09
July
1998
|
18:00 PM
America/New_York
Trustees: Budget, ARMS, Investments
TRUSTEES APPROVE BUDGET FOR FISCAL YEAR
COLUMBUS -- The Ohio State University Board of Trustees on
Friday (7/10) approved the university's current funds budget for
fiscal year 1998-99. The board also authorized spending $10
million for continued implementation of the university's human
resources and financial computer systems, and examined university
investment policies.
Trustees approve fiscal year 1999 current funds budget
Trustees approved an operating budget for the 1998-99 fiscal
year, which began July 1, that focuses funding to enhance the
quality of the education and campus experience for students.
William J. Shkurti, vice president for finance, told
trustees that the three cornerstones of the budget are continuing
to improve the quality of academic programs, improving the
quality of the student experience inside and outside the
classroom, and strengthening the university's financial position
and promoting revenue growth.
The total university current funds budget -- which includes
general funds, earnings operations and restricted funding -- is
projected to increase by 6.4 percent from $1.64 billion to $1.75
billion.
The general funds operating budget is projected to increase
3.7 percent to $670 million, including a 2.6 percent increase, to
$305.5 million, in the state's instructional subsidy and a 4.8
percent increase, to $280.8 million, in student fees, which have
been adjusted slightly downward for enrollment declines partially
attributable to the impact of the economic crisis on the
university's Asian students. The budget plans a reserve of $1
million to ameliorate the impact of enrollment fluctuations.
The operating budget includes a $1.5 million reduction in
state subsidy from previously appropriated levels. Even so, the
budget represents the fourth consecutive year of budget stability
since achieving budget equilibrium in fiscal year 1995.
"During this period, significant funding increases have been
provided to support academic priorities," Shkurti said. "This
has been achieved in an environment where undergraduate tuition
has been capped by the state, federal funding interrupted and
enrollment, as planned, has continued to decline."
In addition to the subsidy cut and uncertainty about the
impact of the Asian economic crisis on enrollments, issues that
could present financial challenges to the university during the
coming year include uncertainty about primary and secondary
school funding in Ohio, growing market pressure to remain
competitive on faculty and staff salaries, and the university's
aggressive list of unmet needs and continuing commitments.
In accepting the budget, trustees approved a 2 percent
increase in general and instructional fees for resident
undergraduates on top of the 4 percent hike that was approved at
the June 5 meeting. State law requires that two votes take place
on tuition increases greater than 4 percent.
In keeping with past university practice, a portion of the
tuition increase will be set aside for student priorities,
including $500,000 in one-time funding for ResNet, a project
giving every student in every residence hall room (where 85
percent of new freshmen live) access to high-speed Internet
service. An additional $770,000 in continuing funding will be
spent on other student initiatives.
General fund expenses also will increase 3.7 percent to $670
million, including a 5.1 percent hike to $80.5 million, in the
amount of money that is returned to students in the form of
financial aid directly from the university. Unit budgets will
increase 3.7 percent to $501.9 million, which includes faculty,
staff and student salaries and benefits. Trustees approved in
May a 3.5 percent increase to the salary pool. Spending on
support of research will increase by an inflationary 4 percent to
$26.1 million and spending on new buildings and reducing deferred
maintenance of university assets will increase 4.6 percent to
$41.1 million.
Nearly $30 million in continuing funds and more than $10
million in one-time money will be spent on the university's
strategic priorities. During the fiscal year, a new $6.5 million
will be spent to directly improve academic quality, including
library acquisitions, research support, student recruitment, the
university's academic excellence, selective investment and summer
enrollment initiatives, and seeding an initiative in public
policy.
More than $7 million in new funding will go toward improving
the student experience, including increasing financial aid,
reducing the number of closed courses, adding new programming
from the Office of Student Affairs and improving retention,
student safety and technology. A total $26 million will be spent
on efforts that protect the university's assets and improve its
revenue growth. These efforts include maintaining compensation
levels, funding supplies and services, improving the physical
environment, complying with state and federal mandates, improving
administrative computing, developing distance education programs
and supporting development efforts to increase corporate and
individual giving to the university.
"Resources alone will not improve outcomes, but comparisons
with our benchmark institutions show that Ohio State needs to
strengthen and diversify its revenue base," Shkurti said. "The
key to financial growth is a quality academic program, an
energized research agenda and an improved student experience, so
that the recruitment and retention objectives that support a
strong enrollment base can be met."
Trustees OK spending on computing systems
Trustees authorized the expenditure of $10 million for
ongoing implementation of the Administrative Resources Management
System for human resources, general ledger and procurement
systems.
Although the ARMS human resources installation in August
1997 did not roll out as smoothly as hoped, many of the goals set
for the past year have been met, Larry Lewellen, acting vice
president for human resources, told trustees.
They include fine-tuning and implementation of a year-end
payroll accounting system, design and implementation of systems
for benefits open enrollment and annual salary budgeting, and
investigating opportunities to improve college and department
processes.
"The first year of implementation of any new system requires
an extraordinary amount of effort by everyone involved to work
out various conversion issues," Lewellen said. "Benefits are not
likely to be readily apparent until at least the second year of
operation."
During the next year, the Office of Human Resources will
continue to improve workflow and reporting functions for colleges
and departments, Lewellen said. Other areas for improvements
include timekeeping and re-evaluation of centralized and
decentralized system functions, he said.
Satisfaction with the ARMS software is mixed, said John
Ellinger, ARMS project director. "We've made some of our
customers' requested changes and we're making progress, but we
haven't been as successful for users as we wanted to be. It's
not a small task and we're continuing to work on it."
Ellinger said one aspect of the project benefiting the
university is that successful implementation of the human
resources and financial systems will address Year 2000 problems
for those areas.
Goals for financial systems -- procurement and general
ledger -- are on schedule, said William J. Shkurti, vice
president for finance. Both systems are still in the
implementation and training stages, with plans for procurement to
be up by January 1999 and general ledger in July 1999, a more
phased in approach that was suggested based on lessons learned
from the human resources implementation. Some central staff will
begin testing the financial systems this summer as a shadow
system to their current accounting methods. User training on
both systems will begin full scale during autumn quarter.
"At this point in the fiscal systems, we're incorportating
lessons we've learned from the human resources implementation
into the process," Ellinger said, including adjustments to time
lines, training and the method of implementing the systems.
"Delaying the implementation to the 1999 dates will cost the
university about $10 million but should result in more effective
implementation," Shkurti said. "Successful implementation will
continue to require major investment of staff and senior
leadership time during the next two years."
ARMS for procurement will replace the systems for
purchasing, accounts payable, equipment inventory and stores and
receiving with one system. The general ledger will replace the
FAS, the financial accounting system that has been the official
accounting record of the university since 1977.
One task for the coming year is to move toward integrating
the procurement system with University Hospital and Research
Foundation procurement systems, Shkurti said.
Goals for the general ledger system include resolving issues
concerning electronic workflow, reporting and usage, as well as
integrating with University Hospitals, Shkurti said.
User satisfaction is a priority for all the systems,
Ellinger said. "Our goal is to deliver a system with necessary
changes recommended by users to make a system that closely meets
the university's requirements," he said.
Other priorities include the degree to which work is
decentralized, the amount of customization of the systems,
security, training, archiving and identifying areas for savings
and funding continuing operating costs, Shkurti said.
The ongoing process will require funding for operating
costs, including software upgrades, even after systems are up and
running. "We need to continue to make improvements to reflect
the needs of users and the university," Ellinger said. "We do
not want to install a system and let it sit. As we move forward,
we need to keep these systems current to the university."
The project will continue to work through setbacks,
including personnel shortages. The high demand for skilled
computer programmers in Columbus' private sector has resulted in
difficulty in retaining technical personnel, which has cost
nearly $1.1 million above the original project budget. Highly
competitive salaries in the private sector have resulted in
approximately 30 percent turnover of the technical and support
staff who have taken private sector jobs.
Trustees hear reports and address investment issues
The university's endowment has reached an all-time high,
James L. Nichols, university treasurer, told trustees. The
endowment ended the 1998 fiscal year on June 30 at $927.8
million, up from $767.7 million a year ago. And that increase
has trustees and university officials smiling.
"The endowment should hit $1 billion by the end of this
fiscal year on June 30, 1999 -- a full year before the end of the
Affirm Thy Friendship capital campaign," Nichols said. "With
just a modest 8 percent increase -- not even counting all the new
gifts -- and we're there at $1 billion."
Nichols also discussed with trustees a proposed investment
policy that would allow the university to invest in equities and
bonds approximately $300 million in eligible operating funds in
order to enhance returns. Eligible funds would include deferred
gifts, self-insurance funds and budgets for auxiliary units that
are not needed for day-to-day operations. Trustees will vote on
the proposal in September.
Trustees also voted to approve the sale of commercial paper
to fund construction projects, making Ohio State the first
university in the state, public or private, to utilize the
funding mechanism. Commercial paper is sold much like short-term
notes. Bonds are sold when the funding needs for construction
meet a critical mass.
#
Contacts:William J. Shkurti, vice president for finance,
614-292-9232
James L. Nichols, university treasurer, 614-292-6261
Written by David Bhaerman, 614-292-8422,
and Susan Wittstock, 614-292-8419, University Communications.
