Unified Budget RYAN LOW CHIEF FINANCIAL OFFICER. May, 2016

Transcription

1 Unified Budget May, 2016 RYAN LOW CHIEF FINANCIAL OFFICER thinkmissionexcellence.maine.edu 1

2 Budget & MYFA Timeline Window for collaborative proposals that impact $ distribution Campus Budget Development Development of 1-yr & 5-yr Capital Plan Enrollment Report (EMC) Fall Census Campus Budgets Due Spring Census Campus MYFA Development MYFA Enrollment Update BOT Budget Approval MYFA Presented to BOT July Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun Finalize Compensation Assumption Finalize Benefit Rate Assumption Legislative requests due to State Budget Office USAC reviews & approves Univ. Svs. allocations Forecast to BOT Forecast to BOT Forecast to BOT FFT 1st reading FFT 2nd reading 76

3 Unified Budget Timeline FY18 Unified Budget (FY16) July Aug Sept Oct Nov Dec Meet with CBOs and campus Presidents Create subteams in key areas Develop charters/ work plans Campus visits (FY16) (FY17) Jan Feb Mar Apr May Jun July Aug Sept Oct Nov Dec Develop recommendations in 6 key areas for implementation of Unified Budget in FY18 Campus Visits May 12 July 1 Open comment period for recommendations May 12 Unified Budget Draft recommendations thinkmissionexcellence July 1 July 15 Team will consider all feedback and release list of final recommendations July 18 Final recommendations submitted to Board of Trustees Sept Final approval of Unified Budget recommendations by BOT Implementation of recommendations 3

4 Key Areas Tuition & Fees State Allocation Model including Outcomes Based Funding Institutional Aid/Waivers Reserves Page Capital Project Funding 69 4

5 Mel Adams Dean of Student and Enrollment Services UMM Pamela Ashby CBO - UMFK Tim Brokaw CBO - UMA TEAM MEMBERS Keith Dubois Director of Student Financial Services USM Laurie Gardner CBO - UMF Sharon Nadeau Director of Administrative Systems - UMF Ben Shaw CBO - UMPI Tuition and Fees Miriam White Director of Budget and Financial Analysis - UMS Joel Wincowski VP for Enrollment Management UM 5

6 Charter Highlights Charter Highlights: Charged with analyzing options & making recommendations on policy and rate setting elements of Tuition and Fees, but not allocation. Scope limited to matriculated students and doesn t include items such as room and board, contracted seminars, non-matriculated student tuition or 3 rd party fees. Key Focus Areas: What is our recommended approach to Market Segmentation and how we price tuition and fees affordably? What is our recommended approach for expanding access to online courses? What is our recommended approach for increasing development of collaborative degree (for example, cybersecurity) programs? How/what can we simplify with our fee structure? How do we make a transition from our current tuition and fee structure to a new/ go-forward one? What is the expected financial impact of the recommended changes? Tuition & Fees 6

7 Guard Rails for the Recommendations Simple and understandable. Transparent. Consistent. Fair student and public perception is important. Expand Access for students and the fiscal stability of our institutions. Aligns with campus differentiation and value delivered to student market segments. Maintain Maine s leadership in higher education affordability. Tuition & Fees 7

8 Summary of Recommendations 1. Develop a Demand Based Tuition Rate Pricing Structure for the University of Maine System. 2. Develop one affordable, unified rate structure to expand access for degree programs that are fully online. 3. Every collaborative degree program will set one agreed-upon rate structure that encourages multi-campus program development. 4. Establish and enforce new definitions for course and program fees. Consider developing a differential tuition rate for certain academic programs rather than embedding these rates into either course or program fees. 5. Maintain existing unified fees, but rename the fee to a more descriptive name such as "Student Support Fee". 6. Examine all other fees for opportunities to simplify and make consistent across campuses. Tuition & Fees 8

9 Draft Recommendation 1 Develop a Tuition Rate Pricing Structure for the University of Maine System. Considerations The University of Maine System has 7 different tuition levels. UM, UMA, UMF, UMM, UMPI and USM charge by the credit hour; UMFK charges tuition based on a 15 credit block. No clear formula to calculate In-State and Out-of-State tuition rates. UMPI, UMFK, UMM have agreed to keep their rates similar for In-state. No clear formula for calculating In-State tuition rate. NEBHE rates are the same across the system at 155% of In-State tuition. Recommendation 1. Recommend UMS explore and create the following pricing levels. Doctoral UM; Masters UMF, USM; Baccalaureate UMA, UMM, UMFK, UMPI. 2. Develop formula to calculate In-State tuition rate based on the state appropriation that each campus receives. 3. Develop clear guidance on calculating Out-of-State tuition rates. 4. New tuition rate structure to be implemented for the summer of The process for developing tuition rates needs to be reviewed carefully with the Enrollment Management Council. Tuition & Fees 9

10 Draft Recommendation 1 (continued) Develop a Tuition Rate Pricing Structure for the University of Maine System. Preliminary/Illustrative In-State Rate Change Summary: Tiered O/(U) Tiered O/(U)% Current Tiered Current Current In-state Rates UM % USM % UMF % UMA % UMM % UMFK % UMPI % While the Tuition and Fees team developed a preliminary set of rates that are illustrative of a 3 tier structure, the final rate structure will be determined by the CBO group (in collaboration with representation from the Enrollment Management Council) after a more refined financial analysis can be conducted. The intent, after the rates are adjusted, is to keep all campuses financially "whole" which may create the need for adjustments to recommendations from the budget allocation components of the unified budget. Tuition & Fees 10

11 Draft Recommendation 1 (continued) Develop a Tuition Rate Pricing Structure for the University of Maine System. Preliminary/Illustrative Out-of-State Rate Change Summary: Tiered O/(U) Tiered O/(U)% Current Tiered Current Current Out-of-State Rates UM % USM (65) -9.8% UMF % UMA (181) -34.5% UMM (272) -44.1% UMFK % UMPI % While the Tuition and Fees team developed a preliminary set of rates that are illustrative of a 3 tier structure, the final rate structure will be determined by the CBO group (in collaboration with representation from the Enrollment Management Council) after a more refined financial analysis can be conducted. The intent, after the rates are adjusted, is to keep all campuses financially "whole" which may create the need for adjustments to recommendations from the budget allocation components of the unified budget. Tuition & Fees 11

12 Draft Recommendation 1 (continued) Develop a Tuition Rate Pricing Structure for the University of Maine System. Preliminary/Illustrative NEBHE Rate Change Summary: Tiered O/(U) Tiered O/(U)% Current Tiered Current Current NEHBE UM % USM % UMF % UMA % UMM % UMFK % UMPI % While the Tuition and Fees team developed a preliminary set of rates that are illustrative of a 3 tier structure, the final rate structure will be determined by the CBO group (in collaboration with representation from the Enrollment Management Council) after a more refined financial analysis can be conducted. The intent, after the rates are adjusted, is to keep all campuses financially "whole" which may create the need for adjustments to recommendations from the budget allocation components of the unified budget. Tuition & Fees 12

13 Draft Recommendation 2 Develop one unified rate structure for undergraduate degree programs that are fully online. Considerations Online programs are currently priced and promoted differently by each UMS institution. Maine s public universities need to expand affordable access to online academic programs. The overall marketing strategy should include a simple and aggressive approach to pricing for these programs. Recommendation CBO group to refine the proposal outlined below, including a financial analysis of the economic impact to each campus as well as an assessment of system capabilities required to implement this recommendation. 1. Adopt a single, unified tuition rate for 100% fully online programs (same rate for all campuses or price tiers). 2. Consider an additional dollar amount per credit hour (TBD) to support unified online efforts. This dollar amount would support a coordinated effort to improve unified online functionality and access. The occasional online course taken by students would not fall under the single unified online rate but rather default to the individual campus pricing structure. 3. The student matriculated in a fully online program would be able to take a limited number of "face-toface" courses at the online rate. 4. Next steps include identifying what degree programs qualify within the system for fully online pricing and the resulting financial impact to each campus due to the new pricing. Tuition & Fees 13

14 Draft Recommendation 3 Every collaborative degree program will set one agreed-upon rate structure for that program. (Applies to both undergraduate and graduate degree programs.) Considerations Limited programs being offered across the System that fall within the collaborative definition and framework, however there is potential and momentum to increase in this area. Today, three primary programs exist: Nursing, Cybersecurity, and Masters: Instructional Technology, but are at various stages of collaboration. Tuition and fees for the courses involved in these programs, across multiple institutions, currently vary based on the campus that is offering the course. The primary issues within the current state center on the complexity of billing for the student. Because the classes are priced per campus, it is difficult for the student to estimate the cost. Additionally, the current pricing model makes it difficult to enter into a true collaborative program between campuses, because of the complexities surrounding proper pricing. Recommendation CBO group to refine the proposal outlined below, including a financial analysis of the economic impact to each campus as well as an assessment of system capabilities required to implement this recommendation. 1. Recommend that UMS create one rate applied across all campuses involved in the specific academic degree program or potentially program(s). 2. The CBO group to develop and refine the specific implementation details including: The development of the rate and revenue sharing methodology. This methodology should be flexible enough to accommodate changes in what campuses are participating in any particular collaborative degree program. Required system enhancements. Financial analysis to determine economic impact to each campus. Tuition & Fees 14

15 Draft Recommendation 4 Establish and enforce new definitions for course and program fees. Consider developing a differential tuition rate for certain academic programs rather than embedding these rates into either course or program fees. Considerations Campuses across the U.M. System charge a myriad of course/program fees. Overwhelmingly, fees are charged as course fees. There are a number of cases where the fee structure could be significantly simplified with a clear delineation between course and program fees. This could lead to a reduction of fees assessed to students while making the fee structure much easier to explain. Recommendation 1. CBO group to develop new definitions for course fees and program fees as well as explore implementing the concept of a differential tuition for certain academic programs. 2. With the new definitions, each campus would then undertake a comprehensive review and reclassification of fees include appropriate justification. 3. The CBO group to lead the development and refinement of the specific implementation details including: The development of the rate and revenue sharing methodology. Required system enhancements. Financial analysis to determine economic impact to each campus. Tuition & Fees 14

16 Draft Recommendation 5 Maintain existing unified fees, but rename the fee to a more descriptive name such as "Student Support Fee". Considerations Currently a Unified Fee is charged by each campus. All campuses differ in the amount and how the charge is determined. The name of Unified Fee does not explain what the fee is for and causes many questions to the campus Student Financials staff. It is difficult to explain and the title has no real meaning to students and parents. Currently campuses are bringing in a large amount of revenue from this fee. Recommendation 1. It is recommended the Unified Fee not be rolled into tuition at this time. The amount of dollars in revenue received by campuses would require a large tuition increase in addition to any normal tuition increases. 2. It is recommended the name of the Unified Fee be changed to a more descriptive name such as "Student Support Fee". The future name of the fee will be determined by the CBO Group after considering alternatives that any stakeholder group might offer to the suggested new name of "Student Support Fee". This should help students and parents better understand the fee. Tuition & Fees 16

17 Draft Recommendation 6 Examine all other fees for opportunities to simplify and make consistent across campuses. Considerations Currently campuses apply and charge many different fees outside of the program and course fees previous mentioned in this report. Examples of such fees include the Late Payment Fee and Late Registration Fee. It is difficult for students to determine when fees will be assessed. In the case of multi-campus students they may be receiving fees from two or more campuses which could make their costs much more than the single campus student. Recommendation 1. Student Financials Team should review all common fees and make recommendations on changes where appropriate with a goal of providing more consistency in policy across UMS. 2. All campus administrations review fees being charged and determine if still needed or could they be included in the Unified Fee. Simplifying the fee structure will improve billing. 3. This effort should be combined with a recommendation from the Allocation team the collaboration across UMS of student financial functions. Tuition & Fees 17

18 Draft Recommendation 7 Consider offering a block tuition rate at 15 (or 16 for UMF) credit hour rate for students taking credit hours. Considerations Currently only one UMS campus, UMFK, offers block tuition (as do many of our identified regional competitors). UMS is foregoing potential marketing and competitive benefits by not implementing block tuition across the system. UMS is foregoing the opportunity to provide a financial incentive for students to graduate earlier. Block tuition at UMFK increases switching costs for a UMFK student who wants to take courses at other UMS campuses. Recommendation 1. Maintain block tuition at UMFK only through FY 2018 while the Enrollment Management Council work with the Student Financial Group and CBOs to evaluate opportunities to create faster, more affordable pathways to degree attainment and reduce student loan indebtedness through a unified block tuition pricing structure. The Enrollment Management Council, in partnership with the Student Financial Group and CBO participation, should continue to evaluate the merits of implementing a block tuition pricing structure. Final recommendation due no later than 12/15/2016. Longer term (beyond FY2018), UMS should take an all or nothing approach where the entire system either offers block tuition or not. Tuition & Fees 18

19 Future Considerations Continue to look for opportunities to accommodate the multicampus student with a single tuition rate. Look for opportunities to unify program fees or program differential tuition rates with a single rate defined for an academic program across the entire system. Likely candidates include nursing, business and engineering. The evolving UM/UMM partnership may cause some of the recommendations in this report to be modified to accommodate changes in the relationships between these two institutions. Tuition & Fees 19

20 TEAM MEMBERS Ryan Low Chief Financial Officer, UMS Claire Strickland Chief Business Officer, UM Laurie Gardner Chief Business Officer, UMF Pam Ashby Chief Business Officer, UMFK Mark Hatt Chief Business Officer, UMM Joe Szakas Provost, UMA Buster Neel Chief Business Officer, USM Allocation Team Ben Shaw Chief Business Officer, UMPI Miriam White Director of Budgeting, UMS 20

21 Charter Highlights Charter Highlights Charged with recommending an allocation model that properly supports students fairly across all UMS campuses with a focus on establishing an appropriate base budget and a method for allocation of new resources. Key Focus Areas: Review base budget allocations does each campus have the opportunity to be successful? New allocation model what will be the method we use to allocate state appropriation going forward? Process for incremental allocations Tuition and Fee revenue will revenue be centralized or continue to remain with individual campus? Allocation 21

22 Challenges Opportunity for change is limited by current allocations, fiscal challenges and lack of new resources Current allocation model has been in place with very minimal change for nearly 50 years. This limited the team s ability to shift existing resources without causing significant disruption across the campuses. Campuses are in varying states of fiscal health. Again, this limited the team s options when it came to reallocating resources internally. Every campus can make a strong case for additional resources but reallocation is a zero sum game unless new resources are identified. Allocation 22

23 University of Maine System Allocation Models Historic Allocation 5% 10% New $ 100% OBF 15% 20% OBF 30% 18 OBF 16, 17 OBF UM 50% USM 25% UMA 9% UMF 6% 95% 90% 85% 80% Historic Allocation Historic Allocation 70% New Funding Model UMFK 3% UMM 3% UMPI 4% Pre (recommended) 2019 (recommended) 23

24 Draft Recommendation 1 Considerations Adjustment for original OBF recommendation Adjust campus base budgets step 1 Make adjustment to increase OBF share of historic appropriation in FY18 to 30% (at 20% for FY17) Reallocate $3m in administrative review savings on a permanent basis to provide $ for base allocations See Recommendation 3 for mechanism to replenish BOT Investment pool Recommendation In FY17, the University of Maine System will be allocating 20% of the historical state appropriation (pre increases) through the Outcomes Based Funding model. The recommendation here is to move to the full 30% allocation in FY18...before shifting to new funding model by FY19 at the latest. (Campus by campus impact on next slide) In FY17, total annual administrative review savings will be approximately $6m. The recommendation is to use $3m of those savings on a permanent basis to reallocate back to campus base budgets. A recommendation later in the report will provide a mechanism to replenish those savings. Provide one-time transition funding for FY18 & FY19 to balance ultimate goal of more equitable funding across UMS with the short term fiscal challenges. Allocation 24

25 Draft Recommendation 1 FY18 Allocations UM UMF UMA UMFK UMM UMPI* USM FY17 Base Allocation 82,497,718 12,253,931 16,803,125 5,308,503 4,482,351 6,999,217 48,032,552 OBF adjustment (1,664,717) 227, , ,285 (264,680) (37,252) 959,900 Adjusted Base 80,833,001 12,481,212 17,436,307 5,454,788 4,217,671 6,961,965 48,992,452 $3m Base adjustment 1,000,000 1,000, ,000 One-time Support 500,000 FY18 Base Allocation* 80,833,001 12,481,212 17,436,307 6,454,788 5,217,671 7,461,965 48,992,452 *(not including one-time support) Allocations are estimates based on FY17 campus budgets and are subject to change prior to implementation. Allocations do not include UMS Governance or other System charges. Allocation 25

26 Draft Recommendation 1 FY19 Allocations UM UMF UMA UMFK UMM UMPI USM FY17 Base Allocation 82,497,718 12,253,931 16,803,125 5,308,503 4,482,351 6,999,217 48,032,552 OBF adjustment (1,664,717) 227, , ,285 (264,680) (37,252) 959,900 Adjusted Base 80,833,001 12,481,212 17,436,307 5,454,788 4,217,671 6,961,965 48,992,452 $3m Base adjustment 50,000 50,000 1,000,000 1,000, , ,000 One-time support 250,000 FY19 Base Allocation* 80,833,001 12,531,212 17,486,307 6,454,788 5,217,671 7,461,965 49,142,452 *(not including one-time support) Allocation 26

27 Draft Recommendation 1 FY20 Allocations UM UMF UMA UMFK UMM UMPI USM FY17 Base Allocation 82,497,718 12,253,931 16,803,125 5,308,503 4,482,351 6,999,217 48,032,552 OBF adjustment (1,664,717) 227, , ,285 (264,680) (37,252) 959,900 Adjusted Base 80,833,001 12,481,212 17,436,307 5,454,788 4,217,671 6,961,965 48,992,452 $3m Base adjustment 100, ,000 1,000,000 1,000, , ,000 FY20 Base Allocation 80,833,001 12,581,212 17,536,307 6,454,788 5,217,671 7,461,965 49,292,452 Increase over FY17 base: (1,664,717) 327, ,182 1,146, , ,748 1,259,900 Allocation 27

28 Draft Recommendation 2 Transition to new funding model that recognizes real campus costs step 2 Highlights of model Instructional Cost is based on a variety of measurements, including a 3 year rolling average of enrollments by academic program and level; student faculty ratios for each type of program, and average peer and regional faculty salary averages by discipline Library & Student Services is based on a tiered per headcount cost Facilities Maintenance costs built into funding model Recognizes Research & Public Service Recognizes difference in type/size of institution Recommendation No later than FY19, start transition from new base allocations (see Recommendation 1) to suggested allocations from new model. Additional dollars to reach new allocation targets would come from a % of new appropriations (see Recommendation 3). Transition would likely need to allocate dollars based on ratios between campus allocations produced by new model. Allocation 28

29 Draft Recommendation 2 - continued The recommendation is to develop a funding model based in part on one used in another university system. The CBOs will work with stakeholders to identify the metrics relevant to our System and those that will advance the goals established by the Board of Trustees. Allocation 29

30 Draft Recommendation 3 Background New Appropriations As part of the BOT policy that implemented Outcomes Based Funding in FY2012, 100% of any new appropriations flow through the OBF formula. Prior to FY2012, all incremental appropriations were distributed according to the historic funding formula. Recommendation Beginning in FY18, incremental state appropriations over the FY17 funding levels will be allocated in the following ways: 70% of any new appropriation will be distributed to campus base budgets with a goal of fully funding the new allocation model see Recommendation 2. In the event that funding is not adequate to achieve 100% funding, allocations to each campus will be pro-rated according to the ratios between campuses that are suggested in the model. If new allocation model is not active in FY18, new appropriations would be distributed via current OBF model for FY18 only. 30% of any new appropriation will be invested in strategic initiatives developed by the Chancellor and President s Council for consideration and approval by the Board of Trustees Allocation 30

31 Draft Recommendation 3 New Appropriations - continued Recommendation Funding Model Recommendation 2. Once parity across each campus is achieved in the new funding model, appropriations are adjusted to: 65% of any new appropriation will be distributed to campus base budgets with a goal of fully funding the new allocation model 25% of any new appropriation will be invested in strategic initiatives developed by the Chancellor and President s Council for consideration and approval by the Board of Trustees 10% will be allocated to a public university capital reserve pool see Capital Planning Recommendation 2 Parity is achieved when the state funding for each campus is at the same percentage of the recommended funding levels. Allocation 31

32 Draft Recommendation 4 Allocation Model Review Recommendation Beginning in FY21 and at least every 3 years after, the Chief Financial Officer will review the allocation model with the Chief Business Officers of each campus and recommend any modifications that may be necessary to the Chancellor and Board. Allocation 32

33 Draft Recommendation 5 Background Tuition & Fees Tuition and Fee revenue is currently retained at the campus level. The Allocation Team discussed whether that practice should continue or whether tuition and/or fee revenue should be pooled centrally and then allocated out according to other metrics. Arguments against pooled revenue mostly focused on the concern that incentives to generate additional campus credit hours would be lost if revenue generated from increased credit hours went off campus. Recommendation Tuition and Fee revenue should continue to be retained at the campus level to incentivize expansion of student access and encourage investments that focus on strategic campus strengths. Allocation 33

34 Draft Recommendation 6 Student Financials Collaboration Recommendation The Chief Business Officers are recommending the student financials team at each campus, working with 2 CBOs, explore opportunities for collaboration. The focus of the workgroup should be more consistent application of policy and procedures across the campuses. Allocation 34

35 Draft Recommendation 7 Maine Economic Improvement Fund Recommendation The CBOs are recommending that the VCAA convene a group of stakeholders', including CAOs, campus researchers, CBOs to review the current allocations for the distribution of Maine Economic Improvement Funds and make recommendations for any adjustments, if any, that might be necessary. Allocation 35

36 TEAM MEMBERS Sherry McCollett Director of Student Financial Services UMA Jared Cash Vice President of Enrollment - UMF Kathy Falco Director of Human Resources and Finance UMF Melvin Adams Dean of Student & Enrollment Services - UMM Sarah Doheny Director of Student Financial Aid UM Nancy Griffin Vice President of Enrollment - USM Chris Bell Campus Operations Officer - UMPI Institutional Aid and Waivers Rosa Redonnett Chief Student Affairs Officer UMS Tracy Elliott Director of Finance and Controller UMS 36

37 Charter Highlights Charter Highlights Charged with analyzing options & making recommendations with a vision of ensuring the delivery of high quality, innovative financial aid services throughout the University of Maine System. Key Focus Areas: Should student financial aid be combined or have components delivered centrally/or consolidated manner? Opportunities for additional back office collaborations? Private funds raised at the campus level be retained by the campus? Federal policies & a shared financial aid distribution model? Header versus trailer consistency across all campuses? Goals for Expected Family Contribution and remaining gap. Do we set a goal of funding x% of the gap, consistently? Institutional Aid / Waivers 37

38 Current State Financial aid offices at 6 of the 7 campuses A presence at UMM as UM has recently taken on a significant supporting role related to their financial aid needs. Certain financial aid functions are centrally supported by the: Shared Processing Center Controller s Office Systems, Processes & Reporting Tools Institutional Aid / Waivers 38

39 One University Reviewing Aid on a Continuum The group was ever mindful of the One University initiative and considered how recommendations might support or hinder this model. The group fully recognized that work in this area should and needs to be done on a continuum as the University evolves toward the One University model including the exploration and realization of further campus differentiations, partnerships and collaborations, and many other new opportunities. As articulated in the February 10, 2015, One University for all of Maine document, The One University model presented here is a destination we must reach, but the final path to our objective and many of the outcomes that will shape our future are still to be decided. As progress unfolds and the vision takes shape, so too will the opportunities in this area. Institutional Aid / Waivers 39

40 Background Need-based financial assistance: Awarded based on a student s demonstrated financial need. Eligibility determined by subtracting the Expected Family Contribution (EFC) from the Cost of Attendance (COA). Merit based awards: Merit awards - offered based on a student s academic, athletic, artistic and/or other talents/interests. Institutional Aid / Waivers 40

41 Draft Recommendation 1 Exploration of Combining and/or Distributing Aid Centrally Considerations Base Guarantee & Matching Requirements Header vs. Trailer Student Athletics Need Based Aid Merit Based Aid Recommendation 1. To avoid the potential for loss of significant Federal dollars, the campuses should continue with their own Program Participation Agreements with the Department of Education and therefore continue to annually file their own Applications to Participate. 2. Need-based financial aid programs should continue to be identified with the individual campuses and should continue to be delivered by the individual campuses. 3. The Financial Aid offices should develop a prioritized list of areas for further service collaboration along with a timeline for completion of work to be delivered to the CBOs by September 1, The Financial Aid Offices should include as a top priority, the complete analysis of moving the two UMS header schools to trailer schools, including timelines and transition costs. Institutional Aid / Waivers 41

42 Draft Recommendation 2 Opportunities for Additional Back Office Collaborations - Verification: We asked the financial aid directors to: Discuss opportunities for back office collaboration & Make recommendations. The aid community: acknowledged various opportunities exist & starting with a single, significant change will promote success & provide a foundational roadmap for future successful collaborations. suggests working on a continual basis exploring opportunities for further collaboration, so that as each project is successfully implemented, preparations and planning for the next project will already be underway. recommends no changes be made that significantly impact the delivery of, or amount of, aid administered to continuing students. Verification the first area recommended for collaboration: Currently: Students complete FAFSA A third are selected for federal verification to verify self-reported items Each campus collects verification documents from students & transmits changes to Dept of Ed Will improve student service. Students often apply to more than one UMS school. Redundant process is unnecessary. Institutional Aid / Waivers 42

43 Draft Recommendation 2 (continued) Improve student service through Back Office Collaborations of Verifications 1. The Financial Aid offices should explore further the IT requirements around collaborating on verification to identify the anticipated nature, timing and extent of necessary IT resources for successful completion of the project. 2. Following a greater understanding of the IT commitment and cost, the CBOs should consider dedicating necessary resources and, if appropriate, charge the Financial Aid offices with planning, designing and implementing a collaborative verification process. 3. In the future, when reviewing functional and strategic opportunities related to student aid: a. Any changes to the delivery of aid, or amount of aid available to students, should do no harm to continuing students. b. Any changes to merit aid programs should be made on a going forward basis so as not to impact continuing students. c. Any proposed changes that could result in an increase of campus Educational and General (E&G) expenditures on student aid should also be made on a going forward basis. Aid budgets are in place several years in advance based on existing multi-year commitments to students. Therefore, any increased spending would be multiplied if the aid strategy were executed for both new and continuing students. Institutional Aid / Waivers 43

44 Draft Recommendation 3 Improve student service and access to aid by pursuing universal on-line application protocols and tools. Review Gifts and Endowments for Utilization and Repurposing within the Law Scholarship Application and Selection Process 1. The Controller s Office should, working with the campuses, review gifts and endowments to determine reasonable levels of utilization and work to repurpose any funds, as appropriate, within the requirements of UPMIFA. 2. The financial aid and gift processing community should explore options and costs for a universal online scholarship application tool that would: a. manage information about requirements, deadlines, and decision making committees for campus and system level endowed scholarships, b. centralize the application process for students, and c. maintain the decision making authority at the campus level. Institutional Aid / Waivers 44

45 Draft Recommendation 4 Private Funds Raised at the Campus Level The Committee recommends that unrestricted and restricted funds raised by a campus, stay with that campus. Institutional Aid / Waivers 45

46 Draft Recommendation 5 In-State Merit Aid & One University Scholarship: One University Scholarship The UMS should pursue a One University approach to in-state institutional merit aid. Eligibility criteria would be aligned and the scholarship (adjusted for differing tuitions) available to students no matter which UMS campus the student chooses to attend while the funding is maintained at the campus level. Increases transparency and choice for students by ensuring equitable financial access to all the campuses and programs of Maine s public universities. Recommendations: 1. UMS campuses will coordinate institutional merit aid offered to in-state students to ensure equitable financial access to programs and campuses across the state. The CBOs will work with financial aid and enrollment management staff to develop the right policies to operationalize this recommendation. 2. UMS should establish a One University in-state merit scholarship program, making the scholarship amounts transparent to students and available regardless of which of the seven campuses the students attend. 3. The Enrollment Management Council should develop the recommendations for: a. Merit criteria (e.g., standardized ACT, SAT, and/or GPA) including continuation criteria. b. A method for adjusting the award amounts to provide equity for the differing tuitions at the various UMS campuses. 4. The scholarships should be funded by campuses current in-state merit institutional aid dollars and perhaps supplemented by the UMS to fulfill this strategic initiative which supports the One University initiative. 5. The merit award should be ongoing, provided the student meets continuation requirements following system-wide criteria. Institutional Aid / Waivers 46

47 Draft Recommendation 6 Marketing Previously attempted some high level marketing of the System/campuses associated with increasing perception of quality and affordability No current similar effort Each campus markets its institution & programs dependent on resource availability UM, USM and, at a more modest level, UMF do some television & radio advertising. All campuses do print, web and social media. Opportunities exist for collaborative marketing around key themes like: Affordability Return on investment related to degree attainment Promotion of the quality of UMS academic programs Recommendation: The UMS Enrollment Management Council should explore opportunities to support current collaborations across the campuses for marketing/public relations associated with affordability, access, and the ROI of degree attainment. Institutional Aid / Waivers 47

48 Draft Recommendation 7 Goals for Expected Family Contribution (EFC) & Gap. Do we set a goal of funding x% of the gap, consistently? Data about unmet need, gaps, yield, retention, and debt levels for various cohorts of students would be beneficial. There may be more strategic ways to positively impact our students & campuses. For example, if some campuses are already yielding & successfully retaining Pell eligible students, but are poorly yielding & retaining middle-income students, perhaps we adopt different strategies at different campuses. Supporting our unique populations and campus differentiation may be better served by a variety of approaches to offering aid, as opposed to a single system-wide approach. Data for strategic financial aid decisions could reduce competition for students within the UMS, while allowing flexibility for overall enrollment management goals. Recommendation: Financial Aid Directors, Institutional Research and Enrollment Managers work together to consider goals for EFC and gap. Steps might include: Looking at EFC bands to see the typical cutoffs. Analyzing results to gain an understanding of how campuses are meeting need within EFC bands, reporting on those results and monitoring changes over time for in-state students. Institutional Aid / Waivers 48

49 Draft Recommendations 8 Discounting Discount rates demonstrate the level institutions are investing in aid from funding over which they have discretion. Perception issue - institutions typically do not want to have a high discount rate published. There is a tipping point where the institution seems weak. Different models for calculating discount rates within UMS have been tried No current UMS standard exists Recommendations 1. Institutional Research and the Chief Business Officers should work to develop a common methodology for calculating discount rates. 2. Discount rate calculations and reporting should be done regularly, perhaps annually, and the results monitored. 3. Key populations/data should be identified as part of the reporting. Such data might include full-time first-time, part-time, transfers, non-traditional students, athletes, residency status. Institutional Aid / Waivers 49

50 TEAM MEMBERS Darla Reynolds Chair, Director of Accounting - UMS Claire Strickland Chief Business Officer - UM Mark Hatt Chief Business Officer - UMM Benjamin Shaw Chief Business Officer - UMPI Janet Warnert Associate Vice President for Finance - USM Tracy Elliott Director of Finance & Controller - UMS Unrestricted Net Position 50

51 Charter Highlights Examine and define the various components of UNP and recommend how the various components will be treated under a unified budget model Address treatment of balances existing at the date the Unified Budget is fully implemented Address treatment of future years surpluses Develop a policy regarding year-end UNP balances Unrestricted Net Position 51

52 Objective of Recommendations Overall Objective of our Recommendations is to Help educate the campus community about the various components of UNP, Provide greater transparency into the composition and use of UNP, Maximize the amount of UNP that is under direct control of the campus CBO, Provide a mechanism for assisting those campuses that currently have little or no UNP balances, and Set policy related to UNP. Unrestricted Net Position 52

53 Introduction What Is Unrestricted Net Position (UNP)? Simple definition: Net position represents the net accumulated surpluses and deficits that have been generated over the years that an entity has been in operation. Technical definition: Net Position = (Assets plus Deferred Outflows) minus (Liabilities plus Deferred inflows) According to the GASB, there are four major categories of net position as defined below: Net investment in capital assets: Capital assets, net of accumulated depreciation and outstanding principal balances of debt attributable to the acquisition, construction, repair or improvement of those assets. It also includes the premiums/discounts related to the outstanding debt. This category excludes the portion of debt attributable to unspent bond proceeds. Restricted - nonexpendable: Net position subject to externally imposed conditions that the System maintain them in perpetuity. In the event that market fluctuations have caused the fair value of an endowment to fall below corpus, the related net position is valued at the lower fair value amount. Such net position includes the historical gift value of restricted true endowment funds. Restricted - expendable: Net position subject to externally imposed conditions that can be fulfilled by the actions of the System or by the passage of time. Such net position includes the accumulated net gains on true endowment funds, restricted gifts and income, and other similarly restricted funds. Unrestricted: All other categories of net position. Unrestricted Net Position 53

54 Approach Taken Internal Review Identified current UMS policies and practices that could impact our work Reviewed trend data and the June 30, 2015 composition of UMS UNP External Review Internet search for policies and recommendations related to reserves and designated funds Referenced documents by organizations/firms in the accounting and auditing industry: American Institute of Certified Public Accountants, Berry Dunn LLC, Grant Thornton, LLP Referenced reserve policies from several institutions of higher education: State University of New York, University of Illinois at Chicago, North Dakota System, University of Arkansas at Little Rock Unrestricted Net Position 54

55 Observations Educational & General UNP Category contains special reserves and E&G reserves which are what we consider our operating reserve Wide variation by campus in the Educational & General UNP balances from FY07 to FY15 UMA s balance increased $7.7 million or 386% USM s balance increased $13.8 million or 186% (had a deficit in FY07) UMPI s balance decreased $3.6 million or 86% GUS balance decreased $7.7 million or 49% A significant amount of the June 30, 2015 balance resides in special reserves UMF: $1.2 million or 45% USM: $2 million or 31% GUS: $4.2 million or 52% Unrestricted Net Position 55

56 Observations Educational & General UNP - continued There is strong support for grandfathering campus UNP balances as of the Unified Budget implementation date Unrestricted Net Position 56

57 Observations Auxiliary Enterprises UNP Viewing Auxiliary Enterprises as a single total for each campus masks the fact that certain Auxiliary operations have significant ongoing deficit balances $5.117 million of deficit balances were masked by surplus balances at 6/30/15 Breakdown of Auxiliary Enterprises UNP as of June 30, 2015 ($ in thousands) CATEGORY UM UMA UMF UMFK UMM UMPI USM GUS TOTAL Auxiliary Enterprises $ 12,710 $ 828 $ 512 $ (1,591) $ (966) $ 495 $ (249) $ - $ 11,738 Bookstores $ 149 $ 828 $ (293) $ 178 $ (23) $ (532) $ 504 $ - $ 811 Residence and Dining $ 11,286 $ - $ 1,030 $ (1,969) $ (963) $ 1,000 $ (1,112) $ - $ 9,272 Motor Pool $ 29 $ - $ (225) $ 200 $ 20 $ 27 $ 167 $ - $ 218 Recreation Center $ 1,115 $ - $ - $ - $ - $ - $ - $ - $ 1,115 Other Auxiliaries $ 131 $ - $ - $ - $ - $ - $ 192 $ - $ 322 Note: Totals have not been adjusted for rounding. UMF s motor pool has had a deficit balance since FY08 UMFK s and UMM s residence & dining operation have had a deficit balance since FY07 or earlier UMPI s bookstore operation has had a deficit balance since FY09 Unrestricted Net Position 57

58 Observations Internally Designated Projects UNP The appeal of designating an activity is that unspent balances at the end of the fiscal year automatically roll over to the next fiscal year and are available for spending by the campus department Determining what activities qualify to be designated has long been a challenge, even with an Administrative Practice Letter (APL) for guidance On-going operating activities will be included among E&G or auxiliary enterprise activities Accounts acting as reserves should not be included in designated funds Some currently designated activities are operating like a reserve Unrestricted Net Position 58

59 Observations Internally Designated Projects UNP - continued Unrestricted Net Position Associated with Internally Designated Projects at June 30, 2015 ($ in thousands) UM UMA UMF UMFK UMM UMPI USM GUS TOTAL Internally Designated Projects $ 7,267 $ 385 $ 921 $ 553 $ 162 $ 89 $ 2,714 $ 696 $ 12,787 Campus projects $ 1,186 $ 176 $ 20 $ 10 $ 2 $ - $ 12 $ 456 $ 1,861 Endowment income programs $ 1,806 $ 29 $ 209 $ 35 $ - $ 10 $ 114 $ 56 $ 2,259 Gift programs $ 1,102 $ 68 $ 641 $ 117 $ 53 $ 31 $ 452 $ 53 $ 2,515 Miscellaneous other designated activities $ 3,174 $ 113 $ 51 $ 391 $ 107 $ 48 $ 2,137 $ 131 $ 6,152 Note: Totals have not been adjusted for rounding. Miscellaneous other designated activities : 144 designated programs with balances at June 30, 2015 Eight of UM s programs have balances that exceed $100 thousand each for a total of $2.4 million or 80% of UM s total dollars Six of USM s programs have balances that exceed $100 thousand for a total of $1.5 million or 70% of USM s total dollars Unrestricted Net Position 59

60 Dependencies and Challenges Although separately stated, our recommendations are interrelated and should be implemented as a cohesive group to help ensure achievement of our stated objectives. An overarching dependency of all our recommendations is what recommendations from the other Subgroups, especially the Allocation Model Subgroup, are implemented. Each campus needs the ability to annually generate operating surpluses. Push back from campus departments that currently control designated balances and management s willingness to be objective in determining the need for current specialized reserves and designated programs are likely challenges. There is a risk that budget managers may adopt an attitude of spend it or lose it rather than allow a portion of unspent funds to assist other campuses. Success is also dependent upon the establishment and enforcement of policies and controls to prevent manipulation of both the annual return from operations that would close out to the E&G Operating Reserve, and the balance of the E&G Operating Reserve. Unrestricted Net Position 60

61 Recommendation 1 Treatment of UNP Balances as of June 30, 2017 Considerations: Current wide variation in the financial health of each campus Current campus commitments to an activity that is already underway or soon to begin Maximizing the amount of UNP under the direct control of the campus CBO Recommendation: A. Grandfather each campus total UNP balance as of the unified budget implementation date; however, do not grandfather the current categorization or classification of UNP (see next bullet for recommendation about categorization) B. Require the CBO s to review their campus special reserves and designated balances between now and the Unified Budget implementation date to determine whether the balances are still needed or can be collapsed into the campus E&G Reserve. Measure existing and future proposed designated activities against the separately circulated draft APL titled, Operating Reserves and Other Types of Unrestricted Net Position For any special reserves or designated programs that exist after the review, the CBO should provide the CFO with a description of why each is needed and the plan for spending it. Unrestricted Net Position 61

62 Recommendation 2 Treatment of Future Surpluses and Deficits Considerations: Current variation in the financial health of each campus Spirit of unity and working together as one university Industry policies and recommendations for reserves Recommendation: A. Require that each campus build and maintain an E&G Operating Reserve Reserve would serve as a source of funds for use in emergencies to sustain financial operations in the unanticipated event of significant unbudgeted increases in operating expenses and/or losses in operating revenues Starting point for the reserve should be the existing balance in the campus E&G reserve Unrestricted Net Position 62

63 Recommendation 2 (continued) Recommendation: B. At the end of each fiscal year, require each campus that has an E&G Operating Reserve balance of 10% or more of its Adjusted E&G Expenses to contribute 10% of its E&G operating surplus to a Unified Reserve that would assist struggling campuses to reach an operating reserve balance of 10% of Adjusted E&G Expenses Adjusted E&G Expenses equals +Total Operating Expenses & Transfers - Depreciation Expense + Debt Service Principal Currently, there are four campuses whose existing E&G reserve covers less than 6% of the campus expenses We expect that only a few campuses will initially be contributing to the Unified Operating Reserve only UMA would have contributed if recommendation was in place at 6/30/15 Maintaining its E&G Operating Reserve at or above the 10% level and eventually building it to the 18% minimum balance target would be up to each individual campus. C. Establish a targeted minimum balance of 18% of Adjusted E&G Expenses for each campus E&G Operating Reserve - at 18%, the reserve would cover about nine weeks of expenses Unrestricted Net Position 63

64 Recommendation 2 (continued) Comparison of the recommended policy associated with an E&G Operating Reserve balance that is: < 10% of expenses; => 10% of expenses, but <= 18% of expenses; or > 18% of expenses. <=0% 10% 18% 20%+ POLICY: Campus retains 100% of fiscal year surplus Campus retains 100% of fiscal year deficit Campus retains 90% of fiscal year surplus and contributes 10% to the Unified Operating Reserve Reserve spending is strongly discouraged and requires justification and UMS CFO approval Reserve balance that exceeds 18% of expenses may be spent in accordance with UMS BOT Policy Manual Section 701, "Budgets - Operating & Capital" Operating Reserve Balance as % of Expenses Unrestricted Net Position 64