1. 1 The Ohio State University Budgeting Basics Presented by: John Kuhar, Financial Planning & Analysis Henry Zheng, Office of Academic Affairs

2. 2 Table of Contents 1.Snapshot of The Ohio State University Enrollment Academic Structure Budget Source of Funds by College FY11-FY12 2.Guiding Principles of the Budgeting Process Principles Competing Goals 3.The Budgeting Process Key elements Rebasing Centrally Distributed Budget Allocations Allocation of Annual Changes in Revenue Allocation of Annual Changes in Expenses Central Tax Illustration – Net Revenue per Student 5.Monitoring and Oversight Quality of Instruction Role of Senate Fiscal 6.Glossary

3. 3 Snapshot of The Ohio State University Enrollment (Autumn 2012 Headcount – Columbus) Undergraduate43,058 Graduate10,034 Professional 3,295 Total56,387

4. 4 Snapshot of The Ohio State University Academic Structure (Autumn 2012) Number of Colleges 14 Undergraduate Majors 175 Master’s Degree Programs 115 Doctoral Degree Programs 90 Professional Degree Programs 7 Courses 12,000

5. 5 Snapshot of The Ohio State University Budget Budgeted Resources – All Funds Columbus Campus – FY 2013 (In Thousands) Total Resources Including Health System Total Resources Excluding Health System RESOURCESGeneralEarningsRestrictedTotal Government Support State Share of Instruction332,010 Board Of Regents Appropriations0 41,678 Ohio Grants & Contracts3,075 51,36254,437 Subtotal State Support335,085 93,040428,125 Federal Grants & Contracts59,735 308,554368,289 Build America Bonds 11,252 Subtotal Federal59,7350319,806379,541 Local Grants & Contracts8,005 13,99822,003 Subtotal Government402,8250426,844829,669 Student Fees Instructional, General828,001 Other60,5745,200 65,774 Subtotal Student Fees888,5755,2000893,775 Other Resources Auxiliary Sales & Services14,318338,55613,100365,974 Departmental Sales & Services 105,000 Private Grants & Contracts16,790 349,104365,894 Endowment Income3,425 27,63231,057 Investment Income10,6042,000 12,604 Other13,463 Subtotal Other58,600445,556389,836893,992 Total Resources without Health System1,350,001450,756816,6802,617,436 Health System 2,104,4354,0122,108,447 OSU - Physicians 335,027 Subtotal Health System 2,439,4624,0122,443,474 Total Resources Including Health System1,350,0012,890,218820,6925,060,911

6. 6 Snapshot of The Ohio State University Budget Budgeted Resources – General Funds COLUMBUS CAMPUS – FY 2013 (IN THOUSANDS) Instructional Fees 828,001 State Support335,085 Other 186,915 TOTAL 1,350,001

7. 7 Snapshot of The Ohio State University Budget Comparison of State Support* to Tuition** Income Columbus Campus * As used here, “State Support” includes State Share of Instruction and (through FY 2009) Success Challenge and Innovation Incentive funding. ** “Tuition Income” includes instructional, general, student activity, and recreation fees, non-resident surcharge, international student surcharge (starting FY 13) and student union facility fee

8. 8 Snapshot of The Ohio State University Source of Funds by College FY12 * The source of funding varies from one academic unit to another

9. 9 Budgeting Process General Fund allocation informed by Academic Plan General Fund revenues are allocated to colleges based on hours taught and cost of instruction A portion of General Fund revenues dedicated to the support of university-wide services At colleges level, deans allocate resources based on college strategic priorities Maintenance of a certain level of budget stability and predictability Appropriate oversight and accountability Continuous review and improvement Guiding Principles

10. 10 Simple vs. Equitable Stability and predictability vs. revenue following the generating units Budgeting Process Competing Goals

11. 11 Budget rebasing of colleges over time Distribute annual change in revenue based on credit hours, market share and cost of instruction Distribute annual changes in expenses Central tax Monitoring for unintended consequences Budgeting Process Key Elements

12. 12 Revenues and expenses for each college were measured Significant differences between revenues and expenses were identified Colleges were placed into three groups in relationship to the goals of the Academic Plan Goals were established to reallocate over $15.5 million among the colleges through the Provost’s Strategic Investment funds and reductions in some college base budgets Base budgets continue to be adjusted annually based on each college’s unique situation and their participation in strategic objectives of the institution Rebasing Budgeting Process

13. 13 Budget Process for Colleges The Big Picture

14. 14 Colleges receive all revenue generated for new credit hours from both instructional fees and state share of instruction (sometimes called state subsidy) Colleges are also impacted by changes in revenue associated with existing credit hours of instruction, from both changes in instructional fees and the change in state subsidy (which could go up or down) Does not apply to differential fees, program fees, technology fees, or general fees Budgeting Process ALLOCATION OF ANNUAL CHANGES IN REVENUE Allocation of Instructional Fees & State Share of Instruction

15. 15 Fee rate per credit hour is established for each fee category Colleges receive the full fee rate per credit hour for each additional credit hour they teach Colleges also receive the inflationary growth in the fee per credit hour; this growth is distributed based on the total credit hours taught The annual change in the instructional fee is shared based on the average of two prior years of credit hours Budgeting Process ALLOCATION OF ANNUAL CHANGES IN REVENUE INSTRUCTIONAL FEES

16. 16 State Share of Instruction rate per credit hour is established for each SSI category Colleges receive the full SSI rate per credit hour for each additional credit hour they teach College also receives the change in the SSI rate per credit hour, whether it is positive or negative; this change is distributed based on the total credit hours taught The annual change in SSI dollars is shared based on the average of two prior years of credit hours Budgeting Process ALLOCATION OF ANNUAL CHANGES IN REVENUE STATE SHARE OF INSTRUCTION

17. 17 100% of the annual changes in indirect cost recovery revenues are allocated directly to the generating college or vice-presidential area except for that portion associated with University Library costs. Annual changes in the portion associated with the Libraries will be allocated to the Libraries Beginning in FY2013, rates have been locked in for the next four years: 2013=52.5%, 2014=53.5% and 2015/2016 are both 54.0% Budgeting Process ALLOCATION OF ANNUAL CHANGES IN REVENUE INDIRECT COSTS

18. 18 Budget Process for Colleges The Big Picture

19. 19 The budget model includes five categories of expenses, each of which is allocated to the colleges based on unique measures: 1.Student Services (applies to colleges & any support units generating credit hours) 2.Physical Plant (applies to colleges & support units) 3.Research Administration (applies to colleges & any support units having research activities) 4.Central Tax (applies to colleges and any support units generating credit hours) 5.Assessment to Support Development (applies to colleges & support units, auxiliaries and regional campuses) ALLOCATION OF ANNUAL CHANGES IN EXPENSES Budgeting Process

20. 20 There are Three Separate Student Service Cost Pools: Cost Pool 1 (Undergraduate): 89% of this cost pool is Undergraduate Financial Aid. This is the largest pool. Also includes operating budgets for Financial Aid, Undergraduate Admissions and First Year Experience. Expense is allocated by average undergraduate credit hours. Cost Pool 2 (Graduate): 82% of this cost pool is Non-Resident Fee Authorizations. Also includes operating budget of the Graduate School and Graduate and Professional Admissions. Expense is allocated by average graduate credit hours. Cost Pool 3 (All Students): this is the smallest cost pool and includes portions of operating budgets for Registrars Office, Enrollment Services, Student Life and for new Library acquisitions. Expense is allocated by an average of ALL credit hours. Budgeting Process ALLOCATION OF ANNUAL CHANGES IN EXPENSES STUDENT SERVICES ASSESSMENT

21. 21 Annual changes in expenses are allocated to the units based on the assigned square footage recorded in the university’s space inventory The square footage is multiplied by a flat rate per square foot for four categories of costs: utilities, custodial service, maintenance, and renewal & replacement, which cover expenses related to heat, power, water/sewer, utilities debt service, FOD operating costs, campus repair and renovation and deferred maintenance ALLOCATION OF ANNUAL CHANGES IN EXPENSES PLANT OPERATION AND MAINTENANCE Budgeting Process

22. 22 RESEARCH ASSESSMENT The cost allocation covers the budgets of units that support sponsored research (e.g. OSP formerly OSURF ), guidelines and research service improvements and mandated expenditures Individual colleges are allocated a research cost proportional to their Modified Total Direct Cost expenditures The Central Tax funds the administrative components of the Office of Research that have university-wide responsibilities (e.g. Office of Responsible Research Practices) DEVELOPMENT ASSESSMENT Expenses are allocated among the units proportionally, taking in to account the development expenses on behalf of each unit and designated funds raised for each unit Budgeting Process ALLOCATION OF ANNUAL CHANGES IN EXPENSES

23. 23 TAX RATE = 24% Supports units such as the President’s Office, OAA, Business & Finance, Public Safety, OCIO, Gov’t Affairs, Legal Affairs are funded by a 19% Central Tax An additional 5% tax funds Strategic Investments These taxes apply to: –Instructional Fees –State Share of Instruction These taxes do not apply to: –Indirect Cost Recoveries, Differential, Program and Technology Fees Budgeting Process ALLOCATION OF ANNUAL CHANGES IN EXPENSES CENTRAL TAX

24. 24 Budgeting Process CENTRALLY DISTRIBUTED BUDGET ALLOCATIONS (Thousands) *Includes Central Distributions from OAA and Research FY 03 - FY 12 Historical FY 2013 Distribution of Central Funds Continuing One-Time Arts & Sciences12,71907,065 Fisher College of Business95300 Food, Agri & Env Sci.1,4750223 Education & Human Ecology69816254 Engineering6,25703,217 Nursing2,28200 Pharmacy55000 John Glenn Institute000 Social Work287018 Dentistry66300 Law (Excluding Law Library)345050 Medicine5,9540676 Public Health1,72800 Optometry1,2600500 Veterinary Medicine662050 Interdisplinary008,750 Provost Reserve 3,601 Total Colleges35,8343,61720,803

25. 25 Monitoring and Oversight Council of Academic Affairs ensures continued quality of instruction through: A comprehensive review of existing courses before a new course is approved Monitoring course and program quality through a number of indicators, such as class size, level of instructor, and course GPA Monitoring college honors course offerings, enrollment, and quality of instruction QUALITY OF INSTRUCTION

26. 26 Senate Fiscal Committee: Provides the Provost and CFO with data and tools to assist in the Provost’s review of the College base budgets Recommends to the Provost modified allocation models when unintended consequences or changes in the financial environment suggest revisions are appropriate. Allocation methodologies implemented in FY08 as a result of these review include: –Combining the undergraduate subsidy and fee revenue and allocating 60% of the revenue on a credit hour basis and 40% on a basis weighted to reflect the cost of delivering instruction Additional recommendations made to the Provost and implemented –Fee reconciliation distribution to the colleges –New taxonomy for the distribution of weighted share of SSI –Support Units participated with colleges in the State subsidy reduction Monitoring and Oversight ROLE OF SENATE FISCAL

27. 27 Budget Process for Colleges The Big Picture

28. 28 Budget Process for Support Units The Big Picture

29. Base Budget – Continuing funds also referred to as annual rate and PBA Fiscal Year (FY) – University accounting/budgeting system works on a standard fiscal year as opposed to calendar or academic years. The fiscal year begins July 1 st and ends June 31 st Ex: FY13 = July 1, 2012 – June 30, 2013 General Funds Spending Authority (GFSA) – General funds cash available for your unit to spend. Includes cash carry forward Indirect Cost Recovery (IDC) – Revenues received from sponsored projects to offset costs already absorbed by the University 29 Glossary

30. State Share of Instruction – Sometimes referred to as instructional subsidy Net Marginal Resources (NMR) – Increase in your budget from one year to the next Plant Operations and Maintenance Funds (POM) – Includes: Utilities, custodial services, maintenance, and renewal and replacement Present Budget Allocation (PBA) – Present budget that generates your cash/GFSA. Also referred to as annual rate 30 Glossary

31. Financial Planning and Analysis (FP&A) – Responsible for University Budgeting Annual Rate – Present budget that generates cash/GFSA. Also referred to as PBA 31 Glossary

32. 32 Questions & Answers ANY QUESTIONS?