Costs of Central Services 1 T HE P AST : T RYING TO LOOK THROUGH DEEPLY TINTED GLASS U NIVERSITY F INANCIAL M ODEL Personnel Costs Endowment Income Actual Tuition Revenue Costs of Financial Aid Dollars from Heaven Private Gifts Direct Expenditures

Complete Strategic Perspective Innovation and Entrepreneurship Responsibility&Accountability Costs of Central Services 2 T HE F UTURE : A COMPLETE FINANCIAL PICTURE U NIVERSITY F INANCIAL M ODEL Personnel Costs Endowment Income Actual Tuition Revenue Costs of Financial Aid Base and Strategic Operating Support Private Gifts Direct Expenditures

3 U NIVERSITY F INANCIAL M ODEL University School StateFunds Private Gifts /Endow. Inc. Tuition Research Funds BaseOperatingSupport AdditionalStrategicSupport Central Services Allocated Costs Direct Expenditures S OURCES U SES T OWARD A MORE TRANSPARENT FINANCIAL SYSTEM Undergrad Financial Aid Portion of undergrad tuition that goes to undergrad financial aid

4 U NIVERSITY F INANCIAL M ODEL

5 CENTRAL SERVICES COST CATEGORIES UNIVERSITY FINANCIAL MODEL TERMS ACTIVITY CLUSTERS REVENUE CENTERS  COST CENTERS 

6 U NIVERSITY F INANCIAL M ODEL S IGNIFICANT C HANGES FROM F ALL 2013: Cost-center for undergraduate admissions services (added) Summer Session undergraduate tuition allocated to schools (added) Indirect cost allocations for specially designated academic/public service entities (added) Elements superseded by budget development process Use of two-year average from prior years as starting point of the model (removed) Reduction in central cost allocations related to Organizational Excellence initiative (removed) Strategic investment tax (removed)

7 U NIVERSITY F INANCIAL M ODEL H OW D O W E A LLOCATE C ENTRAL S ERVICE C OSTS ? General Concepts Each central-cost category has its own usage-approximation formula Developed by planning committees over years prior to 2013 Proposed by University Financial Model steering committee to President, EVP/COO and EVP/Provost in December 2012; adopted in spring 2013

8 U NIVERSITY F INANCIAL M ODEL H OW D O W E A LLOCATE C ENTRAL S ERVICE C OSTS ? Facilities Services: Costs for entities within scope of the University Financial Model will computed as a general per-square-foot-occupied rate. UFM entities will be allocated that cost based on their total of assigned square feet and on their proportion of shared space (such as hallways and bathrooms). Note that utilities will be directly billed in the future to units/schools for space they occupy (currently viewable as “memo” bills); until that billing is ready for implementation, utility costs will be included in the general facilities services allocations and allocated by the above formula

9 U NIVERSITY F INANCIAL M ODEL H OW D O W E A LLOCATE C ENTRAL S ERVICE C OSTS ? IT Services: Total costs allocated by this weighted-proportion formula: weighted 0.75 for headcount salaried employees (excludes Facilities and IT employees in step-down methodology) + weighted 0.25 for regular session FTE students Excludes Communication Services costs, which are recovered through billing.

10 U NIVERSITY F INANCIAL M ODEL H OW D O W E A LLOCATE C ENTRAL S ERVICE C OSTS ? Employee Services: Total costs allocated by proportion of headcount salaried employees

11 U NIVERSITY F INANCIAL M ODEL H OW D O W E A LLOCATE C ENTRAL S ERVICE C OSTS ? Development (all University entities receiving gifts): 41.5 percent of total central costs allocated by this formula: proportion of school/unit-specific gifts greater than $100K for last four years 58.5 percent of total central costs temporarily covered by University grant Alumni Engagement (schools only): 41.5 percent of total central costs allocated by this formula: proportion of contactable alumni for all schools 58.5 percent of total central costs temporarily covered by University grant

12 U NIVERSITY F INANCIAL M ODEL H OW D O W E A LLOCATE C ENTRAL S ERVICE C OSTS ? Central Library Services: Total costs not covered by other funding sources allocated by this formula: proportion of sum of annual FTE regular session students + annual number of doctoral degrees + FTE instructional/research faculty

13 U NIVERSITY F INANCIAL M ODEL H OW D O W E A LLOCATE C ENTRAL S ERVICE C OSTS ? Research Support Services: Total costs not covered by other funding sources allocated by this weighted-proportion formula: weighted 0.5 for total research dollars (in millions) + weighted 0.5 for total awards

14 U NIVERSITY F INANCIAL M ODEL H OW D O W E A LLOCATE C ENTRAL S ERVICE C OSTS ? Student Services: Total costs not covered by other funding sources allocated by proportion of annual FTE regular session students

15 U NIVERSITY F INANCIAL M ODEL H OW D O W E A LLOCATE C ENTRAL S ERVICE C OSTS ? Undergraduate Admissions Services: Total costs not covered by other funding sources allocated by proportion of annual FTE regular session undergraduate students

16 U NIVERSITY F INANCIAL M ODEL H OW D O W E A LLOCATE C ENTRAL S ERVICE C OSTS ? Academic Support Services: Total costs not covered by other funding sources allocated by this formula: proportion of (annual FTE instructional/research faculty + annual FTE regular session students)

17 U NIVERSITY F INANCIAL M ODEL H OW D O W E A LLOCATE C ENTRAL S ERVICE C OSTS ? Executive/Managerial Services: Total costs not covered by other funding sources allocated by proportion of annual direct school expenditures

18 U NIVERSITY F INANCIAL M ODEL H OW D O W E A LLOCATE R EVENUES ? Undergraduate tuition (regular session): (net of financial aid and blind to in-state vs. out-of-state proportions) will be allocated via a blended formula that considers includes the credit hours degree- seeking students (on-Grounds and off-Grounds) take within a school (75% weight) and the schools with which students are affiliated (25% weight). Those undergraduate schools with differential tuitions or school-specific fees will receive that tuition (net of financial aid) or fee revenue directly, not through an allocation formula. Credit-hour counts are recorded at the end of October and the end of March for the regular academic session The proportion of undergraduate financial aid that is funded by undergraduate tuition is calculated on an annual basis, and both the regular-session and summer-session undergraduate tuition pools are reduced by this proportion before allocation to the schools.

19 U NIVERSITY F INANCIAL M ODEL H OW D O W E A LLOCATE R EVENUES ? Undergraduate tuition (summer session): (net of financial aid and blind to in-state vs. out-of-state proportions) will be allocated via a blended formula that considers includes the credit hours students take within a school (0.75 weight) and the schools with which students are affiliated (0.25 weight). For summer session, all undergraduate student credit hours are counted (not just degree- seeking) and the summer session administrative costs of providing undergraduate courses are deducted from the tuition pool before allocation.

20 U NIVERSITY F INANCIAL M ODEL H OW D O W E A LLOCATE R EVENUES ? Graduate tuition has been allocated directly to the schools of enrollment (and includes both financial aid and any out-of-state differential) since Both summer session graduate tuition and tuition generated by enrollment in courses (at any time) in schools other than the graduate school in which the student is registered are subject to specific agreements between relevant entities.. Grants and contracts will be allocated to the school or unit housing the research activity. Facilities and administrative cost recoveries will be allocated to the unit holding the research grant. Restricted endowment distribution will be allocated according to the donor’s wishes.

21 U NIVERSITY F INANCIAL M ODEL H OW D O W E A LLOCATE R EVENUES ? The 50-basis point endowment administration fee will be allocated to the endowment owner. Foundation support in cash and other forms (including in-kind) must be reported as a source by each school. Other revenue (gifts, sales, services, transfers, etc.) is allocated to the school that receives it. ETF credits equal to direct expenditures in the same category are included in school revenue totals.

22 U NIVERSITY F INANCIAL M ODEL H OW D O W E A LLOCATE R EVENUES ? Unrestricted state funding, unrestricted gifts and unrestricted endowment distribution will be retained by the President and deployed in ways that include the following: To maintain a program that will provide supplemental funding in such forms as short-term strategic support or longer-term base operating support from a central pool to ensure that all schools sustain excellence. To invest in the University’s highest priorities as identified by the strategic planning process.