University Financial Model

1. University Financial Model UPDATE August 27, 2014

2. University Financial Model Issues in larger context awaiting resolution/clarification: • Likely significant cuts in state appropriations for FY14-15 and FY15-16 (will affect the availability of supplemental funding) • Model for Affordable Excellence to be considered by the Board of Visitors for approval in February 2015

3. University Financial Model How Do We Allocate Revenues? • 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 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.

4. University Financial Model How Do We Allocate Revenues? • 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 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.

5. University Financial Model How Do We Allocate Revenues? • Study Abroad:schools that sacrifice undergraduate tuition to encourage study abroad by their students will receive special consideration through supplemental funding, in accord with the spirit of the Cornerstone Plan. Specific arrangements will be included in agreements between deans and the relevant executive vice presidents.

6. University Financial Model How Do We Allocate Revenues? • Graduate tuition has been allocated directly to the schools of enrollment with the school responsible for financial aid allocations since 2013-14. 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 contractswill be allocated to the school or unit housing the research activity. • Facilities and administrative cost recoverieswill be allocated to the unit holding the research grant. • Restricted endowment distribution will be allocated according to the donor’s wishes.

7. University Financial Model How Do We Allocate Revenues? • The full 50-basis point endowment administration feewill be allocated to the recipients of the previous 25-basis point distribution. • Schools must make good-faith efforts to report available foundation support(cash and in-kind) to the extent possible during the budget process. • 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.

8. University Financial Model How Do We Allocate Revenues? • Unrestricted state funding, unrestricted gifts and unrestricted endowment distributionwill be retained by the President and deployed in ways that include the following: • To maintain a program that will provide supplemental funding from a central pool to ensure that all schools and units sustain excellence. • To invest in the University’s highest priorities as identified by the strategic planning process. • Additional note: The University expects to provide supplemental funding in FY14-15 and FY15-16 sufficient to meet expectations from the previous model of budgeting if adequate funding is available from all sources to provide it. This has been known previously as “hold-harmless” funding.

9. University Financial Model How Do We Allocate Central Service Costs? • General Concepts • Each central-cost category has its own usage-approximation formula • All allocated costs are net (only include costs not covered by other funding sources) • Regular UFM cost and allocation methodology will apply to Agency 207 entities included in the new Health Affairs financial/management framework (such as School of Medicine, School of Nursing, Claude Moore Health Sciences Library) • Central services will provide base levels of service to all entities in the UFM as detailed in service-level specifications (currently under development)

10. University Financial Model How Do We Allocate Central Service Costs? • 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.

11. University Financial Model How Do We Allocate Central Service Costs? • IT Services: • Net 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.

12. University Financial Model How Do We Allocate Central Service Costs? • HR Services: • Net costs allocated by proportion of headcount salaried employees

13. University Financial Model How Do We Allocate Central Service Costs? • Development (all University entities receiving gifts): • 41.5 percent of net central costs allocated for FY14-15 by this formula: proportion of school/unit-specific gifts greater than $100K for last four years • 58.5 percent of net central costs temporarily covered for FY14-15 by University grant • Alumni Engagement (schools only): • 41.5 percent of net central costs allocated for FY14-15 by this formula: proportion of contactable alumni for all schools • 58.5 percent of net central costs temporarily covered for FY14-15 by University grant • Note: both of these costs will be fully allocated beginning in FY15-16

14. University Financial Model How Do We Allocate Central Service Costs? • Central Library Services: • Net costs allocated by this formula: proportion of sum of annual FTE regular session students + annual number of doctoral degrees + FTE instructional/research faculty

15. University Financial Model How Do We Allocate Central Service Costs? • Research Support Services: • Net costs allocated by this weighted-proportion formula: weighted 0.5 for total research dollars (in millions) + weighted 0.5 for total awards

16. University Financial Model How Do We Allocate Central Service Costs? • Student Services: • Net costs allocated by proportion of annual FTE regular session students

17. University Financial Model How Do We Allocate Central Service Costs? • Undergraduate Admissions Services: • Net costs allocated by proportion of annual FTE regular session undergraduate students

18. University Financial Model How Do We Allocate Central Service Costs? • Academic Support Services: • Net costs allocated by this formula: proportion of (annual FTE instructional/research faculty + annual FTE regular session students)

19. University Financial Model How Do We Allocate Central Service Costs? • Executive/Managerial Services: • Net costs allocated by proportion of annual direct school expenditures