SU_Budget_Process_and_Systems_Presentation - Stanford University

Discussion of Stanford University Budget

Process & Systems

September 6, 2005September 6, 2005

Dr. Andrew Harker

Director of Budget Management

[email protected]

650.725.0666

Outline

• Stanford Financial OverviewStanford Financial Overview

• Stanford Financial ManagementStanford Financial Management

• Changing Role of the “Budget”Changing Role of the “Budget”

• Financial Information SystemsFinancial Information Systems

• Budget Monitoring/Variance ReportingBudget Monitoring/Variance Reporting

• Demonstration of SystemsDemonstration of Systems

Financial Overview

• Fiscal Year: September – AugustFiscal Year: September – August

• In addition to the University:In addition to the University:– Two HospitalsTwo Hospitals– Limited Liability Corporation(s)Limited Liability Corporation(s)

• Financial data presented both in GAAP and Financial data presented both in GAAP and “Fund Accounting” formats“Fund Accounting” formats

• The following are some of the ways we look The following are some of the ways we look at/present financial information:at/present financial information:

2005/06 Consolidated Budget by Line Item

$ in millions2004/05

2003/04 Projected 2005/06 PercentActuals Actuals Forecast Increase

460.5 496.5 Student Income 513.3 3.4%923.5 1,003.0 Sponsored Research 1,086.1 8.3%243.6 256.4 Health Care Services 295.4 15.2%103.8 125.0 Expendable Gifts 130.0 4.0%477.3 529.9 Investment Income 584.2 10.2%251.1 255.8 Other Income 263.4 3.0%

43.5 50.0 Net Assets Released 50.0 0.0%2,503.3 2,716.6 Total Revenues 2,922.4 7.6%

1,294.1 1,393.1 Salaries and Benefits 1,474.4 5.8%233.8 263.0 SLAC 318.0 20.9%128.0 135.2 Financial Aid 142.0 5.0%803.9 855.4 Other Operating Expenses 888.7 3.9%

2,459.8 2,646.7 Total Expenses 2,823.1 6.7%

43.5 69.9 Revenues less Expenses 99.3

(43.2) (65.1) Transfers to Endowment Principal & Facilities (65.1)13.9 22.5 Academic Grants from Hospitals to Med School 0.020.4 15.0 Net Internal Revenues and Expenses 15.0(8.9) (27.6) Total Transfers (50.1)

34.6 42.3 Revenues less Expenses after Transfers 49.2

Consolidated Budget by Unit

SLAC10%

Adm inistrative Units21%

Auxiliaries8%

GSB6%

DoR8%

H&S16%

SOE11%

SOM48%

EducEarth Sci

LawHoover

VPUESUL/AIR

11%

Academic Units61%

2005/06 Total = $2.8B

2005/06 Consolidated Budget by Fund Type

AuxiliaryProjected General Grants & & Svc Ctr2004/05 Funds Designated Restricted Contracts Activities Total

2,716.6 Total Revenues 746.1 456.2 579.9 905.9 234.3 2,922.4

2,646.7 Total Expenses 626.4 426.0 490.5 890.2 390.0 2,823.1

Revenues less69.9 Expenses 119.7 30.2 89.4 15.7 (155.7) 99.3

(27.6) Transfers (109.1) (23.8) (54.5) (15.7) 153.0 (50.1)

42.3 Surplus/(Deficit) 10.6 6.4 34.9 (0.0) (2.7) 49.2

Beginning Expendable Funds 9.9 387.6 572.0 (0.2) 0.6 969.9 Ending Expendable Funds 20.5 394.0 606.9 (0.2) (2.1) 1,019.1

$ in millions

FY2004 Statement of Activities to Consolidated Budget Crosswalk

Statement Consolidatedof Activities Reclass Accrual to Cash Transfers & Other Budget

Student Income 332$ 128$ 460$ Sponsored Research Support 924 924Health Care Services 230 18 (4) 244Expendable Gifts in Support of Operations 105 (1) 104Investment Income 477 477Special Program Fees and Other Income 259 12 271Net Assets Released from Restrictions 46 (3) 43

Total Revenues 2,373$ 146$ -$ 4$ 2,523$

Salaries and Benefits 1,429 (2) 10 1,437 Capital Equipment Expense 56 56 Depreciation 197 (197) 0 Financial Aid 128 128 Other Expenses 740 18 7 73 838

Total Expenses 2,366$ 146$ (136)$ 83$ 2,459$

Revenues less Expenses 7$ -$ 136$ (79)$ 64$

Additions to Plant/Endowment Principal (43) (43) Transfer of Equity from Hospital to Med School 14 14

Revenues less Expenses after Transfers 7$ -$ 136$ (108)$ 35$

Adjustments

(in millions of dollars)

FY2004 Operating Results vs BudgetConsolidated Budget Version


Budget Plan(Approved June 04 FY04 $ VarianceJune 03) Forecast Actual to Forecast

Student Income 469$ 467$ 460$ (7)$ Sponsored Research Support 886 916 924 8Health Care Services 226 250 244 (6)Expendable Gifts in Support of Operations 105 115 104 (11)Investment Income 453 481 477 (4)Special Program Fees and Other Income 234 242 271 29Net Assets Released from Restrictions 50 50 43 (7)

Total Revenues 2,423$ 2,520$ 2,523$ 3$

Salaries and Benefits 1,374 1,426 1,437 (11)Capital Equipment Expense 66 62 56 6Financial Aid 124 132 128 4Other Expenses 818 821 838 (17)

Total Expenses 2,381$ 2,440$ 2,459$ (19)$

Revenues less Expenses 42$ 80$ 64$ (16)$

Additions to Plant/Endowment Principal (61) (62) (43) 19Transfer of Equity from Hospital to Med School 14 14

Revenues less Expenses after Transfers (19)$ 19$ 35$ 16$

FY2004 Consolidated Budget Results by Fund Type


Restricted Restricted Grants & Auxiliaries/ UniversityUnrestricted Designated Expendable Endowed Payout Contracts Service Ctrs Total

Total Revenues 581$ 382$ 150$ 298$ 742$ 370$ 2,523$

Total Expenses (552) (365) (155) (266) (742) (379) (2,459)

Transfers to Assets (14) 15 (14) (18) - 2 (29)

Net Change in Fund Balances 15$ 32$ (19)$ 14$ -$ (7)$ 35$

Beginning Fund Balance 23$ 327$ 332$ 238$ -$ 18$ 938$ Ending Fund Balance 38$ 359$ 313$ 252$ -$ 11$ 973$

FY2004 Consolidated Budget Results by Fund Type


Total Revenues

Total Expenses

Operating Results

Transfers (to)/from Assets

Change in Fund

Balance

Academic Units:

Graduate School of Business $96 $100 ($4) $4 ($0)

School of Earth Sciences 40 37 3 (2) 1

School of Education 30 28 2 0 2

School of Engineering 200 192 8 (3) 5

Hoover Institution 30 33 (3) (7) (10)

School of Humanities & Sciences 267 271 (4) (3) (7)

School of Law 38 35 3 (2) 1

School of Medicine 836 832 4 (5) (1)

Dean of Research 182 176 6 0 6

Undergraduate Education 20 21 (1) 3 2

Total Academic Units $1,739 $1,725 $14 ($15) ($1)

Total Academic Support Units 190 182 8 (2) 6

Total Administrative & Central Units 622 577 45 (12) 33

Total Auxiliary Activities 169 170 (1) 2 1

SLAC 234 234 0 0 0

Indirect Cost Elimination (144) (144) 0 0 0

Interdepartmental Eliminations (286) (286) 0 0 0

Consolidated Budget $2,523 $2,458 $66 ($29) $35

* Som e num bers m ay not add due to rounding

Outline







Financial Management Overview

• Modified Centralized Budget ModelModified Centralized Budget Model– Formula Units: Med School, Business School, Formula Units: Med School, Business School,

Continuing Studies/Summer SessionContinuing Studies/Summer Session– Non-formula Units (~30)Non-formula Units (~30)

• Funds controlled by budget unitsFunds controlled by budget units– Although there also are “University” fundsAlthough there also are “University” funds

• ~30k cost centers; ~10k positions~30k cost centers; ~10k positions

• ~200 people responsible for budget entry~200 people responsible for budget entry

Financial Management OverviewH

osp

itals

Hosp

itals

LLC

sLL

Cs

School of MedicineSchool of Medicine

Graduate School of Business

Graduate School of Business

Continuing Studies/ Summer Session

Continuing Studies/ Summer Session

“Non-formula Units” (Provost GF Allocations)

“Non-formula Units” (Provost GF Allocations)

Auxiliary EnterprisesAuxiliary Enterprises

University

Stanford Consolidated Financials

Annual Budget Cycle

• Load “9/1” Consolidated Budget into financial reporting system• Analyze past year’s financials

• Tie GAAP to Fund Accounting• Variance Analysis of prior year• Update LRF assumptions• Preliminary budget letters from units• Begin budget meetings w/Provost’s Budget Group

CONTINUALLY WORKING TO DO BETTER THAN BEFORE

“Local Management Budgets”: units rebudget “Revenue/Expense Control” as they choose, to display on fund/expenditure statements; these budgets, however, are “ignored” by Budget Office

FALL WINTER

SPRINGSUMMER

• Continue budget meetings• BoT approves tuition, R&B, payout rate, salary program• Determine final GF allocations• High level Projections and Variance Analysis

• Load proposed salaries, endowment income projections into Budget System• Units enter their detailed budgets into Budget System• Preliminary Budget Letters from units• Continue Variance Analysis and YE Projections• Close out fiscal year

• From Units (“Bottom-up”): • 6 month YE projections & Variance Analysis• Next year’s Consolidated Forecast• Including Formula (“autonomous”)

• “Top-down” Consolidated Budget Forecast• Formulate Projected Statement of Activities

• HROs enter proposed salaries for next year• Present Budget Plan to BoT for approval

Provost’s

Budget

Group

Compensation Analysis

CapitalPlanning

Tuition and Financial Aid Analysis

Research Volume and Rate Projections

Academic and Administrative Units Develop Budget Plans

Analysis of School Balance Sheets and Consolidated

Income Flows

General Fund Allocations to Academic and

Administrative Units

Amount of University Reserve

Decisions on Major Program Priorities

and Initiatives

Consolidated Budget Plan – Submitted to Board of Trustees in June

New Initiatives

Budget Group –Oversight and Advice on

Strategic Priorities

Budget Office CreatesLong Range Forecast

Board of Trustees –Policy Decisions on Salary

Program, Tuition, And Financial Aid

Provost Makes Allocation Decisions

Overview of the Non-formula Budgeting Process

How are funds budgeted?

“Pooled” budgets at department and fund type level, at

detailed codes

OB

Auxiliary

Service Center

Designated

Endowed

Gifts

Grants & Contracts

Detailed Budgets, usually to specific cost center

and natural account level, and position level

Budgeted at combination of specific

CC and “Pools” at department and fund type level, at detailed

codes

University UR

Budget Process

• Org Chart for President (see handout)– Finance function reports to President

• Org Chart for Provost (see handout)– Budget function reports to Provost

Outline







How has the budget evolved?

• Until 1991, budgeting focused on “Operating Budget”– General Funds plus Restricted Funds supporting on-going

operations (mainly endowed chairs) and Auxiliaries• Dr. Gerhard Casper became president in 1991; declared

intention to focus on all funds – “Consolidated Budget”• No systems in place to support this kind of budget

development, so for several years stumbled through using Excel to develop high level Consolidated Budgets

• At this same time, the University embarked on a long-term process to replace “legacy” systems with “market-place” solutions, including budget formulation tool to support new budgeting demands

• In the legacy system, the “budget” also served a “control”/fund tracking function– For unrestricted funds (OB, Aux, SC), the legacy accounting

system did not track funds separately by Cost Center

Into what has it evolved?

• The notion of a “static budget”: the 9/1 Consolidated Budget– For reporting to the Board, report only variances rather than “revised”

budgets• Once the budget is set in September, units manage their budgets

“locally”, for their own purposes, revising them (or not) at their discretion– Variance reporting to the Budget Office is done against the 9/1 version of

the budget– We developed a custom web application (“iBudgets”) due to

limitations/complications of entering budget revisions into Oracle• Oracle functionality “freed” the fund tracking role of the budget on

unrestricted funds• Continual refinement of what we should include in the budget

– Fund accounting view vs. GAAP view– E.g. we don’t budget depreciation, but we budget some expense accruals

Outline







Financial Information Systems

• PeopleSoft (HR & Student Information)• Oracle

– General Ledger (GL): • Asset, Liability, Equity, Revenue, and Transfers detail• Expenditure summary

– Grants Accounting (GA): Expenditure detail– Fixed Assets, AP, AR, PO, etc.

• Hyperion (Essbase, Planning, Reports, Analyzer, Master Data Management)

• Reportmart (reporting portal)• Pre-written reports via Portal & DW ad-hoc querying

– Business Objects– Brio (now Hyperion Intelligence)

• Custom web apps: iJournals, iBudgets

History of Budget Solution

• Pre-1996, all systems were “legacy” (home-grown)– Mainframe database, hard-coded reports

– “Operating Budget” only– General Funds, plus restricted funds supporting on-going operations (mainly endowed chairs)

– Data managed mainly by staff in Controller’s Office

• Home-grown salary management and analysis system (“SMAS”)– Used for salary planning/setting and turning those plans

into salary budget data

• Push to all-funds budgeting led to conclusion that no home-grown system would adequately support users

Hyperion Pillar

• Stanford has had a strong relationship with Hyperion Solutions since 1995

– Along with University of Pennsylvania, Stanford first University using Pillar (microcomputer-based product)

– Pillar used for FY96 through FY03 budget entry– 12 different, separate motherships (databases) and

administrators due to size & internal management practices

• Implementation, using Hyperion consulting, took 8 months– Adapting to work with facets of fund accounting

• Started with version 2.0; each year used a new version of software

• After initial work by Hyperion consulting, all training and documentation done in-house

• Once completed, Pillar data loaded into University Data Warehouse to consolidate all 12 files and to facilitate data extraction/feed to legacy mainframe batch accounting system

Why Move From Pillar to Planning?

• “Hit the wall” with Pillar limitations– Size issues– Reporting Issues (e.g. P&L by cost center)– Integrating data from all files for review, analysis, and reporting required

loading data into another environment (our data warehouse)

• Institutional move to Marketplace Web-based financial systems– Started evaluation process in 2001– Final evaluation between Hyperion Planning and Solver/ Great Plains

(Microsoft)– Chose Hyperion based on established relationship, track record, and

product capabilities– Simultaneous conversion from legacy financial systems and chart of

accounts caused significant implementation issues

“Push/Pull”

Pillar to Planning

• Our experience with Pillar shaped our initial design of Planning– Position budgeting: Units x Rates– Line-item Detail– Reforecasting/Revising budgets – Reporting– Usability on Macs (initially*) as well as PCs – Security/Access– Administration/Integrity of metadata– Central vs. Distributed Maintenance – Integration into Financial/UDW systems

Pillar to Planning

• Technology/Infrastructure paradigm shift– From: microcomputer “spreadsheet”/relational

database

– To: server-based, network-configured, multidimensional database with complex computer program interactivity

– Infrastructure issues rose to the top

– Substantial reliance on IT support where previously not needed

Pillar to Planning

• Design Issues of paramount concern:– Security (user access to data)

• To allow complex Position Budgeting

• Design & Maintenance of Forms & Reports

– Metadata “overhead”: Size of the cubes• Org Structure

• Chart of Accounts

• Number of Cost Centers

– Tech Infrastructure unique to Universities• Kerberos Authentication vs. “Firewall”

– Performance (apparent speed to users, control over calculations)

Hindsight: Planning “issues”/”growing pains”

• Hyperion Planning initially an immature product– Version 1.6 (then) vs 3.5 (now)

• We fell short of due diligence in vetting implementation design– Did not challenge our model assumptions sufficiently

• Our initial design constrained use of Planning/Essbase functionality (e.g. security)

– Created a massive amount of unnecessary grunt work in form and report duplication

• Unique characteristics of a university technology infrastructure• Some initial design specifications could not be met (separate salary

planning vs. consolidation cube)– Led to change in design to meet salary planning needs

• To balance cube size and performance: 3 separate apps• Oracle Financials implementation difficulties derailed

implementation

System in Use the first time: A Bumpy Ride

• System went live with version 3.0 in May 2003 for FY04 Budget formulation

– Chose a mix of cost-center detail vs. “pooled” budgeting – Because Essbase security not enabled, security of data access

achieved through form/report design– Thousands of forms and reports created

– Many forms/reports not ready for many users– Some user issues with centralized calculations of business rule– Some system HTML bugs (screen redraw issues)– Analyzer not implemented– Integrated workflow not utilized – Much more dynamic reporting than Pillar, but no user

control/ability to design– “Real-time” central access to data was useful

Smoothing out the rough edges: “Growing Up”

• Revisited system design and assumptions for FY05– Utilized Hyperion consulting to vet ideas, verify proposals– Add additional metadata (cost centers) for more detail– Thorough Hyperion infrastructure review

– Many software link/install issues resulted from several version upgrades over two years

– Changed design to enable use of native Essbase security– Prelude to use of Analyzer to give users powerful ad-hoc analysis and reporting– Significantly reduced number of forms/reports to be created: let the system do the work

• Version 4.1 for FY07 process– Improvements in functionality for administrators and end-users– Improvements in performance and stability

• Import summarized data from three different apps for a Consolidated View

– This process is more or less programmed to be done seamlessly within the software’s functionality

What we have gained: the benefits

• A web-based budget formulation and reporting system– Accessible from home/wherever

• Better control over integrity of metadata• “Real-time” access to budget entry progress

– Much greater ability to monitor the budget along the way

• Better budget process management• Much more flexibility in report design than Pillar• Better ability to report on Consolidated Budget

– Including ability to incorporate “crosswalk” to Statement of Activities

• No software overhead on user machines• System stability (no unplanned down time—more or

less)

Hyperion Products

• Hyperion Planning for Data Entry• Hyperion Reports for canned reports• Hyperion Analyzer for “dashboard” and ad-hoc query

• Hyperion Essbase—an “OLAP” database—is the engine• Hyperion Master Data Management (Razza)—a hierarchy

maintenance tool; currently used to maintain the “master” university admin org hierarchy

• Hyperion Business Intelligence (Brio)

Business Objects Products• Business Objects desktop

• Web BO Also used for web portal report writing and user-controlled ad-hoc querying

Used for web portal report writing and limited ad-hoc querying

Current Resources

• Hyperion:– UBO Staff: ~4 FTE

• Support & train the users; maintain & enhance the app

– ITSS (infrastructure) support: ~2 FTE• Support the servers, networking, databases

• Funding incorporated in “Core” system support budget in ITSS

– Medical School: ~2 FTE• Support their own users; configure app for their needs

• Infrastructure:– Hyperion applications: 6 Windows Servers

– Development, Test/Training, Production environments

System Architecture

Oracle Database 8.1.7.2HYP_PRD

Essbase Database/Planning Serverfor MedSchl

(Windows 2003)

Hyperion Essbase OLAPServer 6.5.4.2

for MedSchl applicationHyperion Planning 3.5.1Hyperion Business Rules

Hyperion Planning/AnalyzerApplication/Web Server

(Windows 2003)

Hyperion Planning 3.5.1Hyperion Business RulesHyperion Analyzer 7.0.1

WebLogic 8.1 SP2EAS 7.1.2

Application Terminal Server(Windows 2000)

Essbase 6.5.4.2 Runtime ClientEssbase Application Manager 6.5.4.2

Essbase Excel Add-InHyperion Reports 7.0.1 ClientHyperion Planning 3.5.1 Client

oraprod2 (Unix)

ithypr3

hypprdapp2hypprdapp1

hypprdess2hypprdess1

Essbase Database Server(Windows 2003)

Hyperion Essbase OLAPServer 6.5.4.2

for all non-Medschlapplications

Hyperion ReportsApplication/Web Server

(Windows 2003)

Hyperion Reports 7.0.1WebLogic 8.1 SP2

Database Layer

Applicatoin/Web Layer

Client Layer

Current State of applications/systems

• Hyperion applications – Target audience: budget officers, finance managers,

department managers• Not down to the level of the reconciler of the PTA

– Used by ~ 200 users through the web (Internet Explorer on PC)

– Used for annual budgeting process (except Sponsored by OSR and Capital projects)

• those detail budgets are entered directly into Oracle GA

– Also used by Medical School for current Year-end Projections & tied to next year’s budget

– Application owned/maintained by UBO; ITSS supports infrastructure

Hyperion: A Common “look & feel” of entry forms and reports

• Budget entry: – Users can define the subset of object codes/expenditure types they

want people budgeting at– Access to data limited by users’ security (maintained in Hyperion)– Working towards “standard” views that are compatible with both

Consolidated Budget and external Financial Statements• Budget Reporting/Analysis

– A variety of views of the data that show fund type, scenario, year, unit across rows or columns

– Hyperlinked drill-through capability to “investigate” numbers from a high level down to a certain level of detail

• Does not store transaction-level detail; ReportMart3 will provide this support through reports that will show detailed transactions that tie to the aggregated data

Budget Entry via Hyperion Planning: Portal Screen

Budget Entry via Hyperion Planning: Non-Salary

Budget Entry via Hyperion Planning: Annual Rate

Budget Entry via Hyperion Planning: Percent Distribution

Budget Analysis & Reporting using Hyperion: “cross-tab” views

Budget Analysis & Reporting using Hyperion: “time series” views

Budget Analysis & Reporting using Hyperion: “time series views”

Budget Analysis & Reporting using Hyperion: “slicing & dicing”

Outline







Goals Moving Forward

• Use Hyperion for more than just budgeting– Load Actuals from EDW– Use it for Variance Analysis – Enable units to develop

Rolling Forecasts

• Roll-out Hyperion Analyzer– Web-based tool that accesses

the data stored in Hyperion– Works as a “dashboard”– Works as an ad hoc analysis

tool

Current Variance Analysis Process

Hyperion (Budgets)

Oracle

(Actuals)Star Schema

Star Schema

DSS

Bus Objects

Collection

Bus Objects Query

Excel

Visual Basic Macro

Variance Report Spreadsheets

Analysis by UnitsUnits email Excel SS to UBO

UBO reviews each SS and then loads

into Hyperion

Variance Reporting via Excel Spreadsheet

• (see handout)

Future Variance Analysis & Reforecasting Process

• Stored within Hyperion:– 9/1 Consolidated Budget (12 months of data

from Budget cycle)– Actuals (e.g. Sep ~ Mar of Actuals from

Oracle)

• Goals: – To identify and analyze variances from budget– To create a Rolling Forecast (Sep ~ Mar

Actuals + Apr ~ Aug Budget) with capability to adjust remaining budget numbers

Concepts/Rationale for Goals

• Hyperion is an excellent tool for analysis of summarized data– Generates fast results for known retrieval patterns– Can present both Consolidated Budget and Statement of Activities

views• Consolidation of all units is easy• Good roll-up and drill-through capability• We design standard reports and data entry forms/templates

for all the units to use• It can facilitate quarterly budgeting and variance reporting• Pre-Oracle: from 1995-2003 we had, via Pillar & UDW, a

mechanism units used for budget, actuals, and reforecasting analysis; we want to give this utility back to the users

Proposal: Hyperion would house most of the budget process

Analysis by Units

Reportmart3/DSS

Hyperion

Oracle

(Actuals)EDW

Since Hyperion will only hold data at a

certain level of detail, RM3/DSS

can provide queries for analysis when

more detail is needed

Units enter their analysis/forecasts

into Hyperion

UBO enters “top-down”

forecast/budget into Hyperion

Budget, Variance, & Reforecast

Reports (printed & on-line)

Ad-hoc analysis & reporting

Variance Reporting using Hyperion

“Business Intelligence” using Hyperion Analyzer

“Business Intelligence” using Hyperion Analyzer

Outline







Documents

SU_Budget_Process_and_Systems_Presentation - Stanford University