1. Chair/Director Orientation David J. Cummins Vice President for Finance & Administration/CFO August 21, 2013* *[ David Cummins has added the following correction to his answer to a question from the audience about spending priorities and the under-investment in instruction at UA; specifically his statement that “We under-spend in total and in essentially all areas relative to most other Ohio public universities”: “My comment that our total spending is less is true. In FY 11 – the most recent comparable data available - we spent $850 less per FTE than the median. However, it is not true that we spent less by nearly every category. We spent more in Research ($133 per FTE more), Public Service ($189), Institutional Support ($218) and “Other Core Expenses” ($259). My comment was more applicable to the revenues. We are below the median in all but one category – Private Gifts, Grants and Contracts. Interestingly, we are below the median in total expenses by $850 per FTE, or 5%. However, we are below the median in revenues by a much greater margin - $4,414 per FTE, or 20%. This is partly the result of the unique IPEDS methodology; but it also highlights my comment that we have a revenue yield problem.”]

2. Audited Financial Statements Eliminations and Reclassifications Fund Accounting Statements Unrestricted Unrestricted Current Funds General FundAuxiliaries Departmental Sales Restricted Restricted Current Funds Sponsored Research Restricted Scholarships Other Restricted Gifts Loan funds Federal Perkins Loan Fund Nursing Loan Fund University Loan Funds Endowment Funds Permanent Endowments Quasi Endowments Plant Funds Current Capital Projects Capital AssetsDebt ReservesAgency Funds Student Organizations Other Outside Entities 2 How Funds are Combined into the Audited Financial Statements

3. FY 2014 General Fund Revenues 3

4. UA’s Shift in Revenue from FY04 - FY14 4 The 10 year comparison illustrates the shift in support from the State to Tuition and Fees. At the University of Akron, the student will bear 70% of the cost of higher education in FY14.

5. FY 2014 General Fund Expenditures 5

6. UA’s Shift in Expenditures from FY04 -FY14 While compensation remains the largest component of expenses, it dropped from 61% of the budget in FY04 to 56% in FY14. Departmental operating budgets (non-personnel) is declining from 9% to 4%. The largest shift was the commitments to debt service and support of auxiliaries. Much of this shift reflects an accounting change related to the General Services fees since FY04. 6

7. 7 UA General Fund Sources of Revenue Source: Query of UA financial accounting system data; FY 13 preliminary. Revenue has increased by nearly 48% Approximately 94% of each year’s revenue is related to enrollment (Items 1-3) Changes in student-related revenue are due to increases in tuition and fees and increases in the number of Student Credit Hours (SCH) generated State Appropriations in FY 13 is slightly below FY 04, even though enrollment has increased 20%

8. UA Specific Trend Student Revenue per FTE (HECA adjusted) 8 Note: Constant 2011 dollars adjusted by SHEEO Higher Education Cost Adjustment (HECA). Educational Appropriations include ARRA funds.

9. 9 UA General Fund Expenses Overall, expenses have grown by 48% Academic Support expenses have increased at a lower rate (38.1%) than have Academic expenses (46.5%) Continuing Obligations has grown at the largest rate (70.9% over 10 years) Source: Query of UA financial accounting system data, FY 13 preliminary.

10. Revenue vs Expenditure Growth ( Excluding Carry-over Transfers) 10 FY 13 – Preliminary, FY 14 - Original Budget, FY 14R - 7% Enrollment Decline

11. FY 2014 Contingency Plan Develop Revised Budget for 7% Enrollment Decline – October Board of Trustees meeting Requested 8% reduction scenarios from each unit – Need to understand the actions necessary to reduce 8% and the impact on teaching and services – Need to control discretionary expenditures – though relatively small part of budget Continue to evaluate other options for reducing expenses diversifying revenue – Mostly longer-term solutions Improved Retention must be a major part of the solution – Entering class down roughly 5% - translates to 1 percentage point of the total decline 11

12. Questions? 12

13. 13 FY-14$ millionsExplanation Base Adjustments: Tuition Shortfall, Other Rev One-time Reductions in FY-13 Subtotal -10.0 - 8.4 - 18.4 FY 13 Enrollment 4% below Estimate Carried in from FY 13 Additional Assumptions: Visiting/Temp Positions Fully-fund Scholarships Strategic Investments Health Insurance Subtotal - 4.0 - 3.3 - 2.0 + 1.0 - 8.3 Currently Not in Base Current Shortfall Next Phase of Achieving Distinction Under-spending to Budget Subtotal- 26.7 Potential Enrollment Decline- 9.3Additional 4-5% Decline Total 36.0 FY-14 Starting Point

14. 14 Approach$ millionsExplanation Starting Balance- 36.0Adjust Assumption for 4-5% Enrollment Decline Revenue Increases+ 4.5 Continuing Obligations+ 6.5 Academic Support+ 8.0 Academic+ 8.0 + 3.0 Unit Reductions (including $1 million for fringe benefits savings) Achieving Distinction Deferrals Balance - 6.0Developing Contingency Plan for Likely Enrollment Decline Balancing the FY-14 Budget