Strategic Budgeting in the Trenches: The Tangible Value of Modern - PowerPoint PPT Presentation

Strategic Budgeting in the Trenches: The Tangible Value of Modern Processes, New Technology, and the Right Data Mike McKee – Florida Kelli Shomaker – Auburn Dr. Paul Friga – UNC and ABC SACUBO 2018 May 8, 2018 www.abc-insights.com

Session Overview Let’s get strategic about our budgeting processes… INTRODUCTION FLORIDA AUBURN Changes are a’ comin ’ to Eight years of a modified Six years to make a higher education and RCM, war stories, and decision, just getting there is a need for better lessons learned rolling with RCM, and budgeting and data (especially related to how data are helping data-based decisions) 2

Let’s take a poll… I would like to improve the quality of the data used in budgeting on my campus. A) Strongly agree B) Agree C) Disagree D) Strongly Disagree 3

There are significant pressures on universities today Revenue Pressures: Demand-Side Pressures: • Continued Cuts in • Investment in state appropriations facilities and • Nascent limitations services to attract top students on increasing tuition • Investment in research infrastructure to support top faculty COST MANAGEMENT Source: The Time Is Right For Higher Education To Embrace Benchmarking (Beisser, S; Friga, P; Krasnov, J.; Phillips, M.) 4

Budgets drive priorities and spending on campus University Budget 5

Decentralized spend in higher ed is difficult to quantify and analyze “Institutions of higher education confront many barriers to cost control. Perhaps the most basic impediment is poor cost information ” 50% of Educause 66% of CFOs lack respondents were the “sufficient unable to estimate information to judge distributed* IT administrative units” costs *Distributed refers to IT services not reporting to the CIO (“decentralized”) Source: www.insidehighered.com, www.universitybusiness.com, library.educause.edu 6

ABC addresses key benchmark data questions How do we To whom normalize? should we compare? # of students, # of faculty, # of acres/ft. What sq, % OpEx, research $, level of development analysis? $, etc. Where Adjustment costs are for local located? labor rates? Which activities to analyze? Source: Academic Benchmarking Consortium, abc-insights.com 7

Peer comparisons can generate insights What is the outsourced and shared services How is strategy? this peer so efficient? Source: Academic Benchmarking Consortium, abc-insights.com 8

Session Overview Let’s get strategic about our budgeting processes… INTRODUCTION FLORIDA AUBURN Changes are a’ comin ’ to Eight years of a modified Six years to make a higher education and RCM, war stories, and decision, just getting there is a need for better lessons learned rolling with RCM, and budgeting and data (especially related to how data are helping data-based decisions) 9

Let’s take a poll… The primary budget model we use on our campus is… A) Incremental B) RCM C) Modified RCM D) Other 10

The University of Florida Established in 1853 Land Grant Institution 2017 Enrollment: 55,862 150 Research Centers and Institutes 2,000-acre campus FY ‘17 total expenditures of $5.3B Source: University of Florida 11

UF Enterprise Revenue Sources FY17 Other Grants, Federal, State & Local Contracts, Gifts and Grants and Contracts; Transfers from $482,751 ; 8% Component Units; $271,192 ; 5% Student Tuition and Fees (Net); $431,659 ; 8% State Appropriation Hospital and (Noncapital); $727,156 ; Component Unit 13% Revenues; $3,019,950 ; 54% Federal and State Student Financial Aid; $116,963 ; 2% Auxiliary Sales and Other Revenues; Total $5.6 Billion $275,132 ; 5% Investment Income; Dollar amounts expressed $289,646 ; 5% in thousands Source: University of Florida 12

UF Enterprise Expenses FY17 Scholarship Allowance and Scholarships, Fellowships and Waivers; $106,891 ; 2% [CATEGORY NAME], [VALUE], [PERCENTAGE] Space - Depreciation; $244,462 ; 5% Space - Debt Service; $30,812 ; 1% Services and Supplies; Space - Utilities and $1,803,053 ; 34% Communication; $71,928 ; 1% Total $5.3 Billion Dollar amounts expressed in thousands Source: University of Florida 13

Concerns with historical budget model  Weights  Start up issues for entrepreneurial activities  Classification of space  Capped enrollment  Calculation too complicated  Tuition allocation  Budget is a surprise each year  Waivers  Can’t predict outcomes of decisions  Self funded courses lead to faculty  Degree production not incentivized overload  Retention not incentivized  Tax creep  Interdisciplinary programs not  Subvention incentivized  Strategic Fund  Research not incentivized (linear tax)  IDC vs SPA Tax  Tax Driver/Assessment Metrics 14

The UF journey to improve budget decision-making Incentives Simplify Strategy Improve Map the model Priorities More predictable Standardize titles Key Activities Clear incentives Align processes Strategic fund 15

Carefully thinking through allocations to units – e.g. 70/30 split, Provost strategic fund, supplements Source: University of Florida 16

And calculating overhead contributions – e.g. overhead is now assessed with fixed rates on rev Source: University of Florida 17

Plans for using the ABC Data Budget decisions (FTE levels and overall dollars invested) • Internal comparisons to other UF units • External comparisons to peer universities Shared service opportunities and effectiveness Better decision making at the unit level with peer data from other universities 18

A major goal is to do a deep dive of activity spend within and between units on campus Source: Academic Benchmarking Consortium, abc-insights.com 19

We also plan to compare spending on campus – analyzing administrative spend as % all spend Source: Academic Benchmarking Consortium, abc-insights.com 20

Session Overview Let’s get strategic about our budgeting processes… INTRODUCTION FLORIDA AUBURN Changes are a’ comin ’ to Eight years of a modified Six years to make a higher education and RCM, war stories, and decision, just getting there is a need for better lessons learned rolling with RCM, and budgeting and data (especially related to how data are helping data-based decisions) 21

Auburn University Auburn, Alabama Land-grant, sea-grant, and space-grant institution Established 1856 2017 Enrollment: 29,776 1,800-acre campus 2017 Endowment: $738M 22

Slow decision making process to change budget model Six years to move to RCM Faculty resistance Unclear benefits Inadequate support for hypotheses about inefficiencies due to decentralization (ABC data would have helped) 23

Auburn needed good data to inform the budget process Situation – Auburn transitioned to an RCM hybrid allocation model for FY17 and needed to find ways to assess administrative spend as a part of the governance of the model. Complication – Historically, Auburn has not maintained any data that would provide meaningful assessment of its administrative functions. Resolution – We now have comparative data to begin assessing our labor spend in key overhead areas which are allocated to our revenue-generating units. We also have a tool to help with decision- making as administrative units begin requesting additional funds. 24

We plan to start with central spend and then work out to the units 25

Auburn uses ABC data to analyze spend 26

Session Overview Let’s get strategic about our budgeting processes… INTRODUCTION FLORIDA AUBURN Changes are a’ comin ’ to Eight years of a modified Six years to make a higher education and RCM, war stories, and decision, just getting there is a need for better lessons learned rolling with RCM, and budgeting and data (especially related to how data are helping data-based decisions) 27