Higher education finance PPoint Project 2

Cheryl FoxEDU 647.90Dr. Gregory Nayor

HIGHER EDUCATION FINANCE AT STANFORD UNIVERSITY

Introduction

This presentation will discuss higher education finance at Stanford University. The first part will discuss the different types of budgets that exist

and how the budgets are developed. The middle will highlight the tools and applications

used in creating and maintaining the budgets as well as some factors influencing their makeup.

The final part will bring to light some social, political, and ethical concerns about budgets, as well as present a critique of the budget process.

History & Facts• Founded by Leland and Jane Lathrop Stanford in 1885• Opened on October 1, 1891 where tuition was free• Private• Co-educational – even when it first opened • Non-denominational – even when it first opened• Covers 8,180 acres and located in Stanford, California• 7 schools:• School of Earth Sciences• Graduate School of Business• School of Humanities and Sciences• School of Engineering• School of Medicine• Graduate School of Education• Stanford Law School • 1,651 undergraduate degrees-2014Figure 1. Stanford University Campus. U.S. News & World Report

http://colleges.usnews.rankingsandreviews.com/best-colleges/stanford-1305

(Stanford University. (n.d.). In Wikipedia.)(Stanford University. (2015). Stanford: Facts 2014-Academics)

Institutional Mission• “Its nature, that of a university with such seminaries of learning as shall make it of the highest grade, including mechanical institutes, museums, galleries of art, laboratories, and conservatories, together with all things necessary for the study of agriculture in all its branches, and for mechanical training, and the studies and exercises directed to the cultivation and enlargement of the mind;• Its object, to qualify its students for personal success, and direct usefulness in life;• And its purposes, to promote the public welfare by exercising an influence in behalf of humanity and civilization, teaching the blessings of liberty regulated by law, and inculcating love and reverence for the great principles of government as derived from the inalienable rights of man to life, liberty, and the pursuit of happiness”

(Stanford University. (2015). Stanford’s Mission)

Finance Department Organization/Structure

Figure 2. Stanford University Budget Office. This figure illustrates the UBO hierarchy. http://web.stanford.edu/dept/pres-provost/budget/misc/UBO%20Org%20Chart.pdf

University Budget Office (UBO) Mission• Lead the development & management of Consolidated Budget and

General Funds Budget of the university• Manage the resources available for university operating

expenditures• Assist staff in establishing, maintaining, and overseeing budgets • Including training• Develop and maintain systems that can support budget

development and reporting• Educate, guide, and report to internal and external constituents

about budgets and finances• Provide the annual budget plan• Perform recurring studies and one-time analyses

(Stanford University. (2015). University Budget Office Mission)

Budgets at Stanford• “Budget” - amalgamation of thousands of smaller budgets• Each smaller budget is created and managed by units which govern each of them• Primary control on local unit budgets is available funding• Big “budget” is overseen by Provost•Fiscal Year – September 1 ----> August 31•Decentralized structure at Stanford• Schools and other units are allowed freedom in creating/executing budgets

•Consolidated Operating Budget• General Funds Budget•Capital Funds Budget

(Stanford University. (2015). Budget Plan 2014/15)

Consolidated Operating Budget• Aggregate of all of Stanford’s smaller budgets• Revenues – • Student income• University-sponsored research• Health care services income• Expendable gifts• Investment income• Projected to exceed $5 billion in 2014/15 fiscal year• Expenses –• Salaries & benefits• Financial aid• Other operating expenses


General Funds Budget• Funds that can be used for any purpose• Supports many of the core academic & support functions of the

university• Half will cover:• Salaries• Benefits• Non-salary costs• Existing facility operating costs• Remainder will cover:• Compliance/Regulations• Security• Necessary administrative activities• 2014/2015 ~$1.25 billion


Capital Funds Budget• Investments for:• Energy facility• Parking structures• Maintenance projects• Housing projects• Building projects• Bass Biology Research Building• Business School Graduate Residences• Manzanita Undergraduate Dorm• New housing needs for faculty/staff/students in coming years• Accelerate efforts to move more non-academic &

administrative functions to satellite campus in Redwood City• ~$655.4 million projected in expenditures in 2014/15


Budget Process

Figure 3. Budget Process at Stanford University (per 2005). https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=4&cad=rja&uact=8&ved=0CDkQFjAD&url=http%3A%2F%2Fweb.stanford.edu%2Fdept%2Fpres-provost

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Budget Process (continued)

Figure 4. Annual Budget Cycle at Stanford University (per 2005). https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=4&cad=rja&uact=8&ved=0CDkQFjAD&url=http%3A%2F%2Fweb.stanford.edu%2Fdept%2Fpres-provost

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85076809,d.eXY

Projected Statement of Activities & GAAP• Stanford uses a fund approach to manage itself• Presents a Statement of

Activities• In accordance with GAAP

(generally accepted accounting principles)

• Summarizes all changes in net assets during year

• Four categories of funds:• Current funds• Endowment principle funds• Plant funds• Student loan funds

• Convert Consolidated Budget Statement of Activities• Eliminate fund transfers• Remove capital equipment purchases• Record depreciation expense for the

current year’s asset use• Adjust fringe benefit expenses• Reclassify financial aid• Adjust health care services• Adjust for internal investment

management expenses• Adjust for debt service• Eliminate net internal

revenue/expense• Include Stanford Sierra Camp• Eliminate hospital equity transfers


Tools & Applications Used in Budget Process• iBudgets(Stanford University. (2015). Overview: About the iBudgets Module of Oracle Financials)• Oracle Hyperion Financial Reporting(Stanford University. (2015). Overview: Oracle Financials Reporting)• Peoplesoft HRMS(Central Virginia Community College. (n.d.). What is PeopleSoft HRMS?)• Microsoft Excel & Access(Stanford University. (2015). Overview: Oracle Financials Reporting)

Factors Influencing Budgets• Enrollment numbers• Student income paid• Donations• Increasing healthcare costs / salary costs• Operating costs• Utilities, maintenance• Taxes/entitlements• Increase of financial aid to students• Increasing burden of compliance• Privacy costs• Affordability• Debt capacity


Social, Political, and Ethical Concerns• Obama’s free two-year college for all (Mangan, K. (2015). Obama Proposes Free Community College For Millions of Students)• Cost of tuition (Stanford University. (2015). Stanford: Facts 2014 – Administration & Finances)• Cost to give back to the community(Stanford School of Medicine. (2015). Emergency Medicine) (Stanford University. (2015). Online High School)• Faulty GAAP accounting practice(Weiler, H. N. (2010). Universities in Trouble)• Shady contractor deals

Critique & Analysis• Decentralization has positives/negatives•Dr. George S. McClellan – Indiana University• Positives/negatives (Hibel, A. (n.d.). Budgets in Higher Education)

• Positives outweigh negatives

Conclusion• Stanford University is a $5.1 billion enterprise• Decentralized method• Each unit creates/manages own budget• Two main budgets:• COFB• General Funds Budget• Overseen by University Budget Office• Capital Funds Budget• Unit budgets ----> Provost’s Budget Group• Provost makes final decision about General Funds• Many factors influence budget• Social, political, and ethical concerns should be considered

References• Central Virginia Community College. (n.d.). What is PeopleSoft HRMS? Retrieved from

http://www.cvcc.vccs.edu/Human%20Resources/Downloads/HRMS%20Training%20-%20Full-time%20Employees.pdf

• Harker, A. (2005). Discussion of Stanford University Budget Processes & Systems [Powerpoint Slides]. Retrieved from https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=4&cad=rja&uact=8&ved=0CDkQFjAD&url=http%3A%2F%2Fweb.stanford.edu%2Fdept%2Fpres-provost%2Fbudget%2Fhyperion%2FSU_Budget_Process_and_Systems_Presentation.ppt&ei=H2TNVKOCCNaQsQTZkYCwBQ&usg=AFQjCNHDpkkjq53aQ56uskyzV37lTecJJg&bvm=bv.85076809,d.eXY

• Hibel, A. (n.d.). Budgets in Higher Education – The Keys to Successful Financial Management. Retrieved from http://www.higheredjobs.com/HigherEdCareers/interviews.cfm?ID=445

• Mangan, K. (2015). Obama Proposes Free Community College For Millions of Students. Retrieved from http://chronicle.com/article/Obama-Proposes-Free-Community/151097/

• Stanford School of Medicine. (2015). Emergency Medicine. Retrieved from http://emed.stanford.edu/donate/

• Stanford University. (2015). Budget Plan 2014/15. Retrieved from http://web.stanford.edu/dept/pres-provost/budget/plans/BudgetBookFY15.pdf

• Stanford University. (n.d.). In Wikipedia. Retrieved January 30, 2015, from http://en.wikipedia.org/wiki/Stanford_University

References (continued)• Stanford University. (2015). Online High School. Retrieved from https://ohs.stanford.edu/• Stanford University. (2015). Overview: About the iBudgets Module of Oracle Financials.

Retrieved from http://web.stanford.edu/group/fms/fingate/staff/fundsmgmt/about_iBugets.html

• Stanford Unversity. (2015). Overview: Oracle Financials Reporting. Retrieved from http://web.stanford.edu/group/fms/fingate/staff/finreporting/oracle.html

• Stanford University. (2015). Stanford: Facts 2014 - Academics. Retrieved from http://facts.stanford.edu/academics/undergraduate-profile

• Stanford University. (2015). Stanford: Facts 2014 – Administration & Finances. Retrieved from http://facts.stanford.edu/administration/finances

• Stanford University. (2015). Stanford University: University Budget Office Mission. Retrieved from http://web.stanford.edu/dept/pres-provost/budget/mission/

• Stanford University. (2015). Stanford’s Mission. Retrieved from http://exploredegrees.stanford.edu/stanfordsmission/#text

• Stanford University. (2015). UBO Organizational Chart. Retrieved from http://web.stanford.edu/dept/pres-provost/budget/misc/UBO%20Org%20Chart.pdf

• U.S. News & World Report. (2015). Stanford University [Photograph]. Retrieved from http://colleges.usnews.rankingsandreviews.com/best-colleges/stanford-1305

• Weiler, H. N. (2010). Universities in Trouble: The Current Crisis in American Higher Education. Retrieved fromhttp://web.stanford.edu/~weiler/Texts10/HSoG_Stanford_Talk.pdf

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Higher education finance PPoint Project 2