financial planning and accounting for q2s

1

Financial Planning and Accounting for Q2S

Ms. Lisa EasonMr. Ken Kincaid

1

2 Three Questions

How’d we get into this ?

How do we prepare for this?

How do we make it through the first year?

3How’d we get into this ?

Academic folks said:

Convert to semesters and it will be good for students

Business folks said:

But this is a huge project, we’re just recovering from mergers, state revenue has crashed, it will impact the entire system’s operations, it’s very expensive, enrollment will drop, and the Regents’ experience has spooked everyone who witnessed it.

4Conversion will be Good

for Students

But it will be expensive

There are no state funds for this

We’ll need Other Funds: tuition, fees, etc

Tuition will need to go up $5 per hr in FY11

Tuition will need to go up $5 per hr in FY12

We’ll need tuition at $50 per quarter hr to make this happen

5

OK. We’ll raise tuition.The conversion will be good for students

Tuition Revenue is expected to increase by over $21,000,000 each year

Summer200901

Fall200902

Winter200903

Spring200904

Sum of 4Quarters*duplicated

Payment Due Hours

less than 15 hours Total Number Enrolled 53,381 72,072 68,569 72,824 266,846 less than 15 hours Total Hours 437,817 628,450 597,716 628,370 2,292,353 2,292,353 less than 15 hours Number Received HOPE 38,829 52,216 50,949 53,620 195,614 15 hours Total Number Enrolled 6,446 10,666 10,011 10,145 37,268 15 hours Total Hours 96,692 159,992 150,166 152,176 559,026 559,026 15 hours Number Received HOPE 4,302 6,868 6,760 6,798 24,728 over 15 hours Total Number Enrolled 7,794 12,478 10,896 12,871 44,039 over 15 hours Total Hours 139,795 224,784 195,203 234,047 793,829 660,585 over 15 hours Number Received HOPE 5,883 9,030 8,148 9,773 32,834 TOTAL Total Number Enrolled 67,621 95,216 89,476 95,840 348,153 TOTAL Total Hours 674,305 1,013,226 943,084 1,014,593 3,645,207 3,511,964 TOTAL Number Received HOPE 49,014 68,114 65,857 70,191 253,176

Additional Annual Revenue due at $45/hr if tuition increased by $5/hr 17,559,819 Amount of Additional Annual Revenue paid by HOPE 12,765,988

Additional Annual Revenue due at $45/hr if FY10 Credit Hours Increase by 20% 21,071,782

6

-

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

80,000,000

90,000,000

100,000,000

Scenario A Scenario B Scenario C

Personnel Costs Revenue Loss (FY12) Revenue Loss(FY13) Formula Loss (FY14)

Not Enough Money. Conversion may cost

$80M+

-3% Enrollment, -8% FTE -7% Enrollment, -13% FTE -9% Enrollment, -15% FTE

$54,000,000

$81,000,000

$92,000,000


for Students

Need Accumulated Reserves

Not enough Other Funds annually

Need to accumulate funds over two years

Carryover statute must be renewed

Carryover statute should include tuition revenue

Caps on reserves must be high enough to cover at least $80M cost of conversion

8

OK. We’ll fix the carryover.

The conversion will be good for students

HB 1128 as Passed

OCGA 20-4-21.1.

Revenue collected by any or all institutions under the Technical College System of Georgia from tuition, departmental sales or services, continuing education fees, technology fees, or indirect cost recoveries shall not lapse. The amount of revenue from tuition that shall not lapse under this Code section shall not exceed 15 percent of the tuition collected. This Code section shall stand repealed on June 30, 2010 2013."

9But there will be fewer terms… Longer terms.

All course-related costs and credits will have to be recalculated

Tuition

Fees

Course load

Credit hours

10

OK. Recalculate the rates.

The conversion will be good for students

The Conversion Ratio for Financial Purposes is 1.5 to 1.0

Since 1 FTE = 45 Quarter Hrs = 30 Semester Hrs, therefore:3 Quarter Hrs = 2 Semester Hours1.5 Quarter Hr = 1.0 Semester Hr1.0 Quarter Hr = 0.6667 Semester Hr

And, therefore, for Tuition:$40/ Qtr Hr = $60/ Sem Hr$50/ Qtr Hr = $75/ Sem Hr

And also, for Student Fees:$28 Qtr Registration Fee = $42 Sem Registration Fee$18 Qtr Activity Fee = $27 Sem Activity Fee$4 Qtr Insurance Fee = $6 Sem Insurance Fee$35 Qtr Technology Fee = $53 Sem Technology Fee

Total Recurring Fees = $85 Qtr, $127 Sem

11Enrollment will drop.

Revenue will fall.

Cost Model produced the following scenarios:

• Scenario A—Enrollment decline of 3%; FTE decline of 8%

• Scenario B—Enrollment decline of 7%; FTE decline of 13%

• Scenario C—Enrollment decline of 9%; FTE decline of 15%


for Students

Maintaining enrollment is critical

Student Advisement can maintain FTE’s

Public information

System-wide education

Advisement software

Leadership Summit

May 11-12, 2010

Q2S LEADERSHIP SUMMITTECHNICAL COLLEGE SYSTEM OF GEORGIA

14How do we prepare for

this?

Supporting role, once again

Maintaining FTE levels is critical to funding

Advisement is critical to maintaining FTE levels

Supporting Advisement is critical

Conversion will be good for students

If done right, it could also be good for the business office.

15Good Advisement, Good

Investment

What if Advisement does nothing?

FTE's Qtr Assume 3 5-Qtr-hr courses Assume 3 3-Sem-hr Courses FTE's Sem % Change

Fall 43,290 649,350 389,610 25,974 -40%Winter 63,283 949,245 - - -100%Spring 62,872 943,080 565,848 37,723 -40%Summer 63,240 948,600 569,160 37,944 -40%

Annual 77,562 3,490,275 1,524,618 50,821 -34%

16Poor Advisement, Very

Expensive

Poor Advisement could reduce Tuition revenue by as much as $60M

FTE's Qtr Assume 3 5-Qtr-hr courses Assume 3 3-Sem-hr Courses FTE's Sem % Change

Fall 43,290 649,350 389,610 25,974 -40%Winter 63,283 949,245 - - -100%Spring 62,872 943,080 565,848 37,723 -40%Summer 63,240 948,600 569,160 37,944 -40%

Annual 77,562 3,490,275 1,524,618 50,821 -34%

Tuition @ $50/Qtr hr 174,513,750$ Tuition @ $75/Semester hr 114,346,350$ -34%

Change in Tuition (60,167,400)$ -34%

17Excellent Advisement, Very

Rewarding

What if Advisement Keeps FTE's Unchanged?

FTE's Qtr Assume 3 5-Qtr-hr courses Assume 5 3-Sem-hr Courses FTE's Sem

Fall 43,290 649,350 649,350 43,290 0%Winter 63,283 949,245 - - -100%Spring 62,872 943,080 943,080 62,872 0%Summer 63,240 948,600 948,600 63,240 0%

Annual 77,562 3,490,275 2,541,030 84,701 9%

Tuition @ $50/Qtr hr 174,513,750$ Tuition @ $75/Semester hr 190,577,250$ 9%

Change in Tuition with no change in FTE each term 16,063,500$ 9%

18Enrollment’s Impact on Fee

Revenue

What if Advisement does nothing?

Headcount QtrAssume Scenario C -

Decrease of 9% under Semesters % Change

Fall 65,139 59,276 -9%Winter 90,246 - -100%Spring 89,476 81,423 -9%Summer 90,965 82,778 -9%

Annual (Duplicated) 335,826 223,478 -33%

Fees @ $85/ Qtr Student 28,545,210$ Fees @ $127/Sem Student 28,381,681$ -1%

(163,529)$

19 Hold on to Headcount

What if Advisement Keeps Headcount Unchanged?

Headcount Qtr Assume No Change in Headcount % Change

Fall 65,139 65,139 0%Winter 90,246 -100%Spring 89,476 89,476 0%Summer 90,965 90,965 0%

Annual (Duplicated) 335,826 245,580 -27%

Fees @ $85/ Qtr Student 28,545,210$ Fees @ $127/Sem Student 31,188,660$ 9%

Change in Fees with no change in Headcount each term 2,643,450$ 9%

20Summary of Advisement

Payback

Financial Risks and Rewards from Quality of Student Advisement

Tuition Recurring Fees Total Baseline 174,513,750 28,545,210 203,058,960 Poor Advisement 114,346,350 28,381,681 142,728,031 Excellent Advisement 190,577,250 31,188,660 221,765,910

Chge from Baseline to Poor (60,167,400) (163,529) (60,330,929) Chge from Poor to Excellent 76,230,900 2,806,979 79,037,879 Chge from Baseline to Excellent 16,063,500 2,643,450 18,706,950

% Chge from Baseline to Poor -34% -1% -30%% Chge from Poor to Excellent 67% 10% 55%% Chge from Baseline to Excellent 9% 9% 9%

21 Advisement is Critical

Poor advisement could result in a loss of $60M

Good advisement could result in a gain of $18M

System stake is $78M

Will you support the implementation of the student advisement plan at your college?

YES is the correct answer.

22How do we make it through the

first year?

Plan

Support student advisement

Salvage something out of the transitional half-quarter

Support year-round programs

Don’t panic

23 The Transitional Half-Quarter

Projecting Enrollment

Term Enrollment Credit Hrs FTE Projected Drop %

Summer FY10 79,069 822,015 54,801

Half-Summer FY12 39,535 411,008 27,401 50% is Baseline

Scenario B (-7, -13) 36,767 357,577 23,838 -7% Enrollment-13% FTE, Credit Hrs

24 The Transitional Half-Quarter

Projecting Revenue

Rev. Earned Rev. Earned Total Rate Used for Projection

Tuition 17,878,826 17,878,826 $50/ Qtr HrRecurring Fees 3,125,202 3,125,202 $85/ Qtr StudentFormula Funding 25,030,357 25,030,357 $70/ Qtr Hr

Half-Summer FY12 46,034,385

Compare to FY10Tuition 41,100,750 41,100,750 $50/ Qtr HrRecurring Fees 6,720,865 6,720,865 $85/ Qtr StudentFormula Funding 57,541,050 57,541,050 $70/ Qtr Hr

Summer Qtr FY10 105,362,665

Change in Revenue (59,328,280) % Change in Revenue -56%

25Fall Semester FY 12 -

Enrollment



Fall FY10 110,940 1,209,105 80,607

Fall Semester FY12 110,940 1,209,105 80,607 100% is Baseline

Scenario B (-7, -13) 103,174 1,051,921 70,128 -7% Enrollment-13% FTE, Credit Hrs

26Fall Semester FY 12 -

Revenue

Projecting Revenue


Tuition 78,894,101 78,894,101 $75/ Sem HrRecurring Fees 13,103,123 13,103,123 $127/ Sem StudentFormula Funding 110,451,742 110,451,742 $105/ Sem Hr

Fall Semester FY12 202,448,966

Compare to FY10


Fall Qtr FY10 154,522,500

Change in Revenue 47,926,466 % Change in Revenue 31%

27Spring Semester FY 12 -

Enrollment



Spring FY10 107,269 1,155,570 77,038

Spring Semester FY12 107,269 1,155,570 77,038 100% is Baseline

Scenario B (-7, -13) 99,760 1,005,346 67,023 -7% Enrollment-13% FTE, Credit Hrs

28Spring Semester FY 12 -

Revenue

Projecting Revenue



Spring Semester FY12 193,631,804

Compare to FY10


Spring Qtr FY10 147,786,265

Change in Revenue 45,845,539 % Change in Revenue 31%

29Summer Semester FY 12 -

Enrollment



Summer Qtr FY10 79,069 822,015 54,801

Summer Semester FY12 79,069 822,015 54,801 100% is Baseline

Scenario B (-7, -13) 73,534 715,153 47,677 -7% Enrollment-13% FTE, Credit Hrs

30Summer Semester FY 12 -

Revenue

Projecting Revenue



Summer Semester FY12 138,066,389 Deferred Revenue @ 50% (69,033,194) FY12 Summer Sem Rev 69,033,194

Compare to FY10


Summer Qtr FY10 105,362,665

Change in Revenue (36,329,471) % Change in Revenue -34%

31Summary of FY12 Revenue

Model

Projecting Revenue FY12

Term Tuition Fees Formula Funding Total

Transitional Half-Qtr 17,878,826 3,125,202 25,030,357 46,034,385 Fall Semester 78,894,101 13,103,123 110,451,742 202,448,966 Spring Semester 75,400,943 12,669,542 105,561,320 193,631,804 Summer Semester 26,818,239 4,669,420 37,545,535 69,033,194 Total 198,992,109 33,567,287 278,588,953 511,148,350

Compare to FY10Tuition Fees Formula Funding Total

Summer Qtr 41,100,750 6,641,796 57,541,050 105,283,596 Fall Qtr 60,455,250 9,318,960 84,637,350 154,411,560 Winter Qtr 60,047,250 9,229,920 84,066,150 153,343,320 Spring Qtr 57,778,500 9,010,596 80,889,900 147,678,996

219,381,750 34,201,272 307,134,450 560,717,472

Change in Revenue (49,569,122)

32 After the First Year

No transitional half-quarter

Credit hours recover from conversion drop

Carryover statute in place

Higher tuition

Less dependent on state funding

Financial situation stabilizes

33Mission Accomplished

Conversion is good for students.

It doesn’t have to be bad for the business office

Stand by for more information on deferring revenue for summer semester 2012

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