Agenda for Excellence 1995-2000
STRATEGIC GOAL 3
The University will manage its human, financial, and physical resources effectively and efficiently to achieve its strategic goals.
Subgoal 3(a): Penn will create a more responsive and effective planning, budgeting, and outcomes evaluation process to ensure that its resources support its academic mission.
Since the initiation of the Agenda for Excellence five years ago, the University of Pennsylvania has made major changes in the methodologies, practices and procedures that are employed across the institution for financial planning and resource allocation.
These changes have enabled the University and its component schools and responsibility centers to plan much more comprehensively and with much greater foresight than in the past for the realization of revenue, the successful development of new initiatives, and the articulation and implementation of realistic, achievable strategic goals. This in turn has greatly enhanced the ability of academic leaders and administrative managers across the institution to increase their efficiency and effectiveness and turn more of their visions into concrete reality.
Among the major changes in planning and financial management that have been realized over the past five years are the following:
Change # 1: The replacement of the prior budget planning process- in which budget plans were constructed only for the forthcoming fiscal/academic year--with a new planning process in which every School and Center now prepares a rolling five year financial plan each year for review by the University's senior officers.
Because the entire institution and each of its component parts always has a five-year prospective financial plan in place, academic leaders and administrative managers are now much better able to model the potential impact on their multi-year financial position of prospective capital projects, new tenure-track faculty hires, the development of new academic programs, and many other initiatives that require near-term decision-making but may not have material financial impacts on the institution and its component organizations for several years.
Change # 2: The development of new and much more detailed and comprehensive procedures for the review and approval of capital projects in a process that tightly integrates facilities planning and capital project financing with the development of each School and Center's operating budget.
A multi-disciplinary team involving representatives from Facilities Services, the Provost's Office, the Treasurer's Office, the Budget Office, and Central Development now reviews and fine-tunes every capital project proposal before it goes to senior officers and the Trustees for final review and approval.
Every project is now required to have a well-thought-out scope definition, a realistic professionally-developed cost estimate, a detailed and realistic financing plan, and a full income and expense cash flow projection before advancing through the review and approval process. No project can be initiated unless its scope has been reviewed and approved either by the Provost or by the Executive Vice President, as appropriate, for consistency with University and School/Center strategic plans.
Change # 3: The development of an "all funds" budget for each School and Center.
Every School and Center is now required to submit at least an outline budget for every fund group in which that School or Center has had revenue or expenditure activity over the past several years, or expects to have revenue or expenditure activity over the coming five year period.
The submission of an "all funds" budget for each School and Center -- accompanied by summary actual "all funds" revenue and expenditure information for the most recently-completed three fiscal years -- permits the Provost and the Executive Vice President to more realistically assess the total financial position of each School and Center whose budgets they review.
Change # 4: The incorporation of detailed "Input Assumption" information into each School/Center budget submission.
Each School and Center is now required to submit a detailed set of input assumptions data as part of their annual five-year budget submission. Actual results for each input for the most recently completed three years are also submitted, so prospective assumptions can be understood in the context of recent actual performance.
Input assumptions data enable the Provost, the Executive Vice President, the Deans and the Vice Presidents to better understand the goals and performance assumptions that undergird each School/Center budget submission. Most important, this non-financial data enables all participants in the budget planning process to assess whether each School and Center is making progress in achieving its strategic goals and improving on its levels of efficiency and effectiveness.
For Schools, key input assumption variables include new matriculants by degree and program, total enrollment by degree and program, numbers of course units taught, filled standing faculty FTEs, and non-standing faculty and associated academic support staff FTEs. Each School also submits a detailed plan outlining how their standing faculty positions are to be funded over the forthcoming five-year period. Material submitted by the Schools is augmented by supplementary material prepared by the Office of Institutional Research presenting actual data for each input assumption variable for each School over the past ten years. This enables the Dean and the provost to assess School goals for the forthcoming five year period against the backdrop of actual trends for the past decade.
Non-School Centers are required to submit "Service Delivery Goals" as part of their annual budget submissions. These Goals define the major service categories in which each Center provides services either to other Responsibility Centers within the University, to major campus constituencies such as students and faculty, or to other external parties. The "Service Delivery Goals" identify the major areas in which each Center expects to deliver service in the coming fiscal year, and present a measurable service delivery goal in each area so identified.
Change # 5: The simplification and rationalization of the University's procedures for allocating certain costs among the Schools and Centers.
The Provost and the Council of Deans carried out a major planning effort in 1999 to revamp the University's Allocated Cost system in order to enhance the transparency and predictability and equity of the cost apportionment methodologies then in place, and to increase incentives for the efficient use of space and other administrative resources.
Change # 6: Incorporation of a budgeting and financial planning component into each School and Resource Center external review.
External reviews for each School and Resource Center were called for in the Agenda for Excellence and are now standard operating procedure. The Provost's Office and the University Budget Office have worked closely together to ensure that an assessment and analysis of each School and Resource Center's recent financial performance, prospective financial plans, and overall financial capacity are an integral component of each external review.
Subgoal 3(b): Penn will broaden its administrative restructuring initiative to encompass all major administrative activities and processes, both in the central administration and in the schools.
Reduce the cost of central and school administration by $50 million over the next five years and reinvest these savings in support of University and school-based strategic priorities.
Standardize Penn's disparate procurement systems to achieve economies-of-scale and maximize savings on goods and services purchased annually.
Generate $10 million at the central level in new revenues through entrepreneurial business ventures and better management of existing auxiliary enterprises.
Provide administrative employees with greater opportunities to improve their skills, grow professionally, and enhance their careers within the University.
Strengthen the system of human resource development and performance review.
Work with all units of the University to ensure the maintenance of a humane and fair workplace environment for all employees.
Streamline, improve, and reduce the costs of Penn's benefit system while maintaining total compensation at levels consistent with those of peer institutions.
In 1995, the University launched a comprehensive administrative restructuring program. To date, the EVP Center has pursued strategies in a broad number of administrative areas and processes that have focused on eliminating services that are no longer necessary, outsourcing services that can be performed more effectively by others, and reengineering core processes that must be performed by the University. Illustrative examples of success include:
Service Improvement and Cost Avoidance
New Revenue Generation
As the chart shows, $35.156 million in new revenue has been generated during the past three years within the Division of Business Services and the Division of Finance--a top priority for both Divisions.
Student Financial Services has developed an innovative program to sell student loans to investors. The program has generated $16.5 million in new revenues to be used to improve student services and provide additional financial aid funding at lower rates to students.
The agreement to outsource the bookstore to Barnes & Noble provides Penn's students with a modern, full-service facility and guarantees the University an improvement to its net revenue of at least $19.5 million over the life of the contract. In addition to an initial payment of $1.15 million, Barnes & Noble has guaranteed the University that it will generate at least $1.3 million in annual revenue to the University. Moreover, Penn and Barnes & Noble will share any gains in revenue above that target.
The decision to work with MBNA to offer a new campus card provided one-time revenue to the University of $6 million--$4 million of which was used to improve campus lighting. The annual payments of $475,000 for five years are used to support Development and PennCard infrastructure maintenance.
Two major national meetings during the summer of 2000 (RNC and ResNet) were very successful and have helped propel initiatives such as Destination Penn. Annual revenue targets of $1 million have already been exceeded. $600,000 of this amount was used to fund the entrance drive to the Inn at Penn known as Steve Murray's Way. The balance will be used toward the Housing and Dining renewal program.
Improving the Quality of Campus Life
In 1995, Penn's overall campus environment was not adequately supporting the University's goal of attracting and retaining the best students and faculty. The campus and surrounding neighborhood were experiencing significant instances of crime. The operations and staffing in Public Safety were insufficient to effectively secure the campus, and Penn lacked the range of services and retail establishments customarily available at urban universities of Penn's size and stature. The neighborhood and environment surrounding the campus were in economic decline.
Restructuring introduced three strategies to improve the quality of campus life:
Crime Reduction: $13 million of one-time investments in the technology, operating budget, and facilities of the Division of Public Safety were made by Penn to reduce campus crime and provide more of a stable environment. Specific investments and improvements include:
These initiatives led to the following reductions in criminal activity between 1996 and 2000:
New Retail Endeavors: In concert with the Public Safety initiatives, a parallel initiative has been introduced to increase the number and quality of retail establishments on and around campus. Investments in new commercial amenities and a welcoming investment climate will encourage further and higher levels of private investment to University City, thereby creating a vibrant level of daytime and evening street-life activity in the area. In addition to the projects below, over $6 million has been spent on improving on-campus lighting and the streetscape.
Sansom Common, undertaken in 1997, is 300,000 square-foot commercial corridor in the heart of campus. The project features one of the largest academic bookstores in the country, operated by Barnes & Noble, the 238-room Inn at Penn and retail stores and restaurants. The Inn provides outstanding lodging and dining accommodations and features diverse meeting and banquet accommodations with approximately 18,000 square feet of flexible meeting space. Operated on Penn's behalf by the Hilton Hotel, the Inn at Penn includes a full-serve restaurant (The Ivy Grille) and houses the new Faculty Club.
The Left Bank at 32nd and Walnut Streets is the gateway to Penn. It is a seven-story Art Deco building that has been transformed from the old General Electric Building. In partnership with Penn, Dranoff Properties is developing and managing the property which features 282 studio, one, two, and three-bedroom apartments.
Other Key Restructuring and Reengineering Initiatives
Parking Services: During the 1998-99 fiscal year, completed a long-term analysis of its operations and finances. As a result of the study, it became clear that costs were threatening to overwhelm revenues, which were far below market. Parking rates were consolidated and increased by approximately 19% in July 1999. A new parking pre-tax program was introduced at the same time to help mitigate the cost impact for Penn faculty and staff.
Ridership on all Penn shuttles has grown more than 600% over the last 10 years. During 1999, Transit Services were restructured and a new bus service was introduced, which helped avoid approximately $200,000 of annual costs for the program.
Telecommunications and Penntrex Student Telephone Services: Business Services entered into two major contracts that reduced cost and improved services. A new two-year contract reduced average long-distance costs by 20% for interstate and international calling, and a new seven-year contract for Penn's basic telecommunications system resulted in annual cost savings of $1 million.
New Business Development and Branded Products: created in 1999, this new department within Business Services supports the University's commitment to economic and business development through new product development, marketing and communications strategy. The office promotes new business initiatives including high technology acceleration, a series of unique licensed products based on the University's diverse and historic resources, such as the Museum, and further positioning University City as a recreational destination for retail shopping, dining and arts and culture attractions.
Campus Development Plan: Nearly two years in the making, the Campus Development Plan creates a robust and integrated vision that positions Penn as a leading and active participant in the economic development and cultural health of Philadelphia and the region. It defines opportunities for growth and development and recommends strategies for implementation over the next 25 years.
Five working committees were established to explore key areas of inquiry with regard to their impact on campus life and learning. These committees examined the following topics:
Facilities Renewal: Consistent with the Campus Development Plan, a building condition assessment has been done for all non-residential campus facilities. The replacement value of the assessed facilities is $1.5 billion; the facilities renewal need is $400 million. As a result of this study, annual facilities renewal funding from central sources has increased from $6 million to $12 million over the past several years.
Capital Approval Process: Facilities Services redesigned the capital approval process for capital projects with estimated costs greater than $250,000 and instituted tighter financial controls for all construction projects. This revised procedure ensures that each capital project completes three review processes (programmatic, financial, and architectural) during the lifetime of a project cycle at a point in time when relevant information is available and highly certain. Efforts have resulted in the completion of 244 projects at 8% ($14 million) below the associated aggregate approved budget since April of 1998.
Minority & Women-Based Employment Program: Recent large capital projects have included MBE/WBE targets within their executed base contracts. Through the end of calendar year 2000, $110 million in construction contract awards have been made to MBE/WBE firms over the past five years.
Residential Initiatives: The renovation of the Quadrangle Residence is a 4-year, $75 million, phased renovation of the historic residence hall, to be completed Summer 2002. At the same time, an ongoing campus housing and dining renewal program is in the early stages of planning and development.
To ensure adequate opportunities and sufficient resources to pursue future campus growth over time, the University has purchased and developed certain key properties in University City, including:
Much of the restructuring undertaken by Finance over the past five years has been centered around improving and upgrading the Financial Management System (FinMIS) introduced in 1995-96. Penn has been a leader in the implementation of new financial systems, and although the implementation of FinMIS was lengthy, rough and complicated, it remains one of the few successful systems projects undertaken by a major research university in the country. FinMIS established new operating systems for purchasing, accounts payable, general ledger, salary management, and budget planning. The project also introduced the data warehouse at the University, which has become the principal repository for enterprise-wide data critical in both planning and day-to-day operations.
Some of the early achievements included:
In Student Financial Services, a comprehensive arrangement with Citibank, allows SFS to continue to offer needed loans to financially aided undergraduates; offer below market rate loans to students attending Penn's graduate and professional schools; and significantly reduce the potential contingent liability from the Wharton Loan. In addition, the "Forward Purchase Agreement" with PHEAA (the Pennsylvania Higher Education Assistance Agency) compensates Penn upon the sale of Stafford Loans. This arrangement results in recurring revenue of between $4-5 million per year, which are used for financial aid.
Office of Investments recruited a Chief Investment Officer in 1998 to manage endowment along with the Trustee Investment Board. The Office has actively begun a process aimed at rebalancing and diversifying the portfolio to produce enhanced long-term returns.
The Office of the Treasurer has been instrumental in developing new funding to facilitate University growth and investment. During the past five years, Penn has implemented $325.8 million of external tax-exempt financing for these purposes.
The new retirement plan allows weekly-paid, non-exempt employees to participate in the same plan as faculty and monthly-paid staff. This ensures that all participants will receive a base contribution to their retirement account without making a contribution.
A web-based benefits open enrollment application is part of a broad effort to make HR a consulting organization rather than a transaction organization. The primary leader of this transformation has been the use of the web to replace paper-based administration. Other applications include course/event enrollment, job postings, and employee appraisal forms. Over 58,000 candidates have submitted their resumes electronically to the Penn resume database, which eliminated $50,000 in copying and courier costs. The University was also able to redirect approximately $500,000 in paper Inquirer ads to electronic web ads.
The Job Classification Redesign Project was completed in April 1998, ensuring that Penn's staff positions and compensation are competitive in the labor market. Further, the Position Inventory system provides a way to count and control positions and dollars, whether open or filled, by funding source, by job class family, and by month, down to the organization level.
Penn's Quality of Worklife (QOWL) initiative was introduced in 1995 to enhance faculty and staff opportunities for a constructive, productive, and positive work experience. QOWL initiatives include flexible work options, health and wellness promotion programs, employee assistance programs, dependent care referral, snow day childcare program, and the spring faculty and staff appreciation picnic, attended annually by more than 6,000 employees. In addition, the Models of Excellence Program was introduced in 2000 to identify and recognize outstanding staff contributions to the University.
The University training offices were combined to produce a more unified Learning and Education Unit, provide ease of access to University staff, improve service, achieve economies of scale, and utilize technology more effectively.
In labor management relations, Penn currently has approximately 1,100 staff members represented by five collective bargaining units. Human Resources has successfully negotiated nine contracts with these bargaining units. Joint labor/management task forces were established in the Facilities, Dining, Library, and Public Safety areas to improve service.
Office of Audit and Compliance
New leadership was recruited for the Office of Internal Audit in 1996, and the internal audit and compliance functions were structured into the Office of Audit and Compliance.
Strategic investments were made to establish a significant Corporate Compliance function focused on identifying opportunities for revenue enhancements and cost reduction. Penn was the first institution to proactively create a "corporate compliance" function charged with assessing "institutional-wide" compliance risk at a time when compliance functions were being established to focus solely on clinical billing issues. A construction audit initiative also was developed to focus on all major new construction and facilities renewal projects.
The University Trustee Committee on Audit and Compliance adopted the Committee of Sponsoring Organizations' (COSO) integrated internal control framework (IICF) as its internal control system in June 1997. IICF provides a facilitated training and assessment process that:
By working with management throughout the University, OAC has enhanced revenues by $1.2 million annually ($5.9 million to date), as well as provided two one-time enhancements realizing more than $8 million. In addition, through continuing cost reductions, the University has saved $1.5 million over the past two years, and through one-time reductions, has saved $880,000.
Significant progress was also made toward building in a process within the University's decentralized management structures to better anticipate, manage and/or mitigate risks.
Penn's model for the internal audit and corporate compliance function is recognized as the industry's benchmark, based on feedback from peer institution representatives and industry leaders.
Information Systems and Computing
ISC has partnered with schools and administrative centers to formulate and deliver the infrastructure, information access and applications that deliver the benefits in service, collaboration and efficiencies that information technology can provide. As the concept of E-Business continues to expand, Penn is responding to the challenges and opportunities by increasing focus on self service. E-Business encompasses a wide range of systems that are progressing from informational web sites to systems that facilitate both web-based interactions (BEN, PennERA, PennInTouch, etc.) and information exchanges (on line personnel recruiting, Undergraduate Admissions etc.)
In the area of ECommerce/Business, a new system of Procurement (B2B) is based on an integrated EC strategy that is designed to ensure efficiency in all our commercial transactions. Authorized users may procure one-time low dollar goods and services from a retailer and authorize payment thorough a University credit card (PROCard).
Penn's "business to consumer" (B2C) includes a suite of branded products and services available via the web (ShopatPenn.com) and a growing portfolio of fee-based transactional activities with external constituencies. Fee payment systems are also under development such as electronic payment of bursar bills and an electronic system to accept credit card authorized gifts (E-Giving).
In 1996, ISC implemented a comprehensive off-site recovery plan for the data center located at 3401 Walnut Street. This plan was developed and is maintained to provide capabilities to recover administrative systems that are essential for the University to conduct critical business processes within 36 hours following a disaster at the data center.
ISC Networking & Telecommunications is a new department begun in June 2000 in recognition of the need for support of the design and deployment of the next generation of PennNet, a multi-year, multi-phase project to enhance PennNet and prepare for the complete convergence of data, voice, and video technologies over one physical network.
Business Enterprise Network (BEN) is a major expansion and upgrade of the University's existing suite of financial systems. BEN is designed to facilitate a further shift from time spent on "transaction processing" by administrators to time spent on more forward looking activities. Improved capabilities include: electronic receipt and matching of invoices, electronic imaging and accessibility of accounts payable invoices, and the electronic transmission of approved purchase orders to supplies. Among the new BEN capabilities will be an on-line Travel Reservation System and an electronic Expense Reporting and Management System for travel and entertainment expenses are under development. The reservation system will allow Penn users to book travel arrangements while ensuring that they receive the lowest fares. The expense reporting function is intended to reduce reporting time and paperwork, provide electronic routing of expense reports for approval, and shorten the turnaround time for reimbursements.
ISC has also built a comprehensive prevention and awareness program with outreach to staff, faculty, and students to control external and internal misuse and abuse of University information and technical resources. Penn works in partnership with local IT staff to detect and correct infractions that threaten the safety and privacy of Penn's information as well as violations of the law (e.g., copyright infringement).
Among our Ivy+ peers, Penn is an acknowledged leader and innovator in the planning, implementation and support of campus-wide administrative systems (e.g., PennInTouch). Penn has shown aggressive leadership in E-commerce and in providing direct access to administrative information. Penn is also a recognized leader in Business Continuity Planning among higher education institutions.
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No. 32, SUPPLEMENT: Agenda for Excellence 1995-2000 (~ 375 k; 32 pages)
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As published in Almanac, Vol. 47, No. 32, May 1, 2001