Strategic Budgeting, The "Auburn Model"

This resource outlines the main features of the Strategic Budget Model from the fiscal year 2022 through 2026.

The model is all funds transparent; that is, it includes all University fund types, whether restricted or unrestricted, for all University divisions. Although all funds for all divisions are included in the model for the sake of transparency, not all funds are considered for reallocation or for the purpose of establishing the Mission Enhancement Fund explained at the end of this document.

**Please note, all dollar amounts provided in this document reflect fiscal year 2020 of operations.**

Two types of revenue are portrayed: direct and allocated. Direct revenues are shown as those generated by each non-auxiliary Revenue Unit and not pooled or redistributed via formula. Allocated revenues—principally tuition and associated financial aid and waivers and the state appropriation for the Main Campus—are pooled for reallocation to the non-auxiliary Revenue Units by formula.

Direct Revenues – The Strategic Budget Model categorizes the following revenues as direct revenues generated by the unit and not reallocated by formula:

• All restricted revenues such as grants, contracts, gifts and private support, and investment income

• Differential tuition and course fees

• Distance learning fees

• Division 2, 3, and 4 revenues

• Government appropriations

• Other revenue

• Indirect cost recovery revenue

• Sales and service revenue

Allocated Revenue – The Strategic Budget Model allocates the following revenues to the non-auxiliary Revenue Units as described below:

Tuition – Tuition revenues from both undergraduate students and graduate and professional students are allocated to the non-auxiliary Revenue Units via formula. For transparency, tuition amounts illustrated in the Strategic Budget Model reflect gross tuition (i.e., assessed tuition or “sticker price,” before considering aid and waivers provided by the University). Institutional undergraduate financial aid and waivers are allocated separately.

Undergraduate Tuition, gross – For each undergraduate student credit hour, the Strategic Budget Model directs 65% of associated gross tuition for the budgeted year to the college of instruction and 35% to the student’s college of record (i.e., where the student is enrolled). This division of undergraduate tuition revenue is conducted separately for the resident and non-resident tuition pools, using the corresponding credit hours as the variable for allocating resources.

* FY2020 illustrated gross undergraduate tuition for traditional and distance programs and includes Fall 2019, Spring 2020, and Summer 2020.

Graduate & Professional Tuition Gross – For each graduate/professional student credit hour, the Strategic Budget Model directs 10% of associated gross tuition for the budgeted year to the college of instruction and 90% to the student’s college of record (i.e., where the student is enrolled). This division of graduate/professional tuition revenue is conducted separately for the resident and non-resident tuition pools, using the corresponding credit hours as the variable for allocating resources.

* FY2020 illustrated gross graduate and professional tuition for traditional and distance programs and includes Fall 2019, Spring 2020, and Summer 2020.

Student Financial Aid and Waivers – The allocation of all undergraduate, graduate, and professional tuition reflects gross tuition (i.e., assessed tuition or “sticker price,”). The Strategic Budget Model allocates institutionally awarded financial aid and waivers formulaically, thereby illustrating net tuition, in other words, the amount of tuition revenues actually collected across the University. Each non-auxiliary Revenue Unit is allocated a share of institutional undergraduate and graduate financial aid and waivers in proportion to the amount of undergraduate and graduate tuition received.

In addition to the allocation of institutional student financial aid and waivers, each non-auxiliary Revenue Unit awards financial aid and waivers derived from philanthropic gifts and other external agencies. These awards are a direct contra-revenue reflected in each non-auxiliary Revenue Unit without reallocation.

AU Main Campus State Appropriations – The Strategic Budget Model uses the AU Main Campus state appropriations to create funding to support sponsored programs and resident (in-state) student instruction and academic support.

The 65% split to support resident instruction and academic support provides financial resources to cover the discounted price paid primarily by Alabama resident students and helps to create an incentive to both instruct and retain students. This amount is allocated to the non-auxiliary Revenue Units in proportion to the gross resident undergraduate, graduate, and professional tuition allocated.

The 35% split to support sponsored activities reflects the strategic importance of sponsored activity, recognizes the high indirect costs associated with conducting these activities, and serves as an additional revenue source beyond the full allocation of indirect cost recoveries. These funds are allocated based on a college or school’s percent of contracts and grants including projects associated with the Alabama Agricultural Experiment Station and the Alabama Cooperative Extension System. (Note: for purposes of defining sponsored programs activity, contracts and grants that fund construction or scholarships and fellowships are excluded as they do not receive any overhead reimbursements from sponsoring agencies).

After presenting direct and allocated revenues, the Strategic Budget Model next presents expenses. As with revenues, two types of expenses are portrayed: direct and allocated. Direct expenses are shown as incurred by each unit without any reallocation. Allocated expenses—those associated with central unit allocations—are pooled and distributed to the non-auxiliary Revenue Units by formula.

Direct Expenses – The Strategic Budget Model portrays direct expenses just as they have been portrayed within the prior historic incremental financial system. Direct expenses include items such as salaries, employee benefits, travel, equipment, supplies, repairs and maintenance, etc.

Allocated Expenses: Central Unit Allocations – Because the Strategic Budget Model allocates nearly all University revenues to the non-auxiliary Revenue Units, the budgets of administrative units, net of revenue, are pooled and funded by the non-auxiliary Revenue Units via formula. Each administrative unit is grouped into one of six categories based on the type of service provided. The amount of allocated expense charged to each non-auxiliary Revenue Unit is based on the Unit’s proportionate share of the allocation variable.

The final component of the Strategic Budget Model is the creation of the University’s Mission Enhancement Fund. This critical component makes it possible to assure ongoing focus on the University’s mission and priorities across the full range of the academic programs.

Mission Enhancement Fund – The Strategic Budget Model creates a pool of resources by assessing a participation rate on certain unrestricted revenues of all non-auxiliary Revenue Units. Beginning with the 2021-2022 fiscal year, only allocated revenues are assessed a participation rate equal to 20% of budgeted revenues. This includes allocated gross undergraduate, graduate and professional tuition; student financial aid and waivers; and the AU main campus state appropriation.

The University’s Mission Enhancement Fund has two primary purposes:

• To redistribute resources across the non-auxiliary Revenue Units to ensure that each unit has the resources needed to achieve its mission, and
• To provide leadership with resources to invest in strategic initiatives and priorities.