Q: In the University Financial Model, my central service provider costs are allocated to other university units and schools. How will those allocations be calculated?
A: Each of Melody Bianchetto’s units fits in one of three central service cost categories: Student Services, Support Services, or Business and Executive Management Services. Each cost category has a unique allocation formula. Here is a breakdown of cost categories and Melody’s associated units:
- Student Services
- Office of Student Financial Services
- Research Support Services
- Office of Sponsored Programs
- Business and Executive Management Services
- The Associate VP’s Office
- Office of the university comptroller
- Managerial Reporting Project
Q: So how does it work?
A: In general, start with the net cost. Any cost a unit generates, without a cost-covering revenue source or recovery, is a cost that must be covered through the cost-allocation process.
So for example, the Office of Sponsored Programs has net costs that are allocated to the units that use its services. A weighted formula based on the number of research awards and dollar value of research awards is used to determine each unit’s proportional share of the OSP costs.
|OSP Formula (sample)|
|Unit’s associated costs = .5 (share of award count) + .5 (share of research dollars)|
Let’s look at a simple hypothetical scenario:
If school A had 10% of the total awards processed by the OSP, and those awards reflected 8% of the total research dollars, School A would be allocated 9% of the OSP net costs as in this hypothetical example.
|Units||Awards #||Research $||# %||$ %||Share of OSP Costs|
|School A||100||$ 800,000||10%||8%||9%|
|Other units||900||$ 9,200,000||90%||92%||91%|
Q: Do all of Melody’s units have their costs allocated by the same formula?
A: As noted above, most of Melody’s units fall in the central service category of Business and Executive Management. The formula for central Business & Executive Management cost allocation is a little more complex. Those costs are allocated only to academic schools and to specially-designated academic or public service entities (Miller Center, ROTC, Center for Public Service, museums, Virginia Film Festival, etc.). Each of these units is allocated the B&EM costs based on its proportion of direct expenditures for each entity as illustrated in the hypothetical example below.
Melody’s other units fit in Research Support Services (whose costs are allocated as shown in the previous example) and Student Services (with costs allocated to schools according to how many students are enrolled in them). For other service areas of the University, there are other formulas—there are a total of eleven central cost-allocation formulas, and Melody’s areas use three of them.
Q: Does the University Financial Model apply to all components of the University?
A: It is important to understand that the University Financial Model applies only to the University Division (agency 207) and only to operating funds (not capital funds). Two schools, the School of Law and the Darden School, are covered under a different arrangement. They pay a flat tax for the central services they use under an agreement from more than a dozen years ago recognizing that they are “self-sufficient” schools. They earn that description because they each generate enough revenue, largely through their market-rate tuitions, to cover the costs of the central services they consume.