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Description

The College's operating budget for fiscal year 2000 is over $60 million, including $37 million for undesignated general operating budget expenses, $3.5 million for designated operations, $17.5 million for auxiliary enterprises, and $4.8 million for grants and contracts, the largest percentage of which is for federal financial aid programs. State appropriated funds provide 26% of the College's undesignated general operating budget in fiscal year 2000, down from 30% in fiscal year 1990; student tuition and fees provide approximately 70%; and the remainder is derived from other sources including investment income.

The College's spending on instruction and academic support has been slightly above 50% of total general operating budget expenses, comparable to other comprehensive state colleges. Total expenditures for salaries, wages and fringe benefits account for more than 70% of undesignated general operating budget expenditures, and have risen by approximately 30% over the past five years. General operating budget expenditures for technology and technology support have increased by 80% over the same five-year period. The USNH Trustees mandate that campuses set aside general operating funds for facilities renovation and repair. Over the past ten years, renovation and repair expenditures have increased from zero to 4% of the College's unrestricted general operating budget.

New Hampshire ranks fiftieth in the nation in state support of public higher education as measured by per-capita contribution and share of personal income. Total state appropriations to higher education would need to increase by 50% to reach the levels in the forty-ninth state. Over the past decade state appropriations have increased at an annual rate of 2.6 %, while the higher education cost index has increased by 4 %. Despite in-state tuition increases of 108 % and out-of-state tuition increases of 65 % over the 1990s, state appropriations combined with resident tuition fell short of the College's expenditures per student in each of the past ten years, as shown in the following graph.

In the first half of the 1990s, out-of-state tuition increases and enrollment increases made up for the lack of increases in state funding. However, USNH enrollment declined between fiscal year 1996 and fiscal year 1999. As a result, in recognition of the increased difficulty of attracting and retaining non-resident students at ever-increasing price levels, the USNH Board of Trustees implemented a plan to bring non-resident tuition into equilibrium with resident tuition combined with state appropriations by fiscal year 2002. The fiscal year 2000 and 2001 appropriations keep this plan on track with in-state and out-of-state tuition increases of 6 % and 2.5 % per year respectively as shown in the following graph.

The primary factor controlling the College's funding is enrollment. All operating revenue remains under the control of USNH rather than the state; however the individual campuses are able to carry year-end balances forward to smooth out annual enrollment changes and to fund one-time program improvements when enrollment exceeds budget projections. Changes in the numbers of admitted students actually enrolling, the in-state/out-of-state enrollment mix, continuing education enrollment, and student attrition rates influence the College's ability to spend at levels authorized by the trustees.

In fiscal year 1999, in spite of a third year of smaller entering classes, total enrollment stabilized due to improved retention and increased Continuing Education enrollment. As a result, undesignated general operating budget reserves increased to 2 % of the fiscal year 2000 budget. Reserves for internally designated and auxiliary enterprise operations also contribute to total fund balances, which amounted to $5.8 million as of June 30, 1999, before being reduced for unfunded benefit liabilities.

Because budgets fluctuate with enrollments, the College's financial viability requires careful monitoring and forecasting of enrollments to ensure that limited resources are directed towards the College's mission and goals. The Institutional Research Office works with Admissions to project future enrollment using a three-year rolling average of attrition by student class. These figures become the basis for establishing the final budget requested from the USNH Trustees. The Business Office and the Vice President for Finance and Planning prepare monthly budget reports that enable the president and vice presidents to compare actual to anticipated revenue and expenditures and make necessary budget and spending adjustments.

In recent years increases in tuition and fees have been reflected in increased financial aid awards to students, with total financial aid, including grants, scholarships, loans and employment increasing by 39% over the past five years. Institutional scholarships have increased from 39% to 52% of total grants and scholarships over the same period. In addition, the College has moved away from giving a few large awards to athletically and academically talented students toward granting more merit awards in the $1,000 to $3,000 range to students likely to enroll and succeed at Keene. Merit scholarship awards amounted to $375,000 in fiscal year 2000, twice the amount awarded in fiscal year 1998. In the same period, the number of entering students receiving merit awards has increased threefold, to 245 in fiscal year 2000. Keene State has a policy of meeting the total direct cost of attendance of all in-state applicants who request financial aid by March first and complete the application procedure on time.

Campus budgets evolve from two parallel processes, with campus processes preceded by general USNH guidelines approved by the trustees and reviewed by the governor and state legislature. Campus input into System-wide guidelines occurs through the Administrative Board and the Financial Planning Advisory Council. USNH biennial budget guidelines, which are largely expenditure driven, and are subject to adjustment by the state legislature, are adopted thirteen months in advance of the new biennium. This allows time for the USNH Chancellor to prepare the USNH biennial budget request. After review by the governor and legislative committees, the budget request is forwarded for legislative action. State appropriation increases generally are distributed to campuses as a lump sum based upon the percent of increase on USNH's previous year's base, without specific spending guidelines per credit hour. The Board of Trustees has the authority to establish tuition and fees for its campuses.

Recent policy changes at the Board of Trustees level provide greater access to unbudgeted funds for support of operations. For instance, campus presidents can authorize use of the first 2% of tuition income over budget, currently around $500,000, without further approval. Accessing income over the guidelines requires action by the trustees' Financial Affairs Committee. The chancellor's office has informed campus presidents that full use of campus approval levels depends upon a campus having achieved a 3% general operating budget reserve. The College has developed a plan to achieve the 3% threshold over a three-year period.

Keene State's fiscal year 2000-2001 biennial budget request summarized the College's current spending priorities as reflected in "Our Plan": upgrading both administrative and academic computing resources, providing increased technology support for faculty, and increased student access to information resources. Capital renovations to Mason Library and the Science Center and the special need for instructional equipment in some of the College's fastest growing majors in the sciences and applied technologies were also given high priority. None of these priorities received funding in the current biennial budget appropriations.

On the campus level, the president establishes processes for recommending budget distributions and involves the principal administrators prior to distribution of budget guidelines and allocations. Over the past ten years there has been an increase in campus involvement in the budget process through additional committee input and review. The Facilities Planning Advisory Committee recommends distribution of renovation and repair funds set aside in accordance with Trustee guidelines, in order to implement the Campus Master Plan. The College Information Technology Committee recommends distribution of technology funds in order to implement a five-year technology plan. The Deans Council reviews all anticipated faculty vacancies and recommends hiring priorities to the VPAA, in light of faculty productivity reports prepared by the Institutional Research Office and three-year projections prepared by department heads and the deans.

In fiscal year 1999, a new College Budget Council (CBC) was formed with membership including the four principal administrators, three academic deans, and representatives from faculty, staff, and students. This Council was charged to review budget trends, assess budget policies and processes, and assist in the communication of budget issues to campus constituencies. Unlike prior budget advisory committees, the CBC is chaired by the president, whom it advises on budget processes, priorities, and changes. Fiscal year 1999 actions included review of work-study allocations, support for a new cost-saving campus printing service, and identifying critical budget needs in the seven principal responsibility areas (the Executive Division, Finance and Planning, Academic Affairs, Student Affairs, the Division of Arts and Humanities, the Science Division, and the Division of Professional and Graduate Studies).

The Student Assembly recommends all mandatory fee budgets and charges to the president prior to trustee committee review and approval. Student fees recommended by the campus to the trustees follow established budget guidelines, historically growing at around 4 % per year, and with additional support for new initiatives subject to trustee approval. Examples of fees increasing over budget guidelines during the past few years include debt service on the new Student Center, greater student access to technology through an education technology fee, new intercollegiate athletics programs, and additional health and counseling services.

Budget planning guidelines are distributed to fee-supported departments in January and to all other departments in February. Departments are encouraged to redistribute funds within current year allocations. Special changes requested by fee-supported departments are reviewed by the appropriate principal administrators and campus committees prior to approval by the president, review by the USNH chancellor's staff, and approval by the trustees. Any additions to current staffing levels require approval by the chancellor. Under the three-year contract between the College and the KSCEA signed in August 1999, department chairs will be assuming greater budget responsibility.

USNH maintains a Long Range Technology Plan which establishes information technology goals and sets aside funds to support high priority campus and system technology improvements. The plan approved by the trustees in 1995 included KSC's acquisition of new student information systems (SIS), and the plan approved in 1999 calls for a new financial and human resources system to be acquired and installed in fiscal year 2002 (the FRESH Project).

Over the past three years KSC has implemented a new student information system, Datatel's Colleague system, which addresses "Our Plan" goals of improving services to students, improving administrative processes, and streamlining operations. As the College completes the second year of implementation, some major improvements, as well as some lessons about information technology, have become apparent and must be taken into account as the FRESH Project progresses. During the Datatel SIS implementation the College experienced problems with insufficient testing periods, financial aid refunds, feeds to student bills, and feeds and reconciliations to the USNH financial information system (CUFS). A reconciliation task force was established, and these problems were largely resolved within the 1999 fiscal year with assistance from the USNH controller and internal audit staff.

The new SIS allows for increased collaboration between the bursar and Financial Services, where significant cross-training has taken place. It has enabled the College to improve monitoring of and response time to financial aid applicants and to improve scheduling of students into classes. These improvements addressed measurable service shortcomings identified by Noel-Levitz consultants in areas key to attracting and retaining students.

Information systems changes have led to changes in the College's financial services organization, implemented in fiscal year 2000. To lead the FRESH Project implementation, a new Associate Vice President for Finance has been hired, reporting to the Vice President for Finance and Planning. This new Associate Vice President will receive support from a Director for Student Financial Services, a Director of Purchasing, and Coordinators of Accounting and Budget.

Additional efficiencies have been gained through the implementation of a purchasing card program in 1997. Accounts payable currently administers approximately 120 purchasing cards. The program has significantly reduced the time and record keeping involved in the purchasing cycle and has, above all, empowered participating account managers and support staff.

The most up to date reference for financial and administrative policies of USNH and Keene State College is via the College's web pages. System financial and administrative policies are periodically reviewed by USNH chief financial officers (FINPAC). Compliance review occurs through the USNH Internal Audit Office.

Over the past ten years the Office of Advancement and Alumni Relations has sought major gifts in support of specific two-year projects, including the $2 million Thorne-Sagendorph Art Gallery (half funded by state appropriations), the $250,000 Appian Way gateway, the $335,000 National Grange Mutual Safety Center project, and the $175,000 College Camp renovation. Annual fundraising has steadily increased over the ten-year period, with fiscal year 1999 emerging as the most successful year in the College's fundraising history. These fundraising efforts serve to reinforce the College's mission by promoting and sustaining relationships among alumni and friends as well as long-term partnerships with corporations, foundations, and the city of Keene. The College has launched another capital project to support improvements to its outdoor athletics facilities. A $2 million bequest received in fiscal year 1999 helped boost funding for financially needy New Hampshire students. This bequest brought the market value of endowment funds invested by USNH on behalf of KSC to $4 million in fiscal year 1999.

Advancement Office annual reports provide quantitative and qualitative assessment of the Office's activities and highlight fundraising accomplishments relative to themes and initiatives from "Our Plan." In fiscal year 2000 the Advancement Office plans to complete the implementation and training for Datatel's Benefactor, a new alumni/advancement information system integrated into the student and financial information systems.

In addition, the Keene Endowment Association (KEA) exists as a separately incorporated 501 C-9 charitable foundation to award scholarships and financial assistance to Keene State students ($55,000 in 1998). The KEA does not engage in fund-raising, which is carried out exclusively by the Advancement Office. The Keene Endowment Association operates within guidelines established by USNH Trustee policy for affiliated organizations, which include the provision that upon dissolution its assets become the property of USNH. The KEA's portfolio, valued at $3.8 million on April 30, 1999, is not included in the USNH Consolidated Balance Sheet, but is disclosed annually in a note to the USNH financial statements.

The College's financial statements are included in the USNH financial statements annually audited by Price Waterhouse Coopers, CPAs. The University System has received an unqualified opinion from its independent auditors in each of the last thirty years.

USNH maintains an Internal Audit Department to assist in establishing and maintaining policies and procedures to safeguard assets and in establishing and appraising compliance with internal controls. The Board of Trustees Executive Committee acts as the Audit Committee to oversee the activities of the Internal Audit Department. In recent years internal audit staff has assisted the College in improving reconciliation processes, balancing accounts receivables to USNH cash and the CUFS General Ledger, and improving administrative processes in financially complex departments such as Intercollegiate Athletics, the Student Center and the Arts Center.


Appraisal

Overall, Keene State College has been successful at addressing many funding priorities in keeping with "Our Plan" and other planning priorities over the ten-year period. Success has been primarily due to prudent management of campus budgets and College reserves held by USNH. Contractual commitments to faculty for salaries have been increased; rank minimums, professional development, and career transition have been funded. PAT and operating staff salaries have increased at rates comparable to faculty. Facility improvements have proceeded in a timely manner in accordance with the Master Plan during the last six years; however continued funding constraints will impair our ability to accomplish goals set forth in the Master Plan in future years. Technology access on campus has improved and the College has recently upgraded all administrative information systems.

Funding sources for new campus priorities, particularly in the form of state appropriations, have not been reliable, for either operating or capital budget initiatives; these initiatives often have required the use and depletion of campus reserves. Mandatory fee increases approved by the trustees are the only reliable source for inflationary increases and programmatic changes, such as student access to technology and Division III athletics. Funding of program and enrollment management initiatives and salary increases typically has been achieved through reallocation of dollars, assignment of non-personnel inflationary increases, or the use of revenue from enrollment increases. Such funding decisions have been made at the highest levels of authority and have produced a sense of confusion among some campus constituencies about how resources become available as well as a sense of bureaucracy and tight fiscal control. Decentralizing budget decision-making remains difficult in the current funding environment.

General operating budget reserves have increased to 2% of the fiscal year 2000 budget, an improvement over the past several years, but still low compared to NACUBO guidelines of 3-5% of general operating fund expenditures, and the USNH guideline of 3%. Keene State's overall reserve position has been relatively healthy among USNH campuses in recent years, and as a result, the College has derived a proportionally higher share of USNH short-term investment income ($740,000 in fiscal year 2000) to supplement the general operating budget.

Recent changes in the awarding of financial aid have addressed the College's goals of strengthening and coordinating recruitment, retention, marketing and financial aid strategies to ensure a stable enrollment, and have resulted in increased support to needy and academically talented students and more timely responsiveness to financial aid applicants. The $2 million bequest received in fiscal year 1999 will provide a permanent source of increased support in the amount of $80,000 per year for needy New Hampshire students. Additional financial resources will be required to support needy and talented students as costs continue to rise.

Over the past ten years technology has infused all aspects of the College's operations. The College has devoted increased financial resources to technology and technology support, as indicated by the steady growth in technology spending, which totaled $1.9 million in fiscal year 1996 and $3.5 million in fiscal year 2000. Technology budgets increased from 6.2% to 9.5% of general operating budget expenses over the same five-year period.

Increasing technology expenditures have been funded through the education technology fee, which doubled to $220 per academic year in fiscal year 1998. In fiscal year 2000, this fee generates $950,000. Academic and administrative staff and equipment resources have been pooled into technology accounts, increasing the accountability over technology expenses but constraining departmental resources. Academic and administrative departments alike recognize a need for additional financial resources to support growing technology applications. Increased information technology spending remains a challenge in the College's level funding environment.

Facilities management without adequate state capital appropriations poses obstacles for addressing the needs of academic programs. While considerable capital improvements have been made over the past ten years, much needed renovations and an addition to the Science Center stand in a long backlog of USNH capital projects needing attention. In light of this, the College assumes all other projects needing to take place over the next ten years will draw upon limited general operating funds. Annual renovation and repair spending averaged 4% of the total general operating budget over the past five years. Total renovation and repair expenses (including renovation and repair spending from auxiliaries) amounted to $2.7 million in 1999, representing approximately 1% of replacement value, well under the NACUBO guideline of 2-4% of replacement value.

The Datatel SIS implementation process at KSC was cited in the independent auditor's management letter in the fiscal year 1999. The auditors recommended that Keene State focus on making sure "that the appropriate control and support structure exists to ensure the stability and integrity of the system" and that policies and procedures regarding the implementation of any new system at USNH be strengthened. The College has responded in a timely manner in order to correct any serious problems with the new SIS and to ensure that they do not reoccur. Fiscal procedures and controls recommended by the auditors are being implemented. Recent modifications to the structure of the Finance and Planning Division address these issues as well. Responsibilities of new Associate Vice President for Finance and Senior Accountant positions include reviewing existing and new processes and recommending and implementing financial controls and procedures as necessary.

Fiscal and personnel policies of USNH place controls on campuses that delay action, add costs and inhibit responsive management practices. Transactions often require approval at multiple levels of responsibility both on and off-campus. USNH Trustee goals have recently indicated a shift away from pre-approval controls to post action auditing and reporting. The campus has begun to focus on responsibility areas in the budget process and is in a position to decentralize some of its approval processes as well. These shifts come at a significant time as the new Human Resources and FIS (the FRESH project) can support this more responsive, decentralized control environment.

The budget process has undergone some change in recent years. Budget planning has tended to be perceived as top down with little responsiveness to departmental needs, not surprising in the fairly static, level-funding environment of recent years. Recent changes have attempted to improve the budget communication process and improve the College's ability to allocate and reallocate limited resources in line with "Our Plan" and other identified planning priorities. Based on recommendations from the College Budget Committee, some department budgets have been increased. That Committee's focus on critical budget needs, begun in fiscal year 1999, will continue to form the basis for reallocation of resources among the seven principal responsibility areas (the Executive Division, Finance and Planning, Academic Affairs, Student Affairs, the Division of Arts and Humanities, the Science Division, and the Division of Professional and Graduate Studies). In fiscal year 2000 the budget calendar has been moved up so that there is more time to review and evaluate before budgets are established, and so that the critical needs can be identified earlier.


Projection

With the current public elementary and secondary education funding problems facing New Hampshire, the College recognizes that operating financial resources will remain tight for the foreseeable future. KSC management must continue to explore new revenue sources and control expenditures, while at the same time continue to reallocate funds to key areas. Having experienced similar constraints over the past decade, options, such as eliminating graduate programs and undergraduate options, shrinking the administrative structure and raising tuition over the inflation rate, lack the potential that previously existed. The College is concerned that anticipated revenue from higher tuition may be offset by greater out migration of college going in-state high school graduates and declining market share of out-of-state students. The College feels that USNH's efforts to increase state funding for educating in-state students are crucial to maintaining the College's affordability and accessibility. The College will increase advocacy efforts with our legislators to increase state funding.

The Trustees' goal of simplifying budget controls provides one new financial management tool for the campus to utilize in meeting fiscal constraints. The College Budget Council has recommended a process for implementing guidelines which will permit the president to authorize use of the first 2% of tuition income over budget (currently around $500,000), without further approval. In addition the CBC will continue discussing procedures for allowing academic departments to save funds for future year needs. These flexible budgetary procedures will provide an opportunity for the College and its principal cost centers to better plan for large expenditures and budgetary uncertainty.

Contributing to new budgetary procedures will be improved budget controls and monitoring tools derived from the FRESH project, implementing an integrated financial and human resources information system. Supplementing this implementation are plans for improved reporting capabilities, which will facilitate decentralized access to financial and personnel information. Over the next couple of years, the FRESH implementation will be a significant priority for both business and personnel staff implementing the system, as well as administrative offices that will use it.

Facilities repair and renovation and technology improvements will continue to draw a greater share of general operating funds. The repair and renovation plan for fiscal year 2000 through 2002 anticipates an increase in budgeted spending of approximately 7% annually. Operating budget repair and renovation funds will support under $1 million projects while larger projects remain in a backlog of USNH capital projects. A number of the campus funded plant and technology projects will require cost sharing among auxiliary enterprises and the general operating budget; such projects include heating plant improvements, security systems, campus debit cards, parking, and technology infrastructure upgrades to handle new and expanding network applications. Fee increases associated with these improvements together with the fee increases attributed to new bond funded projects, endorsed by the Student Assembly, will cause student costs to increase additionally over the next couple years. The lack of state support for funding critical needs will cause technology fees to continue to rise in order to fund student technology access and academic computing improvements identified in the College's technology plan.

"Our Plan" goals of keeping Keene State College affordable for students require a balance among several factors: keeping tuition and fees competitive, increasing institutional financial aid to fill the gap between federal assistance and family/individual ability to pay, and increasing endowment and grant sponsored student assistance to minimize the amount the College discounts its costs with institutional aid. One of the priorities for annual fund-raising is student financial aid, a commitment which must continue in order to help meet the increased costs the College will incur. The Advancement Office also plans to increase the College's scholarship endowment holdings by cultivating major gift prospects and promoting deferred and planned giving programs. While increasing enrollment can also provide funds to meet the above needs, it also inevitably increases expenditures-additional faculty, classrooms, financial aid, and housing and dining capacity.

In addition to seeking annual support from Keene State alumni, the College will continue to cultivate and pursue major public-private partnerships to fund specific capital efforts such as the College Camp renovation and the NGM Safety Center projects. Some of these partnerships benefit specific academic programs. The Division of Academic Affairs and the Advancement Office will cooperate to identify projects worthy of support and ties between academic disciplines and potential donors. Smaller ongoing campaigns targeting individual reunion classes and local businesses will continue to garner support for specific items such as artwork/sculpture or campus equipment needs. These types of projects have enabled the College to utilize its own campus resources by engaging the Physical Plant Department to perform many of these renovation and reconstruction efforts. The strengthening of this partnership between the Advancement Office and Physical Plant Department will continue to benefit Keene State, as these two areas work with other parts of the campus to identify projects that may be funded through private fund-raising campaigns.

The College will need to continue to evaluate, prioritize and make the changes necessary to keep it viable and successful in terms of meeting "Our Plan" visions and strategies. Linking resources to campus goals will reinforce participation in planning. Benchmarking resources and productivity to comparator institutions will provide a basis for identifying how the College can distribute its resources better to accomplish its goals. With improved reporting capabilities from new information systems, we can significantly enhance our participation in national and comparable institution cost and productivity studies. By utilizing and participating in financial reporting studies such as NACUBO's Comparative Financial Statistics survey for four-year colleges, USNH's data base of comparator institutions, and the Council of Public Liberal Arts Colleges survey, the College will possess greater ability to assess its efficiency and productivity.


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