From the CFO: The Colors of Money
As we continue our efforts to get back to basics with our financial and operational management at UCF, we have added an element around campus engagement. Either myself, members of my team, or subject matter experts on campus have shared key themes that underpin our financial operations with colleagues and students. In recent meetings, we have described the university’s funding categories as the “colors of money.”
It was a revelation for some and a reminder for others. As we move forward with our change management efforts, it is prudent to use this month’s CFO update to share information.
The university’s budget for fiscal year 2022 is approximately $2.2 billion. However, when this total is categorized into the different “colors of money” it creates a dynamic view of our operations and provides insight into why certain units and divisions may operate in different ways despite being “One UCF “.
The budget is categorized as follows:
- Local funds: $839 million
- Education and general (main campus): $654 million
- Contracts and grants: $320 million
- Ancillary businesses: $306 million
- Education and General (College of Medicine): $47 million
- Education and General (FCSUA): $9 million
- Faculty Practice Plan: $8 million
Local funds are our main source of funding. It includes several departments and usage restrictions. Approximately $728 million or 87% of the total is for all sources of student financial aid. This includes Title IV, Bright Futures, scholarships, and state-mandated tuition and fee waivers. Student athletic fees are the second largest component at $74 million or 9%. They cover all sports-related activities that students are allowed to participate in and attend here on campus. The student activity fee is the third largest amount at $20 million or 2.3%. This fee covers student government operations and other student-related activities.
Other local funds of an intangible nature are technology fees and campus concessions (vending machines). These amounts are generally less than 2% of the total allocation of local funds in the budget.
Education and General (Main Campus) provides the financing necessary to carry out our operations. They are limited to operating activities for educational purposes, including general education, research, public service, operation and maintenance of factories, student services, libraries, administrative support and d other registration-related operations. These funds cannot be used for other purposes. They are made up of funds from student tuition and fees and state appropriations (general revenue and lottery). Unspent E&G funds are transferred to ‘carry-over’ at the end of each year, and are no longer eligible for recurring expenditures. They can be used for “one-time” expenses that are not recurring (for example, a special educational project).
Contracts and grants are funds generally limited by their purpose and duration (in the case of private grants). Most of the university’s research activities are funded under this income category each year. The Office of Research oversees the administration of these funds and works with faculty, staff, and researchers to ensure that they are spent within guidelines established by federal, state, and private entities. These funds cannot be used for our general operations.
Auxiliary companies are the “commercial” functions of the university. They generate their own income and expenses through entrepreneurial activities. Library, housing, parking and transportation, and catering are all examples. These funds are not used for educational and general operations; however, they pay fees to central functions for services performed on their behalf for payroll, accounts payable, custodial services, etc. They are formed with the intention of supporting the university, but in cases where debt-financed activities have taken place, their “net” is restricted and remains in their operations. For example, housing has a debt on some of our halls of residence, all housing activities remain with housing until the bonds are paid off.
Education and General (College of Medicine) is like the education and general funds for the main campus. The basic operations of the Lake Nona facilities are covered annually by this category of funding.
Education and General for FCUSA (Florida Center for Students with Unique Abilities) follows the same rules and regulations as Education and General for Main Campus and Medical College. The main programmatic expenses of this program are scholarships for deserving students.
A fundamental principle that we must understand is that these different colors of money, together with their restrictions by state law and donor restrictions, must be followed at all times. Therefore, function costs will fall into one of these categories. As we continue to examine the efforts around Knight Vision (WorkDay, Adaptive Planning, and SET), we can see the connection between ensuring resource allocation is prudent and impactful. We also need to ensure that when building future budgets, we try to reduce duplication of effort, eliminate redundancy in our systems, and simultaneously try to find new revenue streams that provide greater flexibility. . The revenue streams that will give us the most flexibility are unrestricted fundraising and larger net operations from ancillary revenue.
This budget categorization does not include our Direct Supporting Organizations (DSOs). We will cover these in a later update as we continue our efforts to educate the campus about our operations.
In next month’s article, we’ll talk about the new budget model and how it brings greater transparency to our budget process, while providing insight into resource allocations going forward.
CFO Gerald Hector and members of his team will host “The Colors of Money,” the next installment in his “Dollars and $ense” webinar series, on March 4 from noon to 1:30 p.m. The webinar is open to everyone and can be joined here: ucf.zoom.us/s/94250566243.