Responsibility Accounting Profitability Analysis- Revenue and Expense by Division/Department August 11, 2006
Overview- Definition Financial model to match all revenues and expenses associated with an Academic (i.e. Arts & Sciences, HSOM, etc) or Auxiliary unit (i.e. Residence Life, Athletics). This model is based upon Responsibility Accounting, a case study prepared by William Laird, Loyola University of Chicago. 2
Overview- Objective Objective is to determine the contribution margin and bottom line financial impact (or profit margin ) of each unit that management views as a distinct entity providing its own programs/services and having its own responsibility structure. The bottom line ties to the Income Statement on the internal financial statements. 3
Goals Ensure university remains financially healthy Supports long-term strategic planning by bringing visibility to net result of each academic unit Enhances awareness of costs and opportunities to generate income 4
Definition of Profit Centers Profit centers are significant units that provide their own programs and services and have their own responsibility structure Schools/Deans that have responsibility for their own teaching credit hours productivity and costs Auxiliaries that have responsibility for managing their own revenue stream, expenses and capital requirements 5
Allocation Methodology-Revenues Undergraduate Tuition and Financial Aid: Allocated to academic units based on proportion of credit hours taught rather than where student is enrolled. Financial Aid follows same methodology as tuition Credit Hours obtained from Registrar s office Majority of Graduate Tuition and Financial Aid goes directly to where the student is enrolled Credit Hour Taught follows enrollment, graduate students take courses in the programs they are enrolled. 6
Allocation Methodology- Revenues Grant Indirect cost recovery is attributed to the academic unit that received the award Direct Revenues are attributed to the unit that incurs the expense that generates the revenue Sales of goods and services (including auxiliaries) Grants and contracts Gifts Majority of Fees (Student Activity, Residence Halls) Endowment income designated for current operations Interest income attributed to general university 7
Allocation Methodology- Expenses Direct Expenses are costs incurred to run the core activities of a unit such as salaries, benefits, supplies and other nonpersonnel expenses. These are obtained from Banner. Indirect Expenses (Overhead) such as depreciation, facilities, interest, utilities, insurance, central and academic administration costs are allocated to the academic and auxiliary units based on a step down methodology. Tier I: Interest, Insurance, Depreciation and Plant Tier II: General and Administrative Costs Tier III: Academic Overhead 8
Allocation Methodology- Expenses Tier I: Interest, Insurance, Depreciation and Plant Depreciation, Insurance, Interest Expense, Utilities and Plant are allocated based on square footage so that the full cost of space is allocated to the unit that occupies that space. It is further pushed down to each dept ratably. Tier II: General and Administrative Administrative costs associated with institutional support and computer services were allocated to the units based on that units percentage of the operating expense budget 9
Allocation Methodology- Expenses Tier III: Academic Overhead and Other Allocations Costs associated with Academic Affairs, Library, Student Services and Divisional support were allocated to each academic unit based on total undergraduate and graduate credit hours, as deemed appropriate 10
Model Overview Revenue - Tuition - Fees - Grants - Gifts - Endowment Distribution - Scholarships - Federal and Institutional Aid - Financial Aid - Salaries & Benefits - Non-Personnel Expenses - Direct Expenses Academic and Auxiliary Units Contribution Margin - Depreciation, Interest, Plant, Utilities, Insurance - Institutional Support (President, Finance, HR, PR, IT) - Academic and Other Overhead (Student Services, Library, Athletics) - Indirect Expenses (Overhead) Academic and Auxiliary Units Profit Margin 11
Exhibits Exhibit I - FY 2005 Results of Operations Exhibit II- FY 2004 Results of Operations Exhibit III Profit and Cost Center Assignments 12
Rockhurst University Revenue and Expense by School/Department As of June 30, 2005 Biology Chemistry Communication & Fine Arts English History Math, CS and Physics Modern Languages Music Philosophy Political Science Psychology Sociology Theatre Arts Theology Other A&S Total A&S Operating Revenues: Tuition $ 1,500,405 $ 859,186 $ 1,618,747 $ 1,841,544 $ 1,120,021 $ 1,484,707 $ 794,581 $ 123,172 $ 1,616,332 $ 725,146 $ 1,809,543 $ 312,157 $ 47,699 $ 1,871,129 $ - $ 15,724,369 Fees 88,590 49,684 61,870 65,139 39,617 59,517 28,106 27,782 57,173 25,650 64,657 11,042 3,987 66,186-648,999 Total Tuition and fees 1,588,995 908,870 1,680,617 1,906,683 1,159,638 1,544,224 822,687 150,954 1,673,505 750,795 1,874,200 323,198 51,686 1,937,315-16,373,368 Institutional Financial Aid (663,583) (379,992) (715,922) (814,459) (495,351) (656,641) (351,419) (54,475) (714,854) (320,710) (800,306) (138,057) (21,096) (827,543) - (6,954,408) Tuition and fees net of financial aid 925,412 528,878 964,694 1,092,224 664,287 887,584 471,268 96,479 958,651 430,086 1,073,895 185,141 30,590 1,109,772-9,418,961 Net grant revenue (expense) 11,494 6,582 14,419 14,107 8,580 140,536 6,087 944 12,382 5,555 13,862 2,391 365 14,334 5,000 256,638 Private gifts and grants 50 62,630 - - - 6,500 - - - - - - 300 525 1,100 71,105 Investment income (interest, dividends & realized gains/losses) - - - - - - - - - - - - - - - - Endowment distribution income 37,574 21,223 39,985 45,488 27,666 36,674 19,627 3,042 54,960 17,912 44,697 7,711 1,178 46,219 158,032 561,986 Other - - - - - - - - - - - - - - - - Total operating revenues 974,529 619,312 1,019,098 1,151,820 700,533 1,071,293 496,982 100,465 1,025,993 453,553 1,132,454 195,243 32,434 1,170,849 164,132 10,308,689 Expenses and Losses Salaries 397,737 297,630 300,265 383,926 235,870 581,741 127,279 920 288,248 129,290 328,289 122,887-331,581 809,979 4,335,640 Benefits 82,669 59,049 64,055 83,342 36,818 115,857 27,479 211 63,110 26,432 67,158 25,123-71,036 167,325 889,664 Non-salary 48,540 27,108 21,439 10,366 5,475 134,456 52,760 6,507 5,017 7,186 13,273 3,154 2,398 9,164 105,493 452,337 Total operating expenses 528,946 383,787 385,758 477,635 278,163 832,054 207,518 7,639 356,375 162,907 408,720 151,163 2,398 411,781 1,082,797 5,677,641 Contribution margin 445,583 235,525 633,339 674,185 422,370 239,239 289,464 92,826 669,618 290,645 723,734 44,080 30,036 759,068 (918,665) 4,631,048 CM % of Operating Revenue 46% 38% 62% 59% 60% 22% 58% 92% 65% 64% 64% 23% 93% 65% -560% 45% Allocation of interest, insurance and plant costs 79,384 79,384 79,384 79,384 79,384 79,384 79,384 79,384 79,384 79,384 79,384 79,384 177,249 79,384 1,209,234 Allocation of institutional support (G&A) costs 123,641 69,986 87,426 110,460 68,193 162,082 37,874 1,471 79,830 39,639 96,471 35,607 229 93,707 236,279 1,242,896 Allocation of other divisional operating expenses 115,280 66,013 124,372 141,490 86,054 114,074 61,050 9,464 124,187 55,715 139,032 23,984 3,665 143,763 (1,082,797) 125,344 Allocation of academic affairs overhead 20,414 11,690 22,024 25,056 15,239 20,201 10,811 1,676 21,991 9,866 24,620 4,247 649 25,458-213,942 Allocation of computer services 22,421 12,691 15,854 20,031 12,366 29,392 6,868 267 14,476 7,188 17,494 6,457 42 16,993 42,846 225,385 Allocation of student development and library 320,729 183,661 346,026 393,651 239,418 317,373 169,851 26,329 345,510 155,008 386,811 66,727 10,196 399,976-3,361,267 Profit Margin $ (213,864) $ (175,209) $ (25,893) $ (75,856) $ (65,917) $ (453,874) $ (69,506) $ (25,497) $ 18,716 $ (48,967) $ (2,583) $ (165,869) $ (161,952) $ 16,781 $ (72,147) $ (1,521,635) Credit Hours 2,485 1,423 2,681 3,050 1,855 2,459 1,316 204 2,677 1,201 2,997 517 79 3,099 Contribution Margin per credit hour $ 179 $ 166 $ 236 $ 221 $ 228 $ 97 $ 220 $ 455 $ 250 $ 242 $ 241 $ 85 $ 380 $ 245 Profit Margin per credit hour $ (86) $ (123) $ (10) $ (25) $ (36) $ (185) $ (53) $ (125) $ 7 $ (41) $ (1) $ (321) $ (2,050) $ 5 ** Adjunct faculty salaries for evening courses in A&S and GPS are assumed by GPS Exhibit I-1
Rockhurst University Revenue and Expense by School/Department As of June 30, 2005 Accounting Economics & Finance Bus Admin Management Marketing Univ of Health Sciences Executive MBA MBA Other HSOM Total HSOM Education Masters of Education CSD OT MPT/DPT American Humanics/ NPLS Undergrad SPS Other GPS** Total GPS Operating Revenues: Tuition Fees Total Tuition and fees Institutional Financial Aid Tuition and fees net of financial aid Net grant revenue (expense) Private gifts and grants Investment income (interest, dividends & realized gains/losses) Endowment distribution income Other Total operating revenues Expenses and Losses Salaries Benefits Non-salary Total operating expenses Contribution margin CM % of Operating Revenue Allocation of interest, insurance and plant costs Allocation of institutional support (G&A) costs Allocation of other divisional operating expenses Allocation of academic affairs overhead Allocation of computer services Allocation of student development and library Profit Margin $ 592,313 $ 1,391,120 $ 913,527 $ 787,939 $ 539,784 $ 775,738 $ 922,550 $ 2,197,993 $ - $ 8,120,963 $ 550,048 $ 866,700 $ 488,424 $ 726,776 $ 1,281,345 $ 185,966 $ 530,123 $ - $ 4,629,382 20,951 49,207 32,313 27,871 19,093 - - - - 149,436 25,056 - - 4,215 4,335 6,578 18,752-58,936 613,264 1,440,327 945,840 815,810 558,877 775,738 922,550 2,197,993-8,270,399 575,104 866,700 488,424 730,991 1,285,680 192,544 548,875-4,688,318 (261,962) (615,250) (404,025) (348,481) (238,730) - - (15,966) - (1,884,414) (243,269) - - - - (82,247) - - (325,516) 351,302 825,077 541,815 467,329 320,147 775,738 922,550 2,182,027-6,385,985 331,835 866,700 488,424 730,991 1,285,680 110,297 548,875-4,362,801 4,537 10,657 6,998 6,036 4,135 - - - - 32,364 19,966-202,645 - - 2,500-21,648 246,759 4,000 - - - - - - - 2,700 6,700 - - - - 625 - - 51,000 51,625 - - - - - - - - - - - - - - - - - - - 14,631 34,362 22,565 19,463 13,333 4,161 10,185 64,280 94,444 277,424 13,587 34,392 21,551 16,391 29,858 4,594 13,095 56,432 189,897 - - - - - - - - - - - - - - - - - - - 374,470 870,096 571,378 492,828 337,615 779,899 932,735 2,246,306 97,144 6,702,472 365,388 901,092 712,619 747,382 1,316,163 117,390 561,969 129,079 4,851,082 165,646 389,039 255,476 220,354 150,955 47,110 110,430 715,096 516,222 2,570,329 229,802 229,802 393,240 239,164 441,591 32,980 284,011 414,297 2,264,886 34,217 80,364 52,774 45,519 31,183 9,732 22,812 147,718 100,835 525,152 47,623 47,623 83,265 46,123 91,237 6,758 56,894 84,007 463,528 1,355 (1,000) 24,586-8 117,661 173,272 37,118 153,727 506,728 17,304 32,446 36,121 24,088 57,843 14,458-237,246 419,505 201,218 468,403 332,836 265,873 182,147 174,502 306,514 899,931 770,784 3,602,209 294,728 309,870 512,626 309,375 590,670 54,196 340,904 735,550 3,147,919 173,252 401,693 238,542 226,955 155,469 605,396 626,221 1,346,375 (673,640) 3,100,263 70,660 591,222 199,993 438,007 725,493 63,195 221,065 (606,471) 1,703,164 46% 46% 42% 46% 46% 78% 67% 60% -693% 46% 19% 66% 28% 59% 55% 54% 39% -470% 35% 31,688 31,688 31,688 31,688 31,688 31,688 31,688 31,688 253,507 41,329 41,329 41,329 41,329 41,329 41,329 41,329 289,304 83,247 144,460 15,836 203,346 60,970 87,909 39,126 19,988 131,105 785,986 128,212 7,644 97,906 71,689 164,705 12,924 78,100 120,572 681,753 67,910 159,496 104,738 90,340 61,888 19,314 45,274 293,171 (770,784) 71,347 80,221 203,063 127,244 96,776 176,293 27,122 77,315 (735,550) 52,485 8,059 18,927 12,429 10,720 7,344 2,292 5,373 34,790-99,935 7,484 18,944 11,871 9,028 16,446 2,530 7,213-73,516 15,096 26,196 2,872 36,874 11,056 15,941 7,095 3,625 23,774 142,529 23,250 1,386 17,754 13,000 29,867 2,344 14,162 21,864 123,628 126,614 297,368 195,277 168,431 115,385 903,075 117,579 39,752 113,320 270,652 $ (144,266) $ (90,751) $ (16,688) $ (187,231) $ (59,919) $ 483,507 $ 550,035 $ 1,259,909 $ (804,745) $ 1,057,760 $ (304,165) $ 320,242 $ (78,357) $ 219,184 $ 326,719 $ (60,463) $ (96,212) $ 8,507 $ 335,455 Credit Hours Contribution Margin per credit hour Profit Margin per credit hour ** Adjunct faculty salaries for evening courses in A&S and GPS are assumed by GPS 981 2,304 1,513 1,305 894 279 654 4,235 911 2,306 1,445 1,099 2,002 308 878 $ 177 $ 174 $ 158 $ 174 $ 174 $ 2,170 $ 958 $ 318 $ 78 $ 256 $ 138 $ 399 $ 362 $ 205 $ 252 $ (147) $ (39) $ (11) $ (143) $ (67) $ 1,733 $ 841 $ 297 $ (334) $ 139 $ (54) $ 199 $ 163 $ (196) $ (110) Exhibit I-2
Rockhurst University Revenue and Expense by School/Department As of June 30, 2005 Auxiliary Services (bookstore, cafeteria) Residence Life South Campus Other Total Auxiliary Academic Affairs Athletics Computer Services Other Non- Operating Institutional Support Student Services Library Int, Ins & Plant Other RU Total Admin Total Operating Revenues: Tuition Fees Total Tuition and fees Institutional Financial Aid Tuition and fees net of financial aid Net grant revenue (expense) Private gifts and grants Investment income (interest, dividends & realized gains/losses) Endowment distribution income Other Total operating revenues Expenses and Losses Salaries Benefits Non-salary Total operating expenses Contribution margin CM % of Operating Revenue Allocation of interest, insurance and plant costs Allocation of institutional support (G&A) costs Allocation of other divisional operating expenses Allocation of academic affairs overhead Allocation of computer services Allocation of student development and library Profit Margin Credit Hours Contribution Margin per credit hour Profit Margin per credit hour ** Adjunct faculty salaries for evening courses in A&S and GPS are assumed by GPS $ - $ - $ - $ - $ - $ - $ 408,159 $ - $ - $ - $ - $ - $ - $ - $ 408,159 $ 28,882,873 1,820,762 2,130,328 77,114-4,028,203-75,684 - - - - - - - 75,684 4,961,258 1,820,762 2,130,328 77,114-4,028,203-483,843 - - - - - - - 483,843 33,844,131 - - - - - - (2,003,156) - - - - - - (2,003,156) (11,167,495) 1,820,762 2,130,328 77,114-4,028,203 - (1,519,313) - - - - - - - (1,519,313) 22,676,637 - - - 133,251 133,251-3,127 41,228 - - - 5,781 - - 50,136 719,147 - - - - - - 35,375 - - 1,044,010 1,517,211 31,034 - - 2,627,630 2,757,060 - - - - - - - - - 333,052 - - - - 333,052 333,052 - - - 177,437 177,437-16,830 - - - - 24,027 3,948 214,454 259,259 1,466,003 - - - - - - - - - 459,405 - - - - 459,405 459,405 1,820,762 2,130,328 77,114 310,688 4,338,891 - (1,463,981) 41,228-1,836,468 1,517,211 60,843 3,948 214,454 2,210,170 28,411,305 - - 8,804 200,067 139,057 198,087 546,015 279,896 500,729 694,543 41,056 2,855,926 2,236,297 384,275 1,385,213 48,281 8,426,216 18,143,086 991 41,688 28,686 40,890 112,254 53,179 103,099 140,141 8,713 1,677,291 462,868 78,629 282,437 10,160 2,816,518 4,807,117 1,515,226 581,782 167,952 41,559 2,306,518 59,870 518,651 443,995 325,015 2,518,119 1,085,179 374,995 9,443,562 119,335 14,888,720 18,573,808 1,525,021 823,537 335,694 280,535 2,964,787 392,945 1,122,479 1,278,679 374,784 7,051,336 3,784,344 837,899 11,111,212 177,776 26,131,454 41,524,011 - - 295,741 1,306,791 (258,580) 30,153 1,374,104 (392,945) (2,586,460) (1,237,451) (374,784) (5,214,868) (2,267,133) (777,056) (11,107,265) 36,678 (23,921,285) (13,112,706) 16% 61% -335% 10% 32% 177% -3001% -284% -149% -1277% -281370% 17% -1082% -46% - - 166,072 1,607,973 350,072-2,124,118-6,019,434 101,403-615,766 126,011 333,109 (11,071,885) - (3,876,162) 0 327,167 202,821 63,934 79,072 672,993 102,031 213,309 289,469 (5,848,512) 842,647 205,461 811,969 - (3,383,627) (0) - - - (280,535) (280,535) - 31,360 - - - - - - 31,360 (0) - - - - - (392,945) 5,553 - - - - - - - (387,392) 0 59,328 36,779 11,594 14,339 122,039 18,502 38,681 (1,226,187) 218,118 152,804 37,258 147,241 - (613,582) (0) - - - - - - 87,249 - - - (3,784,344) (837,899) - - (4,534,994) (0) $ (197,498) $ (504,003) $ (672,586) $ 231,616 $ (1,142,471) $ (102,031) $ (8,943,365) $ (1,628,322) $ (374,784) $ 17,878 $ 548,553 $ (477,727) $ (847,349) $ 36,678 $ (11,807,147) $ (13,112,706) 676 (3,826) (13,230) Exhibit I-3