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					Deans‟ Forum
 October 7, 2009




       1
                       Agenda

B&F Overview and Strategic Framework
  • Tim Slottow
Highlights – Scope, Accomplishments,
  Challenges
  •   Hank Baier – Facilities and Operations
  •   Erik Lundberg – Investments
  •   Rowan Miranda – Finance
  •   Laura Patterson – Information and Technology Services
  •   Laurita Thomas – University Human Resources
Question/Answer


                             2
                     B&F Fast Facts
Q. U-M is one of how many               Q. Approximately how many
   public universities to have a           Human Subject Fee payments
   AAA credit rating from Moody’s          are made per year?
   and Standard & Poor’s?               A.   10,000
A.   3                                  B.    50,000
B.   7                                  C.   120,000
C.   13                                 B.    500,000
D.   20

Q. Roughly what were the net            Q. How many tax forms
   assets of the University in             do we file per year?
   2009?                                A.   None – we are a non profit
A.   $12.9 billion                      B.   1
B.   $4.2 billion                       C.   125
C.   $8.7 billion                       D.   1,500
D.   $8.0 billion

                                    3
.
The CFO and the University
     Who is Shirley Smith?




                4
The Challenge




     5
           Strategic Framework
           B&F Mission and Motto
We partner with the University
   community to provide the
 technical, financial, physical,
     information and human
    resource infrastructure
 essential to being one of the
greatest public universities in
           the world.


     “WE MAKE BLUE GO”
                          6
          Strategic Framework
                    B&F Vision
We will become a high-performance organization by:
   • Being known for our deep expertise (both technical and
     business)
   • Demonstrating our understanding of the University‟s
     businesses
   • Serving as fiduciaries of the University assets
     (physical, financial, human, information and technology
     assets)




                               7
                 Strategic Framework
                    Goals and Initiatives
Three B&F Strategic Goals
• Become the University’s PROVIDER of CHOICE for the UM services we
  offer
• Become the EMPLOYER of CHOICE for high performing staff members
  and teams
• Demonstrate BEST IN CLASS LEADERSHIP in managing University
  resources with respect to quality, cost, service and long term impact for
  the University
         •   Internal implementation of major U-wide initiatives
         •   Best Practices in Leadership and Management
         •   Cost-Savings and Reinvestment
Top Ten Key Initiatives
         •   Clear metrics
         •   Updated annually to align with University goals
         •   Transparent reporting and performance


                                      8
                                                                                          Goal 1
                   Provider of Choice
   Mean Overall Customer Satisfaction
OVERALL CUSTOMER SATISFACTION                      2007         2009           Diff
RATING BY B&F AREA                                 Mean         Mean          2007-
                                                                              2009
B&F OVERALL SATISFACTION SCORE                       7.3          7.5           *.2
FACILITIES & OPERATIONS                              7.0          7.2            .2
FINANCE                                              7.1          7.3           *.2
UHR                                                  7.4          7.4            .0
MAIS (including ITSS)                                7.7          7.8            .1
B&F Overall % Satisfied (rating of 8, 9,10)         56%          59%            *3
B&F Overall % Dissatisfied (rating of 1, 2, 3)     7.1%          7.1%            0

Number of Surveys Received                         6,085        11,526       + 5,441

                                                 *Statistically significant differences




                                      9
                                                                                              Goal 1
                      Provider of Choice
                       Academic Units Only

SERVICE ATTRIBUTE RATINGS                             2007         2009          Diff
                                                      Mean         Mean         2007-
Academic Units Only                                                             2009
1 Understanding of customer's business needs           7.3          7.5         *0.2
2 Explanation of University policies and
                                                       7.3          7.5         *0.2
procedures
3 Communication of service standards                   7.2          7.5         *0.3
4 Functional/technical expertise                       7.7          7.8         *0.1
5 Communication of service changes                     7.1          7.3         *0.2
6 Implementation of service changes                    7.1          7.3          0.2
7 Accessibility of service and/or service provider     7.4          7.6         *0.2
8 Level of courtesy                                    7.2          7.4         *0.2
Overall Customer Satisfaction                          7.3          7.6         *0.3
Number of Surveys Received                            2,530       3,542

                                                     *Statistically significant differences


                                          10
                                                                           Goal 2
           Employer of Choice
Employee Survey Dimension       Jan 2005        Oct 2006      March 2008
Climate                            59              60            *62
Supervisor                         69              69             69
Autonomy/Involvement               64              66            *67
Workload                           61              62            *63
Resources/Environment              71              73            *75
Recognition                        60              60            *62
Co Workers                         72              74            *74
Communication                      58              58             58
Training and Development           60              61             61
Task Significance                  72              76            *76
Compensation                       51              53            *56
Benefits                           72              72            *74
Upper Management                   54              57            *58
Advancement                        64              59             61


B&F Job Satisfaction                71             71              72
             *Statistically significant differences from 2005 to 2008

                                   11
                                                                                         Goal 2
                        Employer of Choice
              Employee Survey Dimension       Jan 2005        Oct 2006      March 2008
              Climate                            59              60            *62
              Supervisor                         69              69             69
              Autonomy/Involvement               64              66            *67
              Workload                           61              62            *63
Red indicates
dimensions    Resources/Environment              71              73            *75
with the      Recognition                        60              60            *62
highest       Co Workers                         72              74            *74
impact on     Communication                      58              58             58
Job
              Training and Development           60              61             61
Satisfaction
in 2008       Task Significance                  72              76            *76
              Compensation                       51              53            *56
              Benefits                           72              72            *74
              Upper Management                   54              57            *58
              Advancement                        64              59             61


             B&F Job Satisfaction                 71             71              72
                           *Statistically significant differences from 2005 to 2008

                                                 12
                                          Customer Survey and
                                         Employee Survey Scores                              Perfect 1:1
                                                                                             Relationship
                                                                     B&F Mean (7.5)
                                  9.0
Employee Satisfaction Score „08




                                  8.5
                                  8.0
                                  7.5                                                          B&F
                                                                                               Mean (7.2)
                                  7.0
                                  6.5
                                  6.0
                                  5.5
                                                Customer Satisfaction Scores
                                  5.0
                                        5.0    6.0                 7.0                8.0   9.0
                                              Customer Satisfaction Score ‘09
                                                             Goal 3
                          Best in Class
                    Financial Leadership

           Target              •   Three years of budget
          Budget                   savings
     4-6% total savings        •   While maintaining
           during                  employee satisfaction
        FY07-FY09
                               •   And increasing customer
      R   Achieved                 satisfaction




14
Facilities and Operations
             Hank Baier
    Associate Vice President for
     Facilities and Operations


                  15
             A Thriving Campus!

Six-year campus growth:
      • Research expenditures             36%
      • Population                        11%
      • Space                             12%
      • General Fund space                10%

Facilities and Operations performance (six years):
        • Operations:
        • Utilities:  Fuel costs,  BTU/sf
        • Capital projects: $94,600,000 funds returned

                            16
Architecture, Engineering and
         Construction




              17
18
Occupational Safety and
 Environmental Health




           19
Parking and Transportation




            20
Plant Operations




       21
Public Safety




      22
                   Operations Budget
$100M

$90M

$80M

$70M
          $68M                                                             $68M
$60M

$50M

$40M

$30M

$20M

$10M

 $0M

-$10M
        FY2003   FY2004     FY2005    FY2006    FY2007      FY2008        FY2009
                   Budget    Base Adjustments   New Space     Inflation

                                      23
                       Utilities Budget
               FY09 total expenditures: $111.7 million
                       Housing, $8.0        Other, $3.0

                                                          Parking , $1.1




General Fund, $71.0                                          HHC, $22.4




                                                                 Athletics, $2.9
                                        Auxilliary Units, $3.3
                                       24
                                           Utilities
             $120,000,000                                                                   200,000
                                                                                            180,000
             $100,000,000
                                                                                            160,000
                                                                                            140,000
              $80,000,000
                                                                               Total Cost   120,000
Total Cost




                                                                                                      BTUs/SF
                                                                               BTUs/SF
              $60,000,000                                                                   100,000
                                                                                            80,000
              $40,000,000
                                                                                            60,000
                                                                                            40,000
              $20,000,000
                                                                                            20,000
                      $0                                                                    0
                            2003   2004    2005      2006        2007   2008      2009
                                                   Fiscal Year
                                     Total cost:           56.0%
                                     BTUs/SF               5.9%
                                                    25
Capital Activity




       26
                 Capital Budget
Fiscal Year   Projects   Budget       Final Cost       Funds
                         (millions)     (millions)
                                                      Returned
                                                       (millions)



2003            153         $156.7          $149.5                  $7.2
2004            165         $414.9          $416.2            ($1.3)
2005            131         $101.7            $87.1            $14.6
2006            147         $536.2          $508.6             $27.6
2007            196         $250.6          $235.1             $15.5
2008            174         $239.5          $217.3             $22.2
2009 (est.)     89            $53.8           $45.0                 $8.8
Totals         1,055     $1,753.4       $1,658.8               $94.6

                               27
    FY10 and Long-term Challenges

Capital:
    • Benchmarking
    • Major projects (North Quad, C&W)
Utilities:
    • Planet Blue - 6% savings on pilot buildings
    • 30 buildings annually
Operations:
    •   Custodial-OS1
    •   Facilities Maintenance-Work Control-Payroll
    •   Office of Sustainability
    •   Thriving campus


                                 28
29
Investment Office
      Erik Lundberg
 Chief Investment Officer



             30
                University Financial Assets
                  June 30, 2009 Total Market Value = $7.5 billion




                                                                                Endowment Funds

                                                                                Working Capital Funds

                                                                                Veritas

                                                                                Other(a)




(a) ‘Other’ includes life income trusts, assets that cannot be commingled in the University's investment
pools, uninvested cash balances and other reserves.


                                                       31
                                                Endowment Growth
                                    Endowment Funds – End of Fiscal Year Market Value
                      $9

                      $8
                                                                                                                                                  $7.6
                                                                                                                                           $7.1
                      $7
                                                                                                                                                         $6.0
                      $6                                                                                                            $5.7
Dollars in Billions




                                                                                                                             $4.9
                      $5
                                                                                                                      $4.2
                      $4
                                                                                                $3.5 $3.6 $3.4 $3.5

                      $3
                                                                                    $2.3 $2.5
                                                                             $2.0
                      $2                                              $1.6
                                                               $1.3
                                                        $1.0
                      $1
                           $0.4 $0.4 $0.5   $0.6 $0.8

                      $0
                            '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09

                                                                                     32
                                                Endowment Growth
                                    Endowment Funds – End of Fiscal Year Market Value
                      $9
                                Compound Average
                      $8
                                Annual Growth Rate                                                                                                $7.6
                                   20 yrs: 14.2%                                                                                           $7.1
                      $7
                                   10 yrs: 9.1%
                                                                                                                                                         $6.0
                      $6                                                                                                            $5.7
Dollars in Billions




                                                                                                                             $4.9
                      $5
                                                                                                                      $4.2
                      $4
                                                                                                $3.5 $3.6 $3.4 $3.5

                      $3
                                                                                    $2.3 $2.5
                                                                             $2.0
                      $2                                              $1.6
                                                               $1.3
                                                        $1.0
                      $1
                           $0.4 $0.4 $0.5   $0.6 $0.8

                      $0
                            '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09

                                                                                     33
LTP Investment Performance
              Long Term Perspective
                          Periods Ending 6/30/09

                                                       5 Years(a)              10 Years(a)
Total LTP (estimates)                                    7.2%                     8.9%

Major Markets
U.S. Stocks: S&P 500                                     -2.2%                     -2.2%
Non-U.S. Stocks: BMI ex-U.S.                              3.7%                      2.9%
Bonds: Lehman Aggregate                                   5.0%                      6.0%

Endowment Universe(b)
Top Quartile                                              4.7%                       5.3%
Median                                                    3.5%                       4.1%


(a) Annualized returns.
(b) Based on Cambridge Associates’ survey of endowments and foundations at about 130 colleges and universities.


                                                  34
      Investment Strategy
LTP Actual Allocation vs. Model Portfolio

                         June 30, 2009
                           Allocation               Model Portfolio


                                 Venture        Absolute         Venture
                                 Capital         Return          Capital
              Absolute
                                   8%             16%              5%
               Return
                20%                         Private
                                          Equity 14%                   Private
                               Fixed Income                            Equity
           Cash                    12%                                  12%
            1%
   Fixed Income
       10%                                       Real Estate
                                                                           Real Estate
                                                    12%
                                                                              12%



                  Equities                 Energy                     Energy
                   25%                      10%                         8%
                                             Equities
                                               35%
                               35
      Goals and Challenges


      Generate sufficient returns to
sustain spending and grow the endowment
      in real terms over the long run.

 Provide steady stream of distributions
     to support University operations.




                    36
           Finance
         Rowan A. Miranda
Associate Vice President for Finance




                 37
                   Functional Responsibilities
Transaction Processing

 Cash Disbursements        Accounts Payable           Travel Expense               Payroll Administration        Payroll Administration


 Revenue & Debt Cycle      Billing & Collections      Debt Issuance               Grant Billing

 Accounting                Fixed Assets/
                                                      Sponsored Research          General Ledger                 Financial Reporting
 & External Reporting      Property Disposition



Compliance Management                                 Planning and Business Transformation

 Tax Management         Tax Management                                                                      Budget Development for
                                                      Budgeting                   Capital Planning
                                                                                                            B&F (& support campus process)

 Treasury
                        Cash Management
 Management                                           Business Analysis          Business Analysis & Cost Accounting

 Compliance
                        Internal Controls
 Management                                                                           Efficiency & Effectiveness Initiatives
                                                      Business Transformation


Procurement
                                                                  Negotiation & Contract                  Sourcing &
 Purchasing             Requisition & PO Processing
                                                                  Development                             Supplier Management




                                                                38
                                                                                                                                 38
                      Fast Facts

In FY09…
• Payroll processed $230M+ in monthly payments
• Property Disposition had 16,000+ sales transactions and
  returned $1.6M back to schools & units
• Procurement Services processed 270,000+ purchase
  orders, 640,000+ invoices, and close to $2.5 billion in
  spending




                              39
              Fast Facts (continued)

In FY09…
• Treasury issued 50,000 MCards to
  faculty, staff, and students
• We administered and maintained over 85,000 unique
  chartfield fund, department, project, and program
  combinations
• We tracked nearly 7,000 endowment funds with
  over $6 billion of market value




                         40
           Major Accomplishments

• New payment process and initial pilot for human
  subject fee participants
• Internal controls certification by all units
   • Employment, PCard, cash handling, and journal entry processes

• Collaborative management with Investment Office
  of university’s liquidity situation
• Project plan for implementation of revised travel and
  business hosting expense policy and pilot of
  Concur



                                 41
                  Budget Wins

• Savings of $10M annually
  through Work Connections
• Self-insurance through Veritas produced savings of
  $23M over the past six years
• Additional indirect cost recovery of more than $25M
  over the next three years due to new rate
  agreement
• Continued growth of Strategic Supplier Program and
  university-wide contracts
• JPMorgan Chase chosen as new PCard vendor
  ($1M signing bonus)
                           42
   FY10 and Long-term Challenges

• Support campus-wide
  administrative efficiency
  efforts
• Benchmarking of select
  administrative services
      Finance
      HR/Payroll

      Procurement

      Information Technology

      Communications

      Development

      Sponsored Research

      Student Services




                                43
   FY10 and Long-term Challenges

• Procurement Strategic Partnering Program
   •   Promote smarter buying in academic and administrative units by analyzing
       spending patterns and encouraging greater use of strategic contracts

• Campus wide rollout of Concur
• Federal Stimulus Act Compliance and Reporting
• Support IT rationalization efforts
  especially on issues related to
  funding model/chargeback approach




                                       44
  Information and
Technology Services
        Laura Patterson
    Associate Vice President
  and Chief Information Officer


              45
46
          Functional Responsibilities

• University-wide Applications    • Central Services
   • Financial, HR,                   (Directory, eMail, Web,
   • Student Administration,           Kerberos)
   • eResearch                    • Campus Computing Sites
   • DAC (replacement DART)       • Data Center Management
   • M-Reports                    • Voice & Data Networks
   • eMploy                       • Video Streaming and
                                    Conferencing
   • Wolverine Access
                                  • Servers, Data Storage, &
• Business Intelligence &
                                    Protection
     Data Management
                                  • Security Services



                                 47
U-M IT Strategy




      48
U-M IT Strategy




      49
               IT Rationalization

Implement IT sourcing strategy that provides more
      competitive services for less money


                  Shared
                 Services
      Unit        (Units    Central IT   External
    Provided     working    Provided     Provided
    Services    together)    Services    Services




                            50
     MAIS Effort Rationalization
Increased capacity equivalent to $1.6 million

   Effort to maintain
   administrative
   systems.

   Effort reinvested in--
   • Business Intelligence
   • eResearch
   • Enhanced system
     features


  = est. $1.6 M

                             51
        Application Rationalization
          Shadow Financial Systems

• 16 units eliminated shadow financial systems
  in 2009
• 22 additional units in transition
• 28 additional departments in assessment




                         52
MAIS Infrastructure Rationalization
             $3 million base reduction in
              hardware/software costs
$8,000,000
                                   New Initiatives (Cumulative)
$7,000,000
                                   Original Base
$6,000,000

$5,000,000

$4,000,000

$3,000,000

$2,000,000

$1,000,000

       $0
             FY03   FY04   FY05      FY06    FY07    FY08    FY09

                              53
          Telephone Outsourcing

• Third party analysis of traditional landline service
• Findings:
      No cost savings by outsourcing our landline
      telephone service (35,615 ports)


            Provider             Cost
               ATT           $15.00 per port
             Verizon:        $7.60 per port
           U-M ITCom         $7.03 per port



                            54
Rationalization Approach




           55
      FY10 Strategic Imperatives

IT Rationalization                   Shared Products
• Benchmarks                         & Services
• Unit assessments
                                     •   DART
• New funding model
                                     •   CTools stabilization
                                     •   Concur
Shared Infrastructure                •   eRecruit
• Tiered storage                     •   Student Admissions App
• Virtual desktop infrastructure     •   Security Assessment Services
• Consolidated data
  center plan
• Calendar integration
                                    ITS Organization
                                    • Transition
  (Windows consolidation)


                               56
University Human
   Resources
      Laurita Thomas
 Associate Vice President
  for Human Resources


            57
                            V5
                Did you know…

   that in 2008 and 2009 the University of Michigan was named…

 “A Great College to Work For”



         by the Chronicle of Higher Education?
In its second annual survey of best workplace practices and policies,
              U-M was recognized in nine of 26 areas
                   within three major categories:
    Work Environment, Pay and Benefits, and
             Institutional Policies.
                               58
            Did you know…

          Voices of the Staff
                   received the 2009
         Arbor Award for Excellence,
the most prestigious human resources award in Michigan.




       The Arbor Award honors organizations for
   innovative human resource practices & programs.


                         59
        Did you know…

The Medical Center discontinued the sale
 of cigarettes on its premises in 1972.



               Effective July 1, 2011, the
                university will implement a
               smoke-free policy designed
                  to help our community
                     “kick the habit”
                and snuff out smoking on
                          campus.


                   60
University Human Resources
  Functional Responsibilities


                               21 UHR service areas:
                   Academic Human Resources  Benefits Office  Career
                   Development Services  Compensation and Classification
                    Early Childhood Programs  Faculty and Staff
                   Assistance Program (FASAP)  Health System, Flint &
                   Dearborn Human Resources  HR Strategy and Planning
                    HR Communications  HR/Payroll Service Center
                   Human Resource Academy  Human Resource
                   Records and Information Systems (HRRIS)  Human
                   Resource Development  Kids Kare at Home  Mediation
                   Services for Faculty and Staff MHealthy  Office of
                   Institutional Equity Recruiting and Employment Services
                    Staff Human Resources  Temporary Staffing Services
                    Work/Life Resource Center

                   Visit us on the web at:   hr.umich.edu


              61
          Major Accomplishments

1.   MHealthy
2.   Health Benefits Strategy
3.   Learning Services
4.   Talent Management
5.   Union Relations
6.   Regulatory Investment
7.   Child Care Initiative
8.   Emergency Hardship Fund
9.   Engagement Gains Achieved through Voices of the
     Staff


                          62
                 Investments in Health
                                     By year five of its strategic plan,
                                     MHealthy expects to "bend the
                                     health care cost trend" by
                                     1 percent or more annually.




Long-term metrics for Mhealthy include:
          reduction in health risk levels
            health status improvements
         improvements in health culture
     reductions in health care cost trend
              impact on avoidable costs
  impact on absenteeism, worker’s comp
                            and disability.


                                        63
                         Budget Wins
  The Committee on Sustainable Health Benefits (COSHB) and the
  Committee to Study Retirement Savings Plan Vesting Options were
  successful in devising the means to maintain our highly competitive
  health care and retirement benefits while curbing our long-
  standing rate of benefit cost increases.



     Implementation of COSHB‟s
          recommendations will:
Preserve access to U-M health plans.
 Help make the costs more affordable
        for those earning lower wages.
Protect children with rates lower than
                  for dependent adults.
       Keep our benefits at or above
                      market averages.


                                          64
                      Budget Wins

• By transitioning from primarily insured to primarily self-insured
  medical plans in 2008, our Benefits office was able to reduce
  overall medical plan expenses by approximately
  $15 million dollars.

• Cost savings in our self-insured prescription drug plan in
  2008 were nearly $3 million due to generic drug use
  increasing over 6%.

• U-M generic drug dispensing, now 73%, outpaces national
  averages.




                                  65
                     Budget Wins




• UHR launched an initiative to transform Human Resource
  Development (HRD) into a high-impact learning services
  center.

• HRD’s Organizational Development consulting services were
  discontinued, reducing the HRD budget by 13.9% and
  creating a leaner professional development center of excellence
  focused on dynamic, collaborative learning.



                                66
                     Budget Wins

HR business processes have been enhanced by
leveraging technology for net efficiency gains:

• Paperless, self-service systems (e.g.: benefit elections,
  retirement transactions)
• E-business processes now capture data at the source (e.g.:
  self-service timekeeping)
• Online transactions improve efficiency and reduce process
  time (e.g.: appointment changes)




                               67
     FY10 and Long-term Challenges

•   E-Recruit
•   E-Verify, IPEDS, ADA Compliance
•   Health Benefits Dependent Eligibility Audit
•   Retiree Health Benefits
•   Return to Work
•   Changing Demographics
•   Employee Value Proposition
•   Building a Culture of Health




                             68
           Q/A and Discussion

• Tim Slottow - EVPCFO
• Hank Baier – Facilities and Operations
• Erik Lundberg – Investments
• Rowan Miranda – Finance
• Laura Patterson – Information and Technology Services
• Laurita Thomas – University Human Resources




                          69

				
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