BUDGETING – CRADLE TO BOARD AT THE UNIVERSITY OF OTTAWA

1. BUDGETING – CRADLE TO BOARD AT THE UNIVERSITY OF OTTAWA CAUBO – Pre-conference June 23, 2007

2. Agenda • Budgeting at the University of Ottawa • Total enterprise budget • Operating fund - Budget process and calendar - Revenues - Expenses - Faculty budget allocations - Challenges of the new formula - Monitoring • Ancillary fund • Research and trust funds • Capital fund • Engaging the Board • Challenges of the budget process Budgeting - Cradle to Board 2

3. Budgeting at the University of Ottawa • Total enterprise includes four funds: - Operating - Ancillary services - Research and Trust - Capital • Board approves the operating fund and ancillary annually • Research and Trust budget for information purposes • Capital fund budget approved annually, and each project over $500,000 is approved • The total budget includes all funds • A complete budget document is prepared annually Budgeting - Cradle to Board 3

4. Operating FundPlanning and budgeting Vision 2010 Strategic Plan - Faculty and services plans Resource Allocation is driven by Vision 2010. Multi-year budgeting: - Three year operating budget reflecting priorities of Vision 2010 - Annual budget and revised projections Budgeting Principles: - Cash basis - Annual allocations to faculties and services - Year-end carry forward of faculty and service net results - Concept of base budget versus one time only funds - Maintenance of base budget and effective budget Budgeting - Cradle to Board 4

5. Funding of expenditures Expenses paid centrally - Employee benefits - Annual economic salary increases - 50% of faculty and services renovation costs • Utilities and maintenance • Software licenses • Scholarships and bursaries Expenses paid by faculties and services • PTR portion of salary increases • 50% of renovation costs • Retiring allowances • All other costs ie. salaries, supplies, books, equipment, travel Budgeting - Cradle to Board 5

6. Operating Fund Budget Calendar 2007-2008 November/December 2006 January 2007 Strategy and assumptions – Administrative Committee Preliminary University budget preparation – Financial Planning Submission of faculty & services plans: - requests for funds for new initiatives - Academic/support staff hiring plans - Space optimization and renovations - Preparation of budget target envelopes Presentation of preliminary budgets to the AC, Deans and Directors March 2007 April 2007 May 2007 Fall 07 & Winter 08 Development of budget target envelopes by faculty and services Preparation of budget document Final budget – Board approval Projections for 2007-08 results Projections and variances Budget adjustments (On-going) Budgeting - Cradle to Board 6

7. Preliminary budget preparation • Prepared centrally by the Financial Planning Service: • Works closely with Institutional Planning, Finance, Treasury, Physical Plant, Computing Services, Human resources, and Faculties and services • Information on major revenues and expenses are gathered • Revenue and centrally financed expense projections are prepared and analyzed Budgeting - Cradle to Board 7

8. Operating fund Revenue projections 1. Provincial Assistance 3. Other revenue - Investment revenue - Indirect cost of research - Rental of space - Donations 2. Tuition fees - Increase in tuition fees 2007-08 & 2008-09 - Enrolments Budgeting - Cradle to Board 8

9. Operating fund Expense projections Budgeting - Cradle to Board 9

10. Budget preparation • Budget envelopes for faculty and services from the prior year reviewed • Budget scenario with projections and current budget envelopes is prepared • Envelope for new initiatives is calculated and identified • Administrative committee approves all new budget allocations based on our Strategic Plan – Vision 2010: • Major priorities are set • Most new budget allocations are analyzed by the Financial Planning service before approval • Budget scenarios are prepared and discussed Budgeting - Cradle to Board 10

11. Faculty budget allocations • In 2005-2006 - Ontario government Reaching Higher Plan: • Provide opportunity to review Faculty budget allocations • Maintained Faculty budgets prior to 2005-2006 as a base – no budgets were reduced • Budget/Generated Revenue ratios per faculty were reviewed • Generated revenue includes Government funding and tuition fees • Ratios ranged from 49% to 72% • Student/faculty ratios ranged from 17 to 30, average 23.9 • Objective was to reduce class sizes and improve student/faculty ratio • After budget adjustments reduced average student/faculty ratios to 22.1 Budgeting - Cradle to Board 11

12. Faculty Budget Allocations Analysis of University indirect versus direct costs Indirect costs include all non-Faculty costs: All centrally funded services : - Computing - Library - Registrar - Financial Services - Human Resources - Physical Plant - Protection etc. All indirect costs represent 55% of total Government grants and tuition fees Budgeting - Cradle to Board 12

13. New funding formula • New funding formula for Faculties is approved: • After 2005-2006, Faculties will receive 45% of the revenue they generate • 80% of additional revenue must be used to hire permanent professors • If revenues generated decreases, the amounts are decreased from their budget according to the new formula • Importance of generating realistic projections of number of student in each program and Faculty Budgeting - Cradle to Board 13

14. Challenges of new formula • Projections of number of students per Faculty and per program • Projections of tuition fees: • Differential fees per year of program • Graduate student enrolment projections • Monitoring the hiring of professors to ensure objectives are met • Working with the Faculties that have decreased projections of students • Confirmation of government grants and tuition fee increases • Adapting the formula to changing environments Budgeting - Cradle to Board 14

15. Budget Monitoring • Faculty and Service budgets are monitored centrally in the Fall and in the Winter • Salary budgets cannot be used for other expenses • Budget transfers must be made and approved • Projections to the current year-end are up-dated with actual data available and presented to the Administrative Committee • Position control system closely monitored to ensure salary data is accurate • Work closely with Faculties and Services that have budget challenges • Base budget and Effective budget are maintained • Effective budget used for projections • Financial Planning office includes 7 staff Budgeting - Cradle to Board 15

16. Ancillary Services Budget Process: • Includes mostly self supporting services, ie. Parking, food services, housing, community life and conventions • All costs are charged, including utilities, staff benefits etc. • Reserves are used to finance renovations and improvements • Budgets are prepared by each area, projecting their revenue and expense objectives Budgeting - Cradle to Board 16

17. Research and Trust Budget Process: • Info from Research services, TTBE, GRIP • Includes all externally restricted funds • Projections of revenues by major granting agencies • All grants and contracts are received one by one, throughout the year • Concept of matching revenues and expenses • Does not include revenues and expenses from affiliated hospitals and research institutes • Budget is for information purposes only Budgeting - Cradle to Board 17

18. Capital Fund Budget process: • Includes capital construction projects and acquisitions • All renovation requests from faculties and services are submitted to Physical Resources service by November 15 annually • Space optimization and deferred maintenance budgets approved by the Executive committee of the Board in February annually to ensure work can be planned for the summer • All projects are approved by the Board Budgeting - Cradle to Board 18

19. Engaging the Board • Board approved the University Strategic Plan – Vision 2010 and the University Balanced Scorecard • Action plans were developed following Vision 2010 • Annually measure and report the progression of the action plans and the Balanced Scorecard • Presentation to the Board prior to the approval meeting on the budget process at the University • Presentation to the Board of the total enterprise budget with an emphasis on the operating budget and priorities • Provide budget document and approve the operating budget • Once in the fall and once in the winter provide new budget projections to the current year-end • Annual financial statements approved by the Board Budgeting - Cradle to Board 19

20. Challenges of budget process • Receiving information on a timely basis ie. Government funding, salary increases, tuition fee increases, projections of number student • The reliability of the projections, ie: number of students, scholarships, salaries, utilities etc. • The Operating Budget is prepared by Financial Planning Service with the cooperation of many other University Faculty and Services • Communication of requirements, process and timelines • Regular communications of budget issues arising during the year • Knowledge required to prepare the budget • Quality of documentation of approvals and changes • Quality of spreadsheets and organization of documents • Research, Ancillary and Capital budgets are prepared by Financial Services Budgeting - Cradle to Board 20

21. Documentation • Web reference http://www.uottawa.ca/services/planfin/bdgt/bdgt08-e.htm • Table of contents A. Budget 2007-2008 – Total enterprise B. Operating Fund 1. 2007-2008 Operating Budget 2. Budget by Major Function 3. Budget by Faculty/Service 4. Analysis of Grants – 2003-2008 5. Tuition Fees – University of Ottawa 2006-2008 6. Five-Year Analysis of Revenue Sources 7. Enrolment projections in FTE’s & BIU’s by Faculty – 2006-2010 8. Analysis of Scholarships and Bursaries – 2003-2008 9. Other Expenses C. Ancillary Services 1. Actual & Budget D. Research and Trust Fund 1. Grants and Contracts by Category 2. Research Highlights E. Capital Fund Appendix Strategic Areas of Development Loan Default Rate Budgeting - Cradle to Board 21

22. QUESTIONS? Budgeting - Cradle to Board 22