Rollins College

1
Rollins College

• Understanding the Finances of the College

2
Understanding the Finances of the College

• How does the College Budget work?
• How do our endowments function?
• How are our construction projects funded?
• What is the relationship between The Campaign For
  Rollins and the budget?
• Where do the funds from the Campaign go?
• How has September 11th and the recession affected
  the College?

3
What are Budgets?

• Plans
• Expectations of Deliverables
• Controls
• Mechanisms to monitor revenues and expenditures
• Curtail spending in excess of authorized levels
• Commitments
• Agreements to deliver enrollment levels
• Agreements to deliver revenue

4
What are Budgets?

• Fiduciary Enablers
• Assurances to Board of Trustees that revenues and
  expenditures will be in balance
• Performance Measures
• Measures whether management is delivering
  expected financials

5
Planning

• Budgets begin by estimating annual revenues
• Student enrollment
• Gifts
• Financial aid
• Auxiliary. Revenue (dining services, bookstore,
  residence halls etc.)

6
Planning

• Determine Spending Priorities
• Proposed Increments
• Salary Wages
• Benefits
• General department expenses

7
Balanced Budget

• Revenues Expenditures

8
Budget Issues

• Salary Wage Increases
• Healthcare
• Property Insurance
• Utilities
• Deferred Maintenance
• Investment Yields

9
Budget Issues

• Labor
• 44 of our expenditures are salaries or about 26
  million
• Each 1 increase costs 260K another 70k
  benefits
• Health Insurance
• Increase of 1 million
• Other Insurance
• Expected to increase 25 to 35 (property
  liability)
• Utilities
• 10 to 30 increase

10
Endowments

• Have a very long-term investment horizon (in
  theory, a perpetual one),
• Generate stream of earnings to support current
  operations that will remain stable or grow in
  real or inflation adjusted terms.

11
Endowments

• True Endowment funds permanent endowments
• Term endowment funds temporary endowments
• Funds functioning as endowment (quasi-endowments)

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Endowments

• True Endowment Funds
• Received from a donor
• Restrictions that principal is not may not be
  spent.
• Term Endowment Funds
• Donor stipulates that the principal may be spent
  after a stated period of time or upon the
  occurrence of a certain event

13
Endowments

• Funds Functioning as Endowments
• Established by the Board of Trustees
• Like an endowment fund but may be spent at any
  time
• Discretion of the board

14
Endowments

• Pooled
• Invested according to a Board determined asset
  allocation
• Individual endowments are configured as shares in
  the pool

15
Endowment

• Spending
• Return available for budget support is calculated
  by spending rule
• To smooth endowment spending three year moving
  average

16
Endowments

• Spendable Return
• Amount of endowment income or income and
  appreciation allotted on a regular, periodic
  basis for current expenditures.

17
Endowment Spending Distributions
18
Yield
19
Capital Projects

• Two Types
• Major must be approved by Board of Trutees
• 100,000
• Buildings, infrastructure
• Minor Approved by Presidents Staff
• Office furniture, computer systems etc.

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Capital Projects

• Master Plan developed
• Identified needs
• Estimated cost
• Decide to fund from
• Net assets (cash)
• Borrowing (bonds)
• Gifts

21
Capital Projects

• College funds a small portion of each project
• Restricted gift to the Project
• Must go to pay construction cost
• Unrestricted gift to the project
• Issue bonds and invest the gift
• Arbitrage earnings
• Revenue base
• Issue debt and pay debt from revenue generated
  (Sutton, SunTrust Plaza)

22
CampaignBudget

• Campaign includes cash and pledges (some are
  testimonials and wont be collected until donor
  passes)
• Pledges will be collected over time (within 5
  years of end of campaign)
• Can be from one year up to an unknown time such
  as upon death of donor
• Sometimes donors default

23
CampaignBudget

• Includes the annual fund which is already built
  into the budget and spent
• We preferred underwriting gifts for the operating
  budget
• However, a number of gifts were restricted to
  enhance facilities, scholarships, provide for
  endowed chairs and cant be spent on operations
• Some of the gifts were designated for
  construction projects

24
Campaign by Purpose

• Capital 40.3 m
• Current Operations 41.2 m
• Endowment 78.7 m

25
Cash and Receivables

• Pledge Receivables 17.2 m
• Expectancies 50 m
• Cash 93 m

26
9-11-01 Recession

• Effect on Rollins College
• Insurance will go up!
• Fear Factor!
• Risk Aversion
• Enrollment
• Investments
• More Prudence