget Proposals. After calculating cost allocations, Distribute Templates to Academic and Auxiliary Units o Distribute templates to budget managers with allocated revenues and allocated costs populated Develop Academic and Auxiliary Budget Proposals o Populate direct revenue and direct expense lines of template to complete funding request using prior-year budget data, prior-year actuals data, and scenario planning tool to inform request Funding Decisions. Review Academic and Auxiliary Budget Proposals o Present funding requests for review in format provided by the Budget Office o Discuss University Revenue Fund resource needs Collect Input on Strategic Funding Opportunities o Consider input from stakeholders on university-wide strategic funding needs Make Funding Decisions o Communicate executive leadership s funding decisions to academic and auxiliary o Adjust budget according to funding decisions to finalize budget System Submission. Submit university-wide budget to UW-System. Page 11 of 15

12 Reforecasting and Budget Updates. Provide updates to budget periodically throughout the course of the year to the Budget Advisory Committee and university community. Model Management Shared responsibility will play a key role in the success of the new budget model, as processes and allocation methodologies alone are not sufficient to ensure long-term success. To make it more likely that the new UW-Platteville Budget Model will be implemented effectively, this document outlines select committees to make a new model work well (committees were approved by Chancellor Shields on June 7, 2016). The proposed committees will be advisory in nature so the Chancellor can retain final approval authority over all University budget decisions. At the onset of the budget development process, the Chancellor, with input from the Senior Team as needed, will approve budget guidelines that are distributed to units. The Chancellor will receive recommendations from the Budget Advisory Committee regarding central unit funding levels, space allocations, and deferred maintenance, and will review budget requests from college deans. After requests are collected, the Chancellor will decide how to allocate the University Revenues Fund with input from the Senior Team and Budget Advisory Committee and will finalize all budget decisions before the budget is submitted to UW-System and approved for the upcoming fiscal period. Appointment Length Except for ex officio members, appointments should be made for three-year periods to achieve broad and diverse representation over time. A phased roll-on / roll-off approach is recommended to ensure these committees establish a consistent approach to decision-making and transmit this approach to new appointees. To accomplish this orderly and gradual turnover of members, some inaugural committee members will need to serve terms longer or less than three years. Model Committees Budget Advisory Committee. The Budget Advisory Committee makes recommendations to the Chancellor regarding the annual all-funds budget of the University, the use of the University Revenues Fund, and the alignment of resources over time with strategic priorities. UW-Platteville provides instruction, conducts research, and offers public service across an array of disciplines that face inherently different cost structures. Consequently, to maintain the University s role and mission, the Committee should develop its recommendations so that a portion of the University Revenue Fund is used to support Colleges that for structural reasons cannot cover their own full costs (e.g., higher cost for instruction delivery), while the balance is invested in strategic initiatives consistent with the mission and priorities of the institution. This Committee is also responsible for evaluating any Central Unit budget requests that are not resolved by the Central Unit Allocation Committee. In these cases, the Page 12 of 15

13 Committee must decide whether to recommend an increase in Central Unit budgets or propose a change to existing service offerings or costs. Other Tasks 1. Inform the alignment of strategic and annual planning with budget development to ensure that the University integrates planning and budgeting. 2. Review and recommend the comprehensive University budget to the Chancellor for final approval by the UW-System. 3. Review issues of affordability and access to UW-Platteville programs and make recommendations regarding tuition, fees and other charges to students. 4. Develop policies on an as-needed basis to address future needs and mitigate unintended consequences. (Example: Administrative Unit Carry Forward Policy) 5. At periodic intervals, assemble a Budget Model Review Task Force to conduct a thorough review and evaluation of all model components to ensure they continue to align with the University s mission, promote desired behaviors, and mitigate unintended consequences. This work should involve consultation with other budget advisory committees and at a minimum, should include the review of the following model components: a. Allocation methodology for tuition revenues b. Allocation methodology for GPR funds c. Organization and grouping of Central Units d. Variables used to determine the allocation of Central Unit costs, and e. Participation rate needed for the University Revenues Fund. Upon completion of this review, the Task Force should present their recommendations to the Budget Advisory Committee for validation and share the validated recommendations to the Chancellor for implementation approval. 6. At the onset of implementation, this group should help define new process components such as frequency of reporting, process for college/academic presentations to the Chancellor and/or Provost, etc. 7. Promote the six guiding principles identified as important for the University s budget model. 8. Communicate with Academic Units and Governance Senates. Central Unit Allocations Committee. The Central Unit Allocations Committee will promote collaboration between academic and central support units, clarify expected service levels by the central units, promote the alignment of central unit services with the strategic plan and priorities within it, and evaluate the funding levels required to deliver those services at desired and realistic levels. As part of the annual budget development process, this Committee will evaluate financial plans proposed by selected central units and make recommendations to the Budget Advisory Committee. These financial plans should outline the proposed unit budget, priorities, and justify additions or changes to service levels or fee structures. If the Central Unit Allocations Committee is not able to reach a recommendation regarding a Central Unit s financial plan, the Committee may refer the case to the Budget Advisory Committee. The final responsibility of the Central Unit Allocation Committee is to recommend a unified budget for all central support units to the Budget Advisory Committee for final review and inclusion in Page 13 of 15

14 the University-wide budget recommended for submission to the Chancellor. The committee is also responsible for promoting the six guiding principles identified as important for the University s budget model. Space Management and Deferred Maintenance Committee. The Space Management and Deferred Maintenance Committee will advise on the funding for maintenance using university resources, priorities for requests to UW System for all agency funds, and the allocations of resources to support improvements across the University. The Committee will recommend priorities among projects (i.e. internal and external DOA/UW System projects) for periodic and as-needed improvements. Additionally, this Committee will serve as a policy developer for space changes to ensure standard processes regarding space management and space audits. Other Tasks 1. Advise on the development of policies and procedures for the management and brokerage of space. 2. Review reports regarding updates to the University s space database to support accurate and equitable space-based cost allocations. Space audits, to that end, should be conducted as necessary. 3. Review prior year maintenance levels and project funding decisions, review proposed project requirements, make recommendations to University leadership on maintenance funding levels, and make recommendations regarding funding for maintenance projects. 4. Make meeting agendas and minutes available to assure full transparency regarding the funding of deferred maintenance projects, as these projects have significant impact on academic and central unit stakeholders across the institution. 5. Provide support to determine and define components of the Facilities Service Level Agreement, outlining the levels of services that units receive in return for their Facilities cost allocations ( space charges ). 6. Promote the six guiding principles identified as important for the University s budget model. Model Management Structure The model management structure below provides an overview of the different committees and stakeholder groups that will be involved in the budget development process. Page 14 of 15

15 Communications Recommendations New Group Chancellor (Funding Decisions) Senior Team Governance Senates Decisions* Budget Advisory Committee (Chair: Provost and VC Administration) Budget Guidelines Strategic Initiative Requests College Deans Central Unit Allocations (Chair: VC Administration) Deferred Maint. and Space Management (Chair: Director of Facilities) Model Operation Task Forces (Chair: Budget Director) Respective advisory committees within each college Administrative Unit Leaders Communications Model Development Reporting and Analysis Training Variable Audit * Model management structure does not replace existing governance processes. Instead, chart denotes that decisions that may impact the budget must be shared with these new committees so that any pertinent adjustments that are needed can be integrated into the process. Implementation Outlay Implementation requires training and outreach support. FY17 Parallel Year (July 1, 2016 to June 30, 2017). During the Parallel Year, UW-Platteville s budgets will reflect the current allocation model with the added component of conducting back-end reporting to mock-up the impact of how resource allocation would have looked like had the new resource allocation model been used to allocate resources. Additionally, UW-Platteville should create and provide formal model training, charge and activate model management committees, and develop the FY2018 budget using new budget model allocation methodology. FY18 Go-Live Year (July 1, 2017 to June 30, 2018). During the Go-Live period, allocation of resources will follow the new budget model allocation methodology. Training Materials and References. Page 15 of 15