Structure and Reporting
Yes. Income statements include all departments within a college or school.
Please note the strategic budget model stops at the college or school level and does not apply at the departmental level. It is possible that deans could elect to follow similar principles in establishing departmental budgets, but the University-level budget model would not require this.
Division 3 and 4 revenues and expenses that are attributable to a specific college or school through Auburn’s chart of accounts appear next to, but separate from, the college or school’s Division 1 funds. Revenues and expenses for Divisions 3 and 4 that cannot be attributed to a specific college or school appear within units titled “Division 3” and “Division 4.”
It is important to show all divisions within the model to ensure strategic direction and commitments are established with full, true understanding of all funds at Auburn University. A model that did not include all funds would limit the University’s ability to make optimal decisions and would hinder transparency. Incorporating all divisions improves the accuracy and transparency of the model and creates an opportunity to educate the campus community about the various components that make up Auburn University (Auburn campus, Montgomery campus, the Agricultural Experiment Station, and the Cooperative Extension System).
While accuracy and transparency are best served by including all divisions in the representation of Auburn’s funds, this inclusion does not imply that divisional funds will be reallocated or made liable to an assessment within the model.
Tuition and Reporting
Budgeted gross tuition is allocated based on each unit’s percentage share of credit-hour activity in the most recently completed full year. To illustrate: When preparing the FY2017 budget in the spring and summer of 2016, the academic year 2015-2016 will not yet be complete. Therefore, we will use credit-hour data for Fall 2014, Spring 2015, and Summer 2015 to determine each college/school's percentage share of budgeted gross tuition.
No, however, budgeted gross tuition revenue is pooled and allocated according to applicable formulas by residency on each college’s income statement.
“Aid” comprises undergraduate and graduate financial aid and scholarships, not including pass-through items such as federally awarded financial aid; “Waivers” are foregone gross undergraduate and graduate tuition. The “allocation” of both aid and waivers relates to the distribution of such via applicable formula and relates to awards made at an institutional level. The “direct” assessment of both aid and waivers relates to college/school-awarded aid and waivers for both undergraduate and graduate students.
Tuition from approved graduate-level programs and online undergraduate completer programs with a unique fee structure will flow directly to the unit generating the revenue as a direct Distance Learning Fee. All other distance education credit hours will be included in the appropriate tuition pool (undergraduate, graduate, resident, non-resident) for allocation.
Yes
Tuition will flow directly to the unit generating the revenue as a direct Distance Learning Fee. Any contractual payments to third parties will be paid by the applicable college pursuant to the contract.
The historical $8/credit hour distribution is included in the allocation of gross tuition. There will not be a separate allocation.
The funding for employee tuition benefit is included in the calculation of the federally negotiated fixed fringe benefit rate. When an employee takes advantage of the tuition benefit, the associated waiver is applied to the AU Fixed Fringe Fund rather than the college/school.
Graduate students do not pay a fixed price for tuition. All students pay a per-hour tuition rate. The per-semester rate is capped at 12 hours and 9 hours for undergraduate and graduate students, respectively.
Other Revenues
Each school or college varies in its dependency on tuition and state appropriation allocations compared to direct revenues received from other sources. The Strategic Budget Model does not take into account the level of dependency as this could be the result of years of potentially misaligned funding. Instead, it aims at educating Auburn University on the amount of additional resources needed to continue operations and creates a Mission Enhancement Fund, a pool of resources maintained by Senior Leadership, to address issues related to additional funding needs.
Scholarship revenue processed by the Auburn University Foundation in one-time or annual gifts are reflected in the Gifts & Private Support Revenue. Scholarship revenue from endowment earnings is a component of Investment Income Revenue.
Variances from budget are possible in any revenue category. However, because of revenue stabilization measures taken by the State of Alabama, it is unlikely that actual state appropriations received would vary by a substantial amount from the amount budgeted. Actual tuition revenue received could vary from budgeted amounts for reasons such as over- or underestimating enrollment and credit-hour generation, improving or worsening retention rates, or changes in course offerings.
Distribution of license and royalty revenue is contractual and will not change under the Strategic Budget model.
Rate structures for service centers should be computed as follows:
- The rate charged to internal users must be based on incurred cost and is not reflected as a revenue, hence there is no Mission Enhancement Fund participation rate charged.
- Rates for external users should recover all costs, including the participation rate for the Mission Enhancement Fund and may also reflect market rates. There is no ceiling for rates to external customers.
Indirect Cost Recovery Revenue will be programmatically distributed to the Principal Investigator's colleges/school.
Personnel Expenditures
All salary enhancement programs will be administered institutionally. Since virtually all revenues are distributed to the colleges and schools, all salary enhancements (permanent or one-time) must be funded by the colleges and schools. Allocations of “base budget” from central pools will no longer occur. Salary enhancements (permanent or one-time) for central unit employees will be incrementally included in the unit’s proposed budget and funded by the colleges/schools based on the allocation variable for the cost pool.
All units (colleges/schools and administrative units) should apply raise guidelines uniformly.
No central pool of funding will be held back for increases in compensation associated with job family promotion, academic rank promotion, matching professorships, merit increases, mandatory fixed fringe benefit rate changes, or one-time salary supplements. All compensation increases will be funded from revenues available to the employee’s college, school or administrative office.
Central Unit Allocations
The faculty and staff headcount figure includes the following types of employees (as reported by the Office of Institutional Research and Assessment):
- Clerical and Secretarial
- Executive/Admin and Managerial
- Faculty
- Instruction/Research Assistants
- Other (student assistants and work-study students)
- Other Administrative
- Other Professionals
- Service/Maintenance
- Skilled Crafts
- Technical and Paraprofessional
For purposes of calculating headcount, each employee represents a headcount of 1.
Within the Campus Planning and Space Management system, general purpose classrooms are assigned to the Office of the Provost.
Like all other features of the strategic budgeting methodology, the central unit allocation variables were selected through a process of extensive study, comparison with peer institutions, and discussion with campus representatives. In general, the allocation variables were selected to balance simplicity and reliability with fit to actual use of administrative services.
The allocation variable for the Facilities central unit cost pool is adjusted square footage, which is based on the annual space survey and includes only space maintained by the AU Facilities Division.
While a college or school may find it feasible or desirable to duplicate, customize, or extend central support services provided by the University, such as information technology support, ultimate responsibility for that function (including maintenance, upgrade, and compliance) lies with central administration. For that reason, no college or school is exempt from contributing to the central units.
All central units will prepare their budgets consistent with resources needed to continue to provide current service offerings to the campus community. For the Facilities Division, any routine and preventative maintenance services that are provided today without additional charge, will likely continue to be provided without any additional cost. Other services may be provided on a fee-for-service basis. Capital projects are excluded from the Strategic Budget model. Allocation of Facilities support costs was done on a simple adjusted square footage basis in keeping with the Strategic Budgeting Steering Committee's guiding principle of simplicity and transparency. The use of square footage is the allocation method to fund the budget for the Facilities Division and not an assessment of the quality or market value of the space.
Expenses associated with providing central support for sponsored-program activity are allocated just like all other central support costs—in a way that logically reflects approximate use of those services by each college or school. For that reason, colleges and schools with greater levels of sponsored activity will provide proportionately more funding to that central pool. However, an increase in sponsored-program expenditures does not necessarily result in an increase in cost to the revenue-producing unit, since the cost pool is allocated by proportionate-shares, not dollars. A unit could increase its sponsored-program expenditures and still pay a smaller share of the allocation for this central support service if other units also increase their levels of expenditure. Further, other elements of the Strategic Budget model approach provide an incentive to participate in sponsored activities. For example, a share of the Division I state appropriation is set aside to reward sponsored program success.
Mission Enhancement Fund
The Strategic Budgeting Initiative is designed to advance the University’s strategic goals. While consideration was given to including in outcome measures such as college-level graduation rates or degrees awarded in the budget model itself, doing so would have increased model complexity and could have led to unintended consequences. Hence, the proposed model incentivizes activities such as generating credit-hours, enrolling and advising students, and conducting sponsored programs that should be associated with the accomplishment of these other strategic goals.
(For purposes of answering this question – “present funding shortfalls” is defined as the difference between resources needed and resources provided to fulfill a college or school’s mission.)
One of the principal problems that Auburn’s Strategic Budgeting Model is designed to solve is potential funding shortfalls and inequities that have resulted from years of incremental budgeting. However, the approach being taken does not attempt to define the “right” amount of resources needed to fulfill each unit’s mission. Instead, the creation of a Mission Enhancement Fund, a central pool of resources for Senior Leadership, is being created so that a discussion can be held to identify where additional resources should be allocated to support mission-critical activities.
The Mission Enhancement Fund does not contain a pool of funding explicitly committed to major equipment purchases, but if the budget development process identifies such purchases as a strategic investment for the University’s benefit, funding could be committed for this purpose. It is likely that funds to purchase major equipment specific to any one college or school will need to be identified from unit reserves or from sponsors, though support from the Mission Enhancement Fund is not ruled out.
One-time, annual and endowed gifts, as well as other sources of revenue processed by the Auburn University Foundation or the Office of Sponsored Programs and classified as restricted are NOT subject to the participation rate for the Mission Enhancement Fund.
Other
The Strategic Budget Model does not use credit hour weights. Accounting for differences in the cost of instruction across colleges and schools was an important consideration for the Steering Committee as it reviewed how tuition revenues could be allocated in an incentive-based budget model. However, using weighted credit hours to allocate revenues is just one of several ways to address this concern. While using weights would direct additional funding to colleges and schools with higher instructional costs, it would also inherently distort the University’s understanding of revenue within the model by representing it in a way that is not consistent with how the revenue is actually generated. Further, schemes for establishing and maintaining credit-hour weights are complex and controversial, detracting from the simplicity and utility of any model in which they are used. The proposed alternative to weighted credit hours is the use of the Mission Enhancement Fund, a pool of resources maintained by Senior Leadership, to address issues related to differences in cost of instruction.
Since the purpose of the Strategic Budgeting Initiative is to align the University’s resources with its mission and priorities, an Auburn budget model must not deprive mission-critical, yet costly programs, of adequate support to meet their costs of instruction. Assuring this support is a primary reason for the creation of Mission Enhancement Funds.
The Strategic Budget Model recognizes funds as either restricted or unrestricted. This distinction recognizes the inherent legal conditions associated with the funds and is accessible through the University’s chart of accounts. While individuals may consider they have “committed” certain unrestricted funds for a specific purpose, this intention does not alter the legal status of the funds themselves. Such funds are “committed” after they are received, and their association with a specific purpose is not accessible through Banner.
In the interest of maintaining a concise, understandable presentation, several types of expenses have been combined into the “Other Operating Expenses” line of the income statement. These expenses vary and are generally not material enough to be shown as individual expense lines across all colleges and schools. Representative examples of “Other Operating Expenses” include special lab and classroom supplies, guest and conference meals, special publications, insurance premiums, postage, and other general administrative expenses.
If a detailed list of Banner account codes is desired, please work with your local budget officer for additional details.
Existing reserve balances of colleges and schools will not be affected with implementation of the Strategic Budget model. Additionally, schools and colleges will continue to have opportunities to accrue reserves by realizing more revenue than was budgeted or decreasing expenditures. There is no plan to reduce commitments from the Mission Enhancement Fund if a college or school is able to improve its budgeted position in any one year. Conversely, negative variances from budget in net revenue may require the use of unit reserves during the fiscal year. Uncommitted reserves may be a factor in determining strategic allocations from the Mission Enhancement Fund.
Existing reserve balances of administrative units will not be affected with implementation of the Strategic Budget model. Uncommitted reserve balances may be a factor in the Central Unit Allocations Committee's review of a central unit’s budget request. Once central unit budgets are finalized, any over or underspending will be reflected in the reserve balance in the unit.
Under the Strategic Budget model, budgets are developed for the full fiscal year. A separate “summer budget” will no longer be required. Revenue will be distributed in each academic semester (fall, spring, summer). Funds needed to compensate nine-month faculty who are additionally compensated in the summer semester should be included in the personnel budget.
The proposed budgeting methodology is the result of extensive planning, consultation, and discussion, including examination of similar initiatives at peer universities. It is important that this methodology remain unchanged for a period of time to ensure consistent reporting and planning from year to year. One charge of the University Budget Advisory Committee will be to commission a full assessment of the methodology after five years and make recommendations for any changes. Meanwhile, the methodology allows the University’s senior leadership sufficient flexibility to adapt to emerging trends.
All three governance committees have been structured to ensure the broad representation envisioned for all University committees.
In itself, the new resource allocation methodology neither encourages nor discourages interdisciplinary research and teaching. Sponsored-program activity earns direct revenue, indirect cost recovery, and a share of the Division I state appropriation whether it focuses on a disciplinary research question or an interdisciplinary one. Interdisciplinary teaching would be restrained by the new resource allocation methodology if, and only if, the academic schools and colleges failed to identify opportunities for collaboration and resource sharing. Compelling interdisciplinary initiatives will also be eligible for strategic investment from the Mission Enhancement Fund.
