Meeting Minutes
Budget and Finance University Policy Committee
Meeting Minutes: May 21, 2003
Members Present
Marjorie Beane
Larry Fortuna
John Frendreis
Cindy Gonye
Bill Laird (Chair)
Tassos Malliari
Tim McGuriman
Policy Committee Overview/Roles and Expectations of UPC provided a brief overview of some of the expectations and
responsibilities for this committee, including
Create School level Profit & Loss statements
Reconsider contract review policy
Review University budget assumptions
This committee will also likely consider issues associated with
changing from the defined benefit plan to a defined contribution plan.
Work from other policy councils will flow through the Budget and Finance UPC
so that councils are working together and not creating policies independent
of one another. The BRT will continue to function to deal with the budget
details while the UPC will deal with policies.
In order to test each policy, due diligence will be achieved through
consultation with members of the University community affected by any
policy. Each committee chair will choose the best method of communication.
Each policy will be presented to the President for approval, after review by
the council and a sampling of those impacted.
Each council will meet as needed
University Contract Policy>
Tim McGuriman provided a brief history of the current contract policy.
Drafted and enacted in 2001, the current policy replaced a 1999 policy that
often created conflicts as it allowed for a broad delegation of signing
authority. The new policy limits signing authority to the VP level,
followed by a review of the contract terms by the Finance Division, General
Counsel and Risk Management. Exceptions are provided for those familiar
with contracts. However, detailed reviews of routine contracts caused
backlogs, leading to attempts by departments to circumvent the policy by
using purchase orders in lieu of a contract or ignoring the policy all
together. The current policy is also not enforceable as a VP may choose to
disregard Finance, General Counsel or Risk Management reviews.
At the request of the VPs, a focus group has been convened to draft a new
policy taking into account the reasonableness of review, i.e. does Finance
need to review contracts without financial terms, as well as the scope and
nature of business activities.
Bill Laird suggested that a policy on authority to commit University
resources should precede a contract policy. Currently only projects with a
cost greater than $3m require approval by the Board of Trustees. It was
suggested that an index of standard contracts could be posted on the web and
a policy to deal with exceptions to those standard forms could be developed.
Bill advised that the Carnegie Mellon website contains examples for standard
contracts. Tim McGuriman offered to work with General Counsel and Risk
Management on developing some standard contract forms.
Action Steps
Define authority to commit policy
Review Standard contracts; Get input from Legal, Finance and Risk
Management
Determine dollar limit required for review
Address issue of one year versus multi-year contracts
Get input from common contract users
Consider possible training program for contract signors.
P & L's
Pete explained that school level profit and loss statements would be created
for Deans' use as a way to encourage more management responsibility and hold
Deans and VPs to clear budget targets and have them share in University
gains and losses while decentralizing authority and responsibility.
Kay Geary distributed a handout on the Tuition Revenue and Financial Aid
allocation Process, the purpose of which is to assist in financial planning
and better match revenue and expenses. The current tuition methodology has
tuition recorded in the student's home college and academic fees recorded in
the department teaching the class. 75% of institutional aid is recorded in
a central pool while 25% goes to a specific school. Financial aid from
grants, gifts and endowments 8% of the total aid given recorded in both the
pool and by school or department.
The new tuition allocation would have the net revenue following the student,
allocating tuition and academic fees to the department in which the courses
are taught, with financial aid allocated across the institution as a
reduction of tuition revenue. The new undergraduate tuition allocation
formula divides the total undergraduate tuition by total credit hours
enrolled to determine the cost per credit hour. The allocation to
department is equal to the cost per credit hour multiplied by the number of
credit hours by class. The undergraduate financial aid follows tuition
revenue using the same formula.
The new graduate tuition allocation formula divides the total tuition paid
by the total hours enrolled for the cost per credit hour and the cost per
credit hour multiplied by the credit hours per class for the allocation to
department. Graduate financial aid will be charged directly to the
accounting unit of the student's graduate program. This formula includes
discounts though by charging lower rates, the grad discount will eventually
be eliminated.
Exclusions from the allocation process include aid from grants, endowments
and gifts as well as aid for housing, board and books. Summer and
"May"-mester tuition will be credited to the department teaching the
courses.
Bill suggested that a formal auxiliary and recharge center policy is needed
to identify department classifications in order to fully cost out
operations. The establishment of a central bank will help with the
distribution of funds for unbudgeted projects that may arise during the
year. Revenue to expense ratio calculations will be used for management
This product will be initially kept outside of the general ledger system to
control as a study. FY 2004 numbers will be used to represent a balanced
budget. A blended rate will be used for communication purposes and
aggregate by discipline structure. The Rome Center will be kept separate.
Next meeting: Wednesday, June 18, 2003 2:00 - 4:00 p.m. 25 E. Pearson, Rm
713