1. Massachusetts Institute of Technology Administrative and Fiscal Officers Meeting November 20, 2009

2. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Welcome and Opening Remarks Terry Stone, Executive Vice President and Treasurer Budget Planning Update – Fiscal Year 2011 Rafael Reif, Provost Institute-wide Planning Task Force – Update Israel Ruiz, Vice President for Finance Member of Task Force Coordinating Team Acting on Task Force Ideas – Sourcing, Travel and Procurement Services Leo McInerney, Director of Sourcing What's New in Your 401(k) Plan Investment Options Alison Alden, Vice President for Human Resources Census 2010 – MIT’s Responsibilities and Challenges Lydia Snover, Director of Institutional Research MIT’s Written Information Security Program (WISP) Allison Dolan, Program Director

3. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Welcome and Opening Remarks Terry Stone, Executive Vice President & Treasurer

4. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Fiscal 2009 - Summary Despite economy, MIT steadily navigated the challenges of FY09  Entered the year with expected consolidated operating surplus and balanced budget  Monitored expenses and liquidity carefully  Achieved operating surplus in line with plan  Secured long-term financing to complete major capital program $610.0M in new, tax-exempt debt; $203.0M used to replace line of credit financing  Put plans in place to operate with fewer financial resources Financial planning tools readied to guide required adjustments

5. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Budget Planning Update – Fiscal Year 2011 Rafael Reif, Provost

6. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting FY2009 and 2010 Budget Highlights FY09 GIB achieved balanced budget  Operating results include $35M for future task force investments & contingencies FY10 budget achieves reductions in GIB operating expenses of $58.3M  Endowment payout the same as that for FY09  Includes $27M for future task force investments and contingencies

7. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Budget Planning Update FY11 budget plan objectives  Absorb most of the effects of endowment decline in FY11 Cut endowment payout to achieve distribution rates in the 5-5.25% range – Modeled reduction of 18.0% from FY10 levels Reduce GIB by $60-70M through a combination of: – Task force-related recommendations – Academic and administrative budget reductions  Additional task force recommendations expected to yield further revenues/savings beyond FY11

8. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Budget Model Update Budget model update & assumptions  FY11-FY20 projections use FY09 figures and FY10 budget expectations  Assumptions for FY11 and beyond: Endowment distribution reduced by 18% in FY11; smoothing distribution rule thereafter Tuition increase = 4.0% per year, up from 3.8% in FY10 MTDC increase = 3.0% per year Utilities increase = 5.0% per year Gifts to GIB = $9.0M per year Gifts increase to endowment = 1.0% per year

9. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Budget Model Update – Before Budget Cuts Planning model demonstrates the effect of the following factors: Impact of FY10 budget cuts FY11 and beyond actions not yet incorporated 18% payout reduction in FY11 with smoothing rule thereafter

10. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Budget Model Update – After Budget Cuts Planning model demonstrates the effect of the following factors: Impact of FY10 budget cuts FY11 budget cuts = 61M 18% payout reduction in FY11 with smoothing rule thereafter $61M Budget Cuts

11. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Budget Reductions & Task Force Initiatives Budget reductionsFiscal 2010Fiscal 2011Fiscal 2012 Total compensation reduction$11M$8-11M* Academic units reduction$11M$12-15M** Administrative units reduction $13M$14-17M No new recurring programs $5M Other budget reductions (e.g.: CRSP/Renovation & Renewal, utilities) $18M Task Force initiatives for near-term savings $12-27M$xM *Compensation reduction in FY11 also recommended by Institute-wide Planning Task Force **GIB only; does not include effect of projected decreased Pool A payout Total $58M$51-75M$xM Preliminary Estimates

12. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Institute-wide Planning Task Force – Update Israel Ruiz, Vice President for Finance, Member of Task Force Coordinating Team

13. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Task Force Process – To Date The Working Groups (February-June)  Working Groups met weekly to Review Idea Bank Gather background and data (interviews, data group requests) Draft working group report on their ‘ideas’ The Preliminary Report (June-July)  Coordinators synthesized the working group reports into a preliminary report with a set of recommendations for further action on each idea The Comment Phase (August-October)  Preliminary report released to the community  Idea Bank re-purposed for soliciting input  Coordinator ‘Road Show’

14. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Task Force Process – Comment Phase Communication efforts  Institute-wide events and forums to disseminate the report’s ideas and themes  Targeted presentations to different stakeholder groups  Collected many comments and feedback from the community  Very thoughtful responses from several groups Feedback: Main areas  Increasing undergraduate enrollment  Housing and educational policies (i.e., 4-year housing, capacity, add/drop date)  HR/Benefits recommendations Retirement benefits; details and assumptions Provision for existing populations (i.e., “Grandfathering”)  “Softening” of faculty salaries  Reduction of choice at the expense of MIT cultural values  Criteria for deciding on which ideas to recommend and/or invest in  Ensure transparency and inclusiveness

15. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Task Force – The Final Report The Final Report Phase (October-November)  Will incorporate community input received from multiple channels  Working Groups just submitted final versions of their reports  Coordinators working to synthesize feedback and finalize the final report Structure of the Final Report  Final report structure largely unchanged Will update individual ideas to recognize feedback or further consideration Will organize ideas around five themes –New Revenue Enhancement and Educational Opportunities for MIT –Framework for Accountability and Transparency –Gaining Efficiencies and Supporting Standards –Process Modernization—Digital MIT –Modern Workforce Policies and Practices Will include recommendations for acting on each of the ideas Will contain appendices with all the ideas, summarized feedback and the reports of the working groups

16. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Task Force – Roadmap for Action Roadmap for Action  Recommendations for action, investment and prioritization on the ideas included in the Final Report will come from the Task Force Leadership  The Task Force Coordinating Team has been charged with: Requesting execution plans from appropriate unit leaders with assigned ideas Coordinating recommendations and implementation plans with operating unit leaders, project teams and study teams Reporting progress assessment to Senior Leadership Working closely with co-chairs of working groups, now acting in advisory capacity, during the implementation phase  Many ideas assigned to units in the Preliminary Report are being actively explored for implementation potential by their respective units

17. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Acting on Task Force Ideas Sourcing, Travel and Procurement Services Leo McInerney, Director of Sourcing

18. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Themes Evolving our Services Acting on Task Force Initiatives Community Engagement

19. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Evolving Our Services Procurement TransactionalActivity-basedData StarvedGeneralists Sourcing StrategicValue OrientedData DrivenCategory Specialists

20. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Review and analysis of 36 Task Force ideas Ongoing meticulous evaluation of cost/benefit of each proposed change/idea Task Force ideas divided into two main types:  Process Improvement  Strategic Sourcing Opportunities Acting on Task Force Ideas List of Task Force Ideas >>

21. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Acting on Task Force Ideas Process ImprovementStrategic Sourcing Opportunities Automate, streamline, and educate the community on the procurement process Computers & Peripherals Furniture SustainabilityLab Supplies & Equipment Travel ReimbursementTravel Management RebatesGas EfficiencyContingency Workforce Printing Office Supplies Meetings & Video Conferencing Spend Distribution >>

22. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Redeploying resources to the categories identified in the Task Force ideas Developed strategic category templates for eight initial categories Developing a strategic sourcing implementation plan for each of the categories Engaging you to work with us Acting on Task Force Ideas

23. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Community Engagement  Reaching out  Awareness  Collaboration  Leverage  Service  Feedback

24. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Community Engagement 1. Gather Data 2. Select a Procuremen t Approach 3. Structure & Issue the Procurement Document 4. Analyze the Bids 5. Conduct Additional Bidding, Negotiate, and Select Supplier 6. Implement Supplier Contract

25. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Acting on Task Force Ideas – Category Mgmt Process Contingent Workforce Gather Data Approach RFI / RFP Analysis Negotiate Implement Travel Gather Data Approach RFI / RFP Analysis Negotiate Implement Computer Peripherals Gather Data Approach RFI / RFP Analysis Negotiate Implement Lab Supplies Gather Data Approach RFI / RFP Analysis Negotiate Implement Printing Gather Data Approach RFI / RFP Analysis NegotiateImplement Office Supplies Gather Data Approach RFI / RFP Analysis NegotiateImplement Furniture Gather Data Approach RFI / RFP Analysis NegotiateImplement Facilities Gather Data Approach RFI / RFP Analysis NegotiateImplement Gases Gather Data Approach RFI / RFP AnalysisNegotiateImplement In Process Complete Not Started

26. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Example: Travel Market Overview

27. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting MIT Early Travel Initiatives Contracts: AirAgencyHotelCar *Jet Blue*BCD TravelMarriottAvis/Budget US AirOT&T*Starwood AmericanSonesta United * - New Supplier Contract Finalized Contract in Negotiation

28. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Modernizing MIT Travel Pilot program now underway  45 travel credit card holders, their travel arrangers and approvers  Planning: On-line booking tool (integrated with expense reporting system)  Payment: Travel credit cards (credit card expenses feed to Concur)  Expense reporting: Automated (electronic workflow for approvals)  Reimbursement: Out-of-pocket expenses via direct deposit (available spring)  Training: In-person, on-line training portal, drop-in sessions Early feedback is positive! Pilot will continue through January We will work closely with you  As we prepare for the Institute-wide rollout  Throughout the implementation phase

29. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting What's New in Your 401(k) Plan Investment Options Alison Alden, Vice President for Human Resources

30. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting New Investment Plan Options  More Choice  Life Cycle Funds: Automatically adjust the stock/bond mix over time  New for participants who don’t select investments  Index Funds: Typically structured to mirror the performance of, for example, the S&P 500  Replaced underperforming funds  Most of the current choices remain  Added funds with lower expense for participants  Fidelity remains the administrator of our plan  What you should do  Review where your 401(k) is invested  Understand the new options http://hrweb.mit.edu/benefits

31. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Census 2010 – MIT’s Responsibilities and Challenges Lydia Snover, Director of Institutional Research

32. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting MIT’s Written Information Security Program (WISP) Allison Dolan, Program Director

33. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Sensitive Data  Massachusetts requires notification if an individual’s SSN, person credit card # or other financial account, or driver’s license info is lost or stolen > New category of sensitive data: PIRN (“personal information requiring notification”)

34. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Data Protection  Massachusetts requires anyone with “PIRN” to have a “Written Information Security Program” (WISP), with administrative, technical and physical safeguards > MIT will introduce a WISP in early 2010

35. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Immediate Steps  If you don’t have it, you can’t lose it => know when you need it, and ask questions if you aren’t clear about the reason.  If you don’t need it, securely destroy it.

36. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Contacts Questions/comments? Contact Allison Dolan adolan@mit.edu Potential breach? Email infoprotect@mit.edu

37. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting APPENDICES Additional Sourcing information

38. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Task Force Ideas Cost Avoidance Program Source - Influence - Negotiate 1Renegotiate and bid out contracts for goods and services 25Standardize on Dell configurations 2Leverage Facilities MRO purchasing power across campus 26Standardize on video and audio conferencing services 3Increase P-Card rebate 27Purchase only MIT recommended desktop and laptops 4Renegotiate VWR contract 28Accelerating Green Procurement 5Renegotiate other scientific supply contracts 29Airgas proposal 6Renegotiate contracts with ECAT suppliers 30Transition from laser jet printers to multifunction machines 7Establish direct contracts for air and hotels Customer Relationship Management 8Rebid office supply 31Educate the community about procurement processes 9VMS system 32Ensure that cost savings are not achieved at the expense of others Continuous Improvement Program Supplier Rationalization 10Automate and streamline key processes 33Reduce the number of purchasing choices 11Promote sustainable purchasing practices 34Consolidate purchases of design services for capital projects 12Develop creative solutions and fair practices 35Combine campus and Lincoln furniture purchases 13Reduce the number of fax machines on campus 36Eliminate purchasing furniture from Office Depot 14Change P-card rules to allow computer purchases 37Consolidate travel agencies 15Examine the impact of $3,000 capital threshold on computers 38Vendor consolidation for clerical temp help 16Order scientific equipment under $5,000 on ECAT 17Institute a travel card 18Institute an electronic expenses reporting system 19Electronic travel reimbursements 20Onsite life science operation 21Office supplies update core list, implement $50 min per order 22Reduce small dollar purchases processed by procurement 23Employee job share bank 24In House casual labor Back >>

39. Massachusetts Institute of Technology November 20, 2009 Administrative and Fiscal Officers Meeting Spend Distribution $273M in Spend 21 Categories Task Force SPI’s $205M – 75% Other $68M – 25% $273M in Spend 21 Categories Task Force SPI’s $205M – 75% Other $68M – 25% Back >>