October 28, 2011

Michelle QuinnSr. Vice President for AdministrationUniversity of Northern Colorado

MANAGING THE MONEY

Managing the Money? ...

We care about the money because we care about the mission.UNC President Kay Norton

Managing the Money! …

Four Key Questions*

• Are we achieving strategic and financial balance?

• What financial measures and reporting help us assess our effectiveness in fulfilling our mission?

• Are we demonstrating integrity in our financial management?

• What is our overall financial health?

* Strategic Financial Analysis for Higher Education: KPMG, Prager, Sealy & Co. LLC, Attain

Are we achieving strategic and financial balance?

• Making data-informed decisions

• Setting realistic strategic objectives given fiscal constraints

• Allocating resources in accordance with mission and priorities (connecting planning and budgeting)

University Finances are Complicated

State Funding19%

*Tuition On-Campus

32%

*Tuition Extended Campus5%

*Student Fees5%

*Academic & Technology Fees

2%

*Room & Board14%

Grants, Contracts,

Gifts9%

Pell, Loans6%

Retail , Athletic, Theater, Events

4%

Other1%

Parking, Rec, Health1%

Conferences, Catering1%

Capital1%

Revenue Sources

* Students 60%

Fiscal Constraints

FY 20

05-06

FY 20

06-07

FY 20

07-08

FY 20

08-09

FY 20

09-10

FY 20

10-11

FY 20

11-12

$0

$100,000,000

$200,000,000

$300,000,000

$400,000,000

$500,000,000

$600,000,000

$700,000,000

$800,000,000

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$555,289,004$602,028,183$652,927,495$555,289,004

$323,956,816

$615,315,617$519,040,694

$150,676,055

$382,008,243

$29,167,486$555,289,004

$602,028,183$652,927,495

$705,965,059$705,965,059$644,483,103

$519,040,694 $4,074

$4,487 $4,814 $5,065

$4,626

$4,044

$3,225

State Funding for Public Institutions of Higher Education

ARRA General FundTotal State Fund-ing per Resi-dent Stu-dent FTE

Stat

e Fu

ndin

g pe

r R

esid

ent

Stud

ent

FTE

FY12 UNC = $32.8

M

Strategic and Financial Balance

• Enrollment growth• Discounting• Student success and support

• Mission-driven, data-informed

• “profitability”

• Reality of personnel costs• Functions

• Instruction• Academic Support• Research• Public Service• Student Services• Institutional Support• Operation & Maintenance of Plant• Auxiliary

What financial measures and reporting help us assess our effectiveness in fulfilling our mission?Basic:• Budget with comparison to actual• Revenue• Expense• Departmental• Natural• Functional

• Full cost of programs

Measures based on financial policy

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Proportion of revenues related to:• Student instruction and support

• Main campus• Other locations• Online

• Grants and contracts• Housing, Dining• Retail and events

Percent of revenues invested in innovation

Percent of revenues invested in capitalLevel of reservesDiscounting tuition

Are we demonstrating integrity in our financial management?

• Reasonable and appropriate control of university assets

• Compliance with standards and regulations

• Using consistent principles of money management

What is our overall financial health?• The sufficiency of resources to achieve

our mission• Adequate flexibility in deploying

resources to achieve its mission• Effective management of assets and

liabilities (including liquidity)• Operating results (relationship of

revenues and expenses)

13

A little basic accounting, the balance sheet:

Assets -- Liabilities = Net Assets

House Mortgage Equity

CashAccounts Receivable

Buildings

BondsAccounts Payable

Fund Balance

A little basic accounting, the income statement:

Revenues (current year)-- Expenses (current

year)Change in Net Assets

+ Prior Year Cumulative Net Assets

Year End Net Assets ** Assets -- Liabilities = Net Assets

Composite Financial Index (CFI)

16

Calculation (UNC and Foundation Results)

Purpose

Primary Reserve Ratio

Expendable Net Assets Total Expenses

Measures resource sufficiency and flexibility by comparing expendable net assets (“equity” not tied up in capital or endowments) to total expenses.

Net Operating Revenues Ratio

Revenues - Expenses Revenues

Measures operating results by comparing net income (before capital and other) to total revenues. In lieu of a for-profit operating margin.

Return on Net Assets Ratio

Change in Net Assets

Total Net Assets

Measures economic return – operating results and management of assets and liabilities – by comparing “the bottom line” to total net assets (“equity”).

Viability Ratio Expendable Net Assets Long-Term Debt

Measures management of debt by comparing expendable net assets (“equity” not tied up in capital or endowments) to long-term debt.

Graphic Financial Profile CFI

17

Resource SufficiencyAre net assets (equity) sufficient compared to expenses?

Debt ManagementAre net assets (equity) sufficient compared to long-term debt?

Operating ResultsDo operating results indicate organization’s expenses are in alignment with revenues?

Asset Performance & ManagementAre our returns (operating & non-operating)appropriate compared to our net assets (equity)?

Budgets are only a small piece of managing the money

Budget ActualYear 1 - Groceries $6,000 $4,000Year 2 -- Groceries $5,000 $4,500Result Budget Cut of

$1,000Spent $500

More

We care about the money because we care about the mission