|January 29, 2009|
LEROY DUBECK AT USF
2007 audited Financial Statement, he found $ 240 million in "unrestricted net assets" on page 7, on which the Statement read, on page 8, "Unrestricted net assets are available to the University for any lawful purpose of the University."
UFF raised the issue of this buffer for hard times with the administration and then in this Biweekly. And the subject has attracted attention ever since, most recently in the Provost's January 20 letter to the faculty, where he listed general areas where unspecified funds from these unrestricted net assets would be allocated.
At his presentation, Dubeck emphasized that the only officially confirmed financial statements are embedded in audit reports. Institutions generate many documents, including budgets, but the documents that reflect what actually happens are the audited financial statements made by the institution, published and in USF's case, submitted to and audited by the State of Florida.
USF's statements go back only to 2003, and there are two reasons for this. First, such statements are governed by the Government Accounting Standard Board (GASB), which overhauled its standards in 2002, making comparisons before and after 2002 problematic. Second, Florida's State University System was overhauled (twice!) early this decade. It is only in the last decade that USF has had local control over its assets. The result is that we have relatively little history to go on.
Dubeck directed our attention to four classes of assets:
What does that mean? Dubeck tended to suggest that "unrestricted" meant what the Financial Statement said it meant – after all, that is the report that the Board of Trustees and its delegate (the university administration) submitted to the state government, so presumably they stand behind their own report.
Dubeck warned that one has to be careful with how language is used. One can "commit" or "designate" funds for a particular purpose, but such commitments and designations can often be changed. His example was that if he decided to designate some of his savings towards purchasing a new car, and if the economy subsequently soured, he could change his mind. Similarly, the Board could commit or designate funds and then, if circumstances changed, the Board could change its mind.
Exhibit A was the $ 240 million in unrestricted net assets reported on the table on page 7 of the Financial Statement. But there were other exhibits as well. One of the most important lies in the history of the unrestricted net assets.
USF is surrounded by a cluster of "component units" (e.g., the USF Foundation) that raise, handle, and spend money. As of the end of the fiscal year 2003, the university had $ 117 in unrestricted net assets while the "component units" had $ 59 million more. At the end of the fiscal year 2007 – in the last audited statement – the university had $ 240 million in unrestricted net assets and the "component units" had $ 88 million more. The recent 2008 statement, as yet unaudited, reports $ 240 million in unrestricted net assets, and $ 79 million more in the component units; it is Dubeck's interpretation that all three hundred-odd million dollars are available in a crisis.
People may disagree about what a "crisis" is, but Dubeck was only interested in legal restrictions, and these funds appear to be effectively at the disposal of the board and the administration.
In addition, Dubeck noted that in the "Compensated Absences Payable" (for annual and sick leave) section, while the state pays only for the leave used or paid during the year, the university reports all outstanding leave as liabilities. Because the Statement says "The University expects the liability to be funded primarily from future appropriations," Dubeck argued that the money for leave is not tied up and therefore could be treated as additional usable assets: in 2007, the University reported $ 59 million of leave liability. Altogether, that's nearly $ 380 million available for a crisis as of summer, 2007.
WHERE DO WE GO FROM HERE?
Faculty Senate President Larry Branch announced that on Wednesday, January 21, the provost had convened the USF System Annual Strategic Budget Planning Process, which is charged with preparing an annual balanced operating budget "through a transparent, engaged process" while articulating with the strategic plans and the missions of the components of the system, finding funding sources (and efficiencies), and providing for growth while maintaining the financial integrity of the system and "the public trust through developing a clear understanding of revenue and expenditure patterns across the USF system." The operating principles included "openness and transparency," "mutual trust and respect," "customer service commitment," "training to assist people in working effectively," and "treating information as a resource."
The panelists viewed this initiative as a positive step for two reasons. First, the university and the community will benefit by involving and empowering its constituents. Just as panelists were glad that Dubeck's presentation brought the Student Government, Faculty Senate, and UFF together, and just as they hoped that they could build on these new connections, they also hoped that the new budget planning process will bring more collaboration and cooperation into the budgetary process.
You will need that collaboration and cooperation, advised Dubeck, who noted (as Provost Wilcox had in his January 20 letter) that President Obama's stimulus plan included money for higher education. Federal funding proposals under consideration ranged from $ 15 billion for higher education construction to $ 80 billion to states for various educational purposes, not to mention more money for the NSF, the NIH, and the Department of Energy. Most money will be funneled through the states, although some of it will come directly from the federal government. But money will not rain on USF, said Dubeck: we will need to lobby for our share. USF needs to have a committee that looks at the budget and can effectively advance USF's cause. "You cannot overlook this," said Dubeck, who urged the panelists and the audience to organize to get a share of the stimulus money.
An occasion is historic only in retrospect. The economic downturn, the public debate over USF's budget, and the new stimulus plan arrive together at a moment of realization. As several panelists said, we are all in the same boat. There was a consensus that building (as the new budget committee's charge put it) "a premier research university with state, national, and global impact" requires active involvement by all the players in the entire process. If USF succeeds, then this presentation will likely be remembered as a landmark in USF's transition; if USF fails, it will be remembered as a poignant might have been.
USF people first encountered Dubeck when he gave an invited talk about institutional finances at the joint Higher Education Conference of the National Education Association and the American Federation of Teachers. As Dubeck is one of the NEA's roving financial experts, UFF promptly asked the NEA if he could look at some statements from Florida universities and community colleges, and the NEA kindly obliged.
While Dubeck is a professor of physics at Temple University, he is also author of the NEA's "Budget Handbook," co-author of the American Association of University Professor's handbook on "College and University Budgeting," and he has lent his financial expertise to Temple's Board of Trustees, to the American Association of University Professors, to the U.S. Chess Federation, to various state education associations and the American Council of Education, as well as the NEA.
"Money," wrote Emma Lathen, "has a strange and powerful effect on human behavior." Anyone with Dubeck's experience will have a few Lathenesque stories to tell, and Dubeck had a few. For example...
Hopefully, Dubeck's visit, as a result of a cooperative effort of the Student Government, the Faculty Senate, and UFF, and the new Strategic Budget Planning Process, will lead to a more transparent and rational budgetary process.