Resource Management: An Overview and Assessment of the Current External Environment. Melody Bianchetto

Transcription

1 Resource Management: An Overview and Assessment of the Current External Environment Melody Bianchetto 2013 Managerial Analysis and Decision Support Salt Lake City, UT November 14 15, 2013 Agenda Resource Management Overview Role in strategic planning Operating budgets and methodologies Capital budgets Multi year financial planning Current Higher Education Environment

2 Financial Planning/Budget Cycle Assessment & Accountability Strategic Planning Budget Execution Financial Planning/ Capital Budgeting Annual Budget Process Strategic Planning Understand past and present, culture and politics Assess external environment Develop future state Create a map of how to get from current place to desired vision

3 Strategic Planning Be collaborative, with buy in from faculty, staff, students, board Align activities with strategic vision Invest resources in those activities Assess and re adjust Multi-Year Planning Informs strategic planning process future benchmarks and goals Projects future available resources Provides a focus on long term costs of initiatives Evaluate financial sensitivity Higher degree of variability

4 Capital Budgets May include new construction, acquisitions, renovations, equipment, systems implementations Usually crosses fiscal years Usually large dollars As a result, not usually incorporated into operating budget, but does impact the operating budget Annual Budget Process If planning is done well and activities are aligned with strategic direction, budgeting will follow Budgeting is simply a tool for making resource allocation decisions to implement the strategic plan Budgeting does NOT set priorities. Review of actual results versus budget provides a statement of how the strategic plan is implemented

5 Annual Resource Allocation Issues Budget model must matches mission/culture Unpredictable external impacts Inflexibility of costs, inability to redirect Pressure from internal and external constituents Difficulty in stopping activities Unintended incentives/disincentives Primary Operating Budget Models Incremental Responsibility center or activity based Performance funding Formula Zero based Initiative based Hybrid

6 Incremental Historical based + / some amount Easy to administer Not linked to strategic activities or priorities Many revenues/expenses centrally managed therefore, lack of incentives to grow revenues or reduce expenses Decision making is not transparent Responsibility Center / Activity Revenue centers keep revenues generated and pay for direct and indirect expenses Will require subventions for some Cost centers are funded from direct assessments and general taxes Improves awareness of financial ramifications of decisions Address funding of institutional priorities and interdisciplinary activities Be aware of unintended consequences

7 Performance Funding Based on achieving specific actions in a performance plan Combines new program needs with existing activities Prioritization of actions is a must Culmination of a comprehensive, integrated planning approach, but difficult to develop and implement Input and accountability from the schools, auxiliaries and administration Must quantify cost and outcome of each action in plan Need to address where the priorities are established Limited budget resources hinder effectiveness Formula More common among public institutions, based on state funding formulas Resource allocations driven by quantitative factors input vs. output measures? Relatively easy to implement Probably not linked to strategic planning priorities Can become outdated

8 Zero-Based Assumes no history and builds from there Difficult to implement; time consuming Identifies activities and related costs Difficult to apply consistently between administrative and academic areas Rarely applied 100% every year Initiative-Based Focused on strategic planning priorities Funds taken off the top of available institutional revenues or through re allocation Usually applied used one time or short term funds rather than permanent allocations Competitive process used to distribute resources Must incorporate assessment process

9 Hybrid Few pure budget models in place Hybrids will Emphasize strengths of some models Minimize weaknesses of some models Or, simply be the result of one off decision making rather than a comprehensive, thoughtful approach Budget Model Popularity Incremental 60.2 percent Zero based 30 percent Formula 26.1 percent Performance based 19.6 percent Responsibility center 14.2 percent Total exceeds 100 percent because some institutions combine budget models Source: Inside Higher Ed s 2011 Survey of College and University Business Officers

10 Questions? Higher Education External Environment

11 Higher Education External Environment Economic Picture Access Changing Market Students Competitors Affordability Accountability Economic Environment Tuition pricing is under scrutiny Discounting is coming under fire State appropriations still being cut Federal sequestration, shut downs, etc. Investing uncertainty

12 How An Institution is Funded Influences the Economic Impact 100% 90% Other 80% Auxiliary Services 70% 60% Grants and F&A Recoveries 50% Endowment Distribution 40% 30% Annual Giving 20% State General Funds 10% 0% Small Private Master's College Medium Public Master's University Large Public Research University Large Private Research University Tuition Students Access Changing Markets Declining number of high school grads Expansion of veterans benefits High unemployment Loss of high earning factory jobs Competitors Traditional land grant institutions more selective Two year colleges offering four year degrees Expansion of for profit sector On line; MOOCs; what else?

13 Source: Chronicle of Higher Education website: Affordability Publics: higher tuition as the result of the long term shift in the responsibility for paying for public higher education from taxpayers (public good) to students and families (personal benefit) Privates: increasing sticker price and lack of transparency around discounting Higher Education Authorization Act s Net Price Calculators President Obama s Plan for College Affordability

14 Affordability Why A Focus? Percentage growth since in average price for tuition, fees, room, and board, adjusted for inflation. Source: Chronicle of Higher Education, Almanac

15 Growing Student Debt $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $ 57% of graduating seniors from public college have debt Public 65% of graduating seniors from private not for profit colleges have debt Private Non Profit Data from 4-Yr and above college/universities. Source: The Institute for College Access & Success. College InSight, Pres. Obama s Plan for College Affordability Rating system to evaluate colleges on outcomes, affordability, and access Will link student aid to this rating more federal aid for students enrolling at colleges with higher ratings Bonus for colleges enrolling large numbers of Pell Grant students Toughens requirements for students on aid

16 Accountability Fund accounting has always meant some degree of accountability All are getting increasing vocal Donors want to have influence over how their gift is used Federal and state legislators want more degrees at a lower cost Students want cutting edge technology, high end residence halls, a variety dining options, and top notch recreational facilities Tuition payers want low tuition Athletic supporters want national championships and world class facilities Examples of Accountability Measures Regional accreditation standards State performance measurement initiatives American Recovery and Reinvestment Act of 2009 reporting White House s College Scorecard education/college score card College Board s Net Price Calculator Delta Cost Project College Portraits (Voluntary System of Accountability NASULGC project)

17 Resources Managerial Analysis and Decision Support (NACUBO: First Edition Pages 29 & 85) College and University Business Administration (NACUBO: Sixth Edition Chapters 2, 4 & 6) College and University Budgeting: An Introduction for Faculty and Academic Administrators (NACUBO: Third Edition) The Erosion of State Funding for Virginia s Public Higher Education Institutions by the State Council of Higher Education in Virginia for good summary: Almanac of Higher Education 2011 by the Chronicle of Higher Education, of Higher Education/536/