Defining New Defining New Standards for Standards for Financial Financial Management Management

University of Missouri – Kansas University of Missouri – Kansas City Presentation to the Faculty City Presentation to the Faculty SenateSenate

January 15, 2002January 15, 2002

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Future Budget Picture Future Budget Picture at UMKCat UMKC

Year 1 Year 2 Year 3 Year 4

Year 5 2001 - 2002 2002 - 2003 2003 - 2004 2004 - 2005 2005 - 2006

Financial Financial FinancialUnderstanding Viability Freedom

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RealityReality

Recession - Serious cuts in Recession - Serious cuts in public higher education in 44 public higher education in 44 StatesStates

Missouri tax structureMissouri tax structure Change in the way we are Change in the way we are

handling financial handling financial management management

Items remain as cost funded Items remain as cost funded centrally without a permanent centrally without a permanent (rate) revenue source(rate) revenue source

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““The true test of The true test of leadership is the leadership is the

capacity to tell the capacity to tell the hard truths”hard truths”

Jeff Bezos

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“People are always blaming their circumstances for what they are.

I don’t believe in circumstances.

The people who get on in this world are the people who get up and look for the circumstances

they want, and if they can’t find them, make them.”

George Bernard Shaw

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This is This is Us Us & &

We Are the We Are the LEADERSLEADERS

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The Facts:The Facts:

Ending Cash Balance Requirement: Ending Cash Balance Requirement: Curators require a Curators require a minimumminimum of of

a 5% cash balance at the end a 5% cash balance at the end of the year (FY 2002 Budget - of the year (FY 2002 Budget - $8.4 million)$8.4 million)

Our Goal is to have an ending Our Goal is to have an ending cash balance of at least cash balance of at least 6.0% of 6.0% of our annual revenues or $10.0 our annual revenues or $10.0 millionmillion

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The Facts:The Facts:Current Budget ConstraintsCurrent Budget Constraints

Original Budget was based on Original Budget was based on only 97% of the approved State only 97% of the approved State Appropriation of moniesAppropriation of monies

Added Revenue Cuts - $5.12 Added Revenue Cuts - $5.12 millionmilliono July 2001 - $3.5 million (5.0% July 2001 - $3.5 million (5.0%

withholding)withholding)o January 2002 - $1.65 million loss in state January 2002 - $1.65 million loss in state

appropriation which appropriation which now requires added now requires added reallocationsreallocations

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The Facts:The Facts:Unfunded Commitments & Requests Unfunded Commitments & Requests

FY 2002 Budget included a centrally FY 2002 Budget included a centrally held reserve of $8.7 million to fund held reserve of $8.7 million to fund various “known” program various “known” program commitments – YTD tallying of these commitments – YTD tallying of these off-budgeted items totals over $14.6 off-budgeted items totals over $14.6 millionmillion

As a result, there are $8.64 million As a result, there are $8.64 million in program commitments do not in program commitments do not have current permanent revenues to have current permanent revenues to cover expenses – cover expenses – Need for Need for ReallocationReallocation

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The Facts:The Facts:

““Some” Some” Good NewsGood News

Estimated $2.0 million growth Estimated $2.0 million growth in budget revenues in in budget revenues in Education Fees from what was Education Fees from what was originally projectedoriginally projected

Centrally budgeted Centrally budgeted contingency reserve has a contingency reserve has a balance of $2.94 millionbalance of $2.94 million

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The Facts:The Facts:Recap Mid- Year Budget:Recap Mid- Year Budget:

+ + $ 2.00 million $ 2.00 million Education fees Education fees++ $ 2.94 million $ 2.94 million Central reserve Central reserve- - $ (8.64) million $ (8.64) million Unfunded program Unfunded program

commitments commitments - - $ (1.65) million$ (1.65) million Mid-year withholding Mid-year withholding

- - $ (2.26) million $ (2.26) million Shortfall in ending Shortfall in ending cash cash balance target balance target

______________________________Total $ (7.61) million Total $ (7.61) million Reallocations or Reallocations or

reductions neededreductions needed

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The Facts:The Facts:Looking at FY 2003 Budget :Looking at FY 2003 Budget : Additional 5.0% cut in State Additional 5.0% cut in State

funding which means $4.3 funding which means $4.3 million in less revenuesmillion in less revenues

Probable increase of 8.0% in Probable increase of 8.0% in Education Fees or $5.6 million in Education Fees or $5.6 million in added revenuesadded revenues

More than $8.0 million in new More than $8.0 million in new and added department programand added department program spending requests and initiativesspending requests and initiatives

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UMKC TOTAL UMKC TOTAL ANNUAL BUDGET ALL FUNDSANNUAL BUDGET ALL FUNDS

REVISED 2002 BUDGETREVISED 2002 BUDGET$239,238,866

General Operating Fund Revenues $168,821,365

Fees - $77.2 million46%

State - $81.4 million48%

Other - $10.26%

Total FY 2002 RevenuesAll Funds - $239,238,866

Designated - $21.7 million

9%

Operating - $168.8 million

72%

Restricted - $45.6 million

19%

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The Opportunity: The Opportunity: Lead as Defining New Lead as Defining New

StandardsStandards Say what is so out loud Say what is so out loud

(integrity and candidness)(integrity and candidness) CollaborateCollaborate Stick with the valuesStick with the values Support each otherSupport each other

  

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The The Opportunity: Opportunity:

Lead as Defining Lead as Defining New New StandardsStandards• We are campus leaders• Encourage your colleagues to

participate –– Campus meetings– Unit meetings

• Be constructive• Think creatively• Remember UMKC’s vision and values

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The Opportunity: The Opportunity: Lead as Defining New Lead as Defining New

StandardsStandards   Great leadership because we Great leadership because we

dealt with the circumstances, dealt with the circumstances, not because we got the not because we got the circumstances we wanted. circumstances we wanted.

Great leadership because we Great leadership because we created the future we wanted in created the future we wanted in our vision- we did not go into our vision- we did not go into survival and move to mediocritysurvival and move to mediocrity

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Looking Back 3 Months Looking Back 3 Months from Now – What is from Now – What is

Possible?Possible?• We did not lose sight of our values in the We did not lose sight of our values in the

face of adversityface of adversity• We stuck with our vision in the face of We stuck with our vision in the face of

adversityadversity• We collaborated to find solutionsWe collaborated to find solutions• The organization will emerge strongerThe organization will emerge stronger• The predictable (turf and “hunkering down”) The predictable (turf and “hunkering down”)

did not happendid not happen• We engaged the collective wisdom effectivelyWe engaged the collective wisdom effectively• We reallocated the $7.6 million and we see We reallocated the $7.6 million and we see

more opportunities for the futuremore opportunities for the future

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Next Steps:Next Steps:Budget Planning:Budget Planning:

oWe need to ask ourselves: We need to ask ourselves: •What options are available for short and long term budget efficiencies?

•What options are available for revenue enhancements?

•What options available to save money?

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Next Steps:Next Steps:

Budget Planning:Budget Planning: Gain a better understanding of our

budgets – Budget staff committed to meet with each of us to gain a better understand the issues facing each of our units

Questions we need to think about:1. What revenue sources do you have

available beyond the general operating budget?

2. How do your expenditures year-to-date compare with the original budget projections

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Next Steps:Next Steps:

Budget Planning:Budget Planning:oWe need to engage We need to engage ourselves in owning the ourselves in owning the issue and the solutionsissue and the solutions

oNeed for other meetings Need for other meetings and faculty involvement?and faculty involvement?

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Design of Collaborative Design of Collaborative ProcessProcess

Four Guiding PrincipalFour Guiding PrincipalA.A. Stick with the vision and values (these came Stick with the vision and values (these came

from the grassroots of this organization)from the grassroots of this organization)

B.B. Avoid "silo only" conversing which often leads to Avoid "silo only" conversing which often leads to entrenchment and a set up for failureentrenchment and a set up for failure

C.C. Executive Cabinet places high value on Executive Cabinet places high value on unit level unit level Authority Authority and and ResponsibilityResponsibility

D.D. Take a Five Year Perspective – We need to Take a Five Year Perspective – We need to strategically realign our priorities within the strategically realign our priorities within the availability of fundsavailability of funds

Defining New Defining New Standards for Standards for Financial Financial Management Management

University of Missouri – Kansas University of Missouri – Kansas City Presentation to the Faculty City Presentation to the Faculty SenateSenate

January 15, 2002January 15, 2002