Florida International University

Transcription

1 Florida International University Finance Managers Meeting September 24,

2 Finance Managers Meeting Agenda AGENDA Budget Update Kenneth Jessell Activity Number & Department Hamza Lazrak & Ana Pineda Maintenance eform Affordable Care Act (PPACA) Carlos Flores Introduction: New Director of Purchasing Cecilia Hamilton Unrelated Business Income Tax Edgardo Salazar New Agency Policy & Accounting Topics Desiree Elias Business Services Update Jeff Krablin Tip of the Day Hamza Lazrak 2

3 Florida International University Budget Update September 24,

4 University Operating Budget FY FY Operating Budget of $1.2B Concessions, $0.7M, 0% DSO's, $38.6M, 3% Student Fees, $49.5M, 4% Other, $(7.0M), -1% E&G State Appropriations, $183.1M, 15% Contracts and Grants, $101.1M, 9% Auxiliary Enterprises, $171.6M, 14% E&G Tuition, $195.5M, 16% E&G Reserves, $4.0M, 0% E&G - College of Medicine, $42.7M, 4% Student Loans, $261.0M, 22% Student Financial Aid, $147.2M, 12% Other includes Self-Insurance Program, Principal Payment of Debt and Interfund Adjustments 4

5 Educational & General Operating Budget FY $ millions State Appropriations Base Budget 142 Restoration of FIU Share of $300M cut 24 Legislative Adjustments / Budget Passthroughs 8 PO&M and Legislative Specials Total State Appropriations E&G Tuition Budget 192 Incremental Tuition E&G Tuition Budget 196 TOTAL E&G REVENUES 379 E&G Base Expenditure Budget (363) PO&M, Legislative Specials & Passthroughs (17) 10-year Plan Investments Continuation (1) Additional need-based financial aid and advisors (2) TOTAL E&G EXPENDITURES (383) E&G ESTIMATED SHORTFALL (4) 5

6 Educational & General Funding Gap University Carry Forward funds will be used to cover the E&G estimated shortfall $ millions FY Beginning Balance 83 Historical Carry Forward Expenditures in FY (47) Carry Forward FY Funds 13 FY Beginning Balance 49 E&G Funding GAP (4) Legislative Earmarked Funds (6) Capital Campaign Investment (3) Health Services Compliance (1) College and Area Commitments (12) FY Commitments: (26) Actions to address future budget shortfalls FIU will continue to monitor overall state budget Suspend Strategic Plan enrollment growth of 2,000 students per year Hire only strategic, mission critical positions Reduce operating expenditures while protecting STEM and other critical programs, anticipate 2% budget reduction FY Estimated Available Balance 23 Minimum Statutory Reserve 20 6

7 State Appropriations vs. Tuition Revenue $250 24,412 24,412 24,511 25,380 27,815 28,566 29,237 29,604 35,000 $ Millions $200 $150 $100 $229 $218 $106 $106 $203 $116 $179 $129 $182 $155 $174 $191 $166 $144 $195 $180 30,000 25,000 20,000 15,000 FTE 10,000 $50 5,000 $0 FY Before Budget Reductions FY FY FY FY FY FY FY Budget - Enrollment, FTE State Appropriations Tuition State Appropriations include General Revenue and Lottery, but exclude Financial Aid, and Risk Management ($3M), and College of Medicine 7

8 Auxiliary Enterprises FY FY revenue increase driven by academic auxiliaries, new student residence, Parkview Hall, and student health fee increase of $10.50 per semester 200 Revenue Growth $ 188 $ 195 $ $ 129 $ 145 $58 $63 $63 $ millions $49 $11 $22 $46 $50 $12 $26 $57 $13 $25 $76 $14 $14 $26 $29 $85 $89 0 FY Actuals FY Actuals FY Actuals FY Actuals FY Budget Academic Auxiliaries Housing Parking and Transportation Food service, retail operations, student health Actuals adjusted to remove DSO reimbursement revenue now reported under Contracts and Grants 8

9 Student Financial Aid FY % of total budget, comprising funding from student financial aid fees, support from federal and state financial aid awards, institutional programs, as well as numerous private scholarships Anticipate approximately 55% of students receiving financial aid will be Pell Grant recipients Challenges Substantial component of affordability of higher education to the student Stricter eligibility requirements for student financial aid will result in significant reduction in number of FIU students eligible for financial aid Implement initiatives to allow students to graduate faster Leverage existing programs to maximize available funds and raise money from private donors 9

10 Contracts and Grants FY % of total budget, comprising funding from different sources, including federal, state and local governmental agencies and private organizations, to support research, public service and training Challenges Impact of sequestration on ability to obtain new, federal research grants Focus on commercialization of FIU-related research Identification of cluster hiring opportunities Retain and recruit a world-class faculty 10

11 Fixed Capital Outlay Will receive $19M in FY but funding for future years is unclear PUBLIC EDUCATION CAPITAL OUTLAY (PECO) Utilities / Infrastructure / Capital Renewal/ Roofs (P,C,E) $0 Student Academic Support Center (MMC) $5,678,129 Minor Building Repair and Maintenance $3,603,832 TOTAL $9,281,961 CAPITAL IMPROVEMENT TRUST FUND PROJECTS (CITF) Recreation Center Expansion (MMC) $8,595,233 Wolf University Center Improvements (BBC) $1,108,352 TOTAL $9,703,585 11

12 What does the future hold? Economy showing signs of recovery nationwide and in Florida National unemployment down from 8.1% to 7.3% year over year as of August State general revenue estimates for FY and FY continue to reflect upward trend Additional demands on state revenue associated with health care / Medicaid Election year politics But Higher Education funding model has changed State no longer providing funding for enrollment growth since 2007 Moving toward performance based funding Little appetite for tuition and fee increases Stricter eligibility requirements for student financial aid Limited Public Education Capital Outlay (PECO) funding for capital projects Universities need to do more and better with less state funding Governing body emphasizing quality education at an affordable price Increased reliance on enrollment growth and new revenue sources 12

13 Florida International University Activity Number & Department Maintenance Request eform September 24,

14 Activity Number & Department Maintenance Request eform 14

15 Create New Department 15

16 New Activity Number Request Link of List of CIP 16

17 Department Changes 17

18 Activity Number & Department Maintenance eform The form will be located through the controller s office website or for your convenience, it will also be available within Panthersoft HR 18

19 Florida International University Patient Protection Affordable Care Act (PPACA) September 24,

20 PPACA Legislative Update Division of State Group Insurance (DSGI) Senate Bill 1802 was signed into Florida Law which provides that an OPS Temporary employee meeting certain criteria (working an average 30 hours or more) is eligible to participate in the state group health insurance program, etc. DSGI provided guidance to state agencies and universities to continue our efforts toward and stay on course for a January 1, 2014 implementation. 20

21 PPACA HR Update Division of Human Resources (DHR) DHR is continuing with the action plan for 2014 implementation. Recruitment Services continues to work with Department Heads to clean-up the temporary employee data. A Temporary Appointment Policy has been developed and is being reviewed to address the proper procedures for hiring and use of temporary workforce. 21

22 Fringe Benefit Pool Fiscal Year Fringe Benefit pool will absorb the additional cost of providing health insurance for temporary employees working more than 30 hours per week Fiscal Year Health benefits will be factored into the temporary employee fringe rate 22

23 Florida International University Introduction: New Director of Purchasing September 24,

24 Florida International University Unrelated Business Income Tax (UBIT) September 24,

25 FIU s Income Tax Exemption Often asked question? Isn t Florida International University (FIU) exempt from income tax? The answer is that it depends. Federal Income Tax Exemption: Generally, FIU is exempt from federal income tax for those activities which are related to the University s exempt purpose (such as education, research, and public service). The Internal Revenue Code provides that the exempt purposes of state universities include all purposes and functions described in IRC 501(c)(3): charitable, scientific, testing for public safety, literary, educational, to foster national or international amateur sports competition, or for the prevention of cruelty to children or animals. 25

26 What is UBIT? However, FIU is not exempt from income tax on activities which are unrelated to the exempt purpose. What is UBIT? Unrelated Business Income Tax (UBIT) is federal income tax imposed on non-profit organizations, including state colleges and universities, for conducting activities that are not related to the exempt purpose of the organization. Similar to for profit companies, which pay taxes on their profits, the IRS requires FIU to pay taxes on the net income that it earns on unrelated business income (UBI). 26

27 Income tax return (990-T) FIU is not prohibited from engaging in activities which generate UBI, but the IRS requires that FIU report the net operating results from these activities. Activities that are determined to produce UBI will be included on FIU s Exempt Organization Business Income Tax Return (Form 990-T), which is filed with the IRS each year. It is extremely important that all unrelated business activity is reported on the tax return because the IRS can assess costly penalties and interest for underpayment of taxes due to under reporting of income. 27

28 UBIT Defined For an activity to be considered an unrelated trade or business, all three of the following criteria must be satisfied: 1. The activity must be a trade or business; 2. The activity must be regularly carried on; and 3. The activity must not be substantially related to the exempt purpose of the organization If all three requirements are satisfied, then it s subject to UBIT unless the activity meets an exception or exclusion. These terms are given a specific meaning within the rules set forth by the IRS and several important exceptions exist, therefore guidelines for these criteria are available from the Tax Compliance office for your review. 28

29 Trade or Business The term trade or business generally includes any activity carried on for the production of income from the sale of goods or from the performance of services. A trade or business activity is one in which a profit is expected to be made. Do not report revenue from sales to other University departments, UBIT is only applicable to revenue generated from external sources. Do report external revenue even if the activity results in a loss for a particular year. 29

30 Regularly Carried On Business activities are considered regularly carried on if such activities show a frequency and continuity and are pursued in a manner similar to comparable commercial activities of non-exempt organizations. An activity should not be considered regularly carried on if it is on a very infrequent basis; for a short period of time during the year; or without competitive and promotional efforts. However, year round activities are regular even if they are conducted only one day a week. Further, seasonal activities may be regularly carried on even though they are conducted only for a short period each year. 30

31 Not Substantially Related To be considered exempt (non-taxable) income, there must be a substantial relationship between the activity that generates the revenue and the exempt purpose of the organization (i.e., the activity must contribute to the accomplishment of the exempt purpose, apart from the need to produce income). The mere fact that an activity generates funds that are then used for an exempt purposes does not mean that the activity is related to the exempt purposes. In looking at an activity, particular emphasis is placed on the size and extent of the activity. If an activity is conducted on a scale larger than reasonably necessary to carry out the exempt purpose, it is more likely to be treated as unrelated. 31

32 Exceptions to General Rule: An activity that otherwise satisfies the General Rule will not be subject to UBIT, if: Substantially all of the work is performed by a volunteer workforce substantially all (85%) the work is performed without compensation (the IRS construes compensation broadly) provided for the convenience of members (students, faculty, officers, staff) The IRS treats Alumni as part of the general public and not University members selling donated merchandise (thrift store exception) substantially all (85%) of the merchandise has been donated 32

33 Exclusions to General Rule: The following are exclusions from UBIT: Passive investment income is not considered UBI Interest Dividends Annuities Royalties Payments with respect to securities loans, and Any other incomes from routine investments Real property rental income (where no personal services are provided) 513(i) Safe Harbor Qualified Sponsorship Payments A payment of money, property or services where the sponsor has no expectation of receiving any substantial return benefit. The use or acknowledgement of a sponsor s name or logo is exempt. 33

34 College & University Compliance Project In 2008, the IRS sent compliance questionnaires to approximately 400 tax-exempt colleges and universities. After examination of the questionnaire responses, 34 colleges and universities were chosen for audit. The audits resulted in UBI tax ( UBIT ) increases for 90% of the colleges and universities examined; over 180 changes to the amounts of UBIT reported on Forms 990-T (Exempt Organization Business Income Tax Return); and the disallowance of more than $170 million in losses and net operating losses. The major reasons for adjustments to UBI were: a) misclassification of an activity as a trade or business, b) misallocation of expenses, c) errors in computation or substantiation, and d) misclassification of related activities. The release of the report reinforces the continuing trend of increased scrutiny by the IRS upon tax-exempt colleges and universities. 34

35 Contact Information: Each department is responsible for accounting and documenting for unrelated business income. An was sent to all department heads/budget managers on September 9 th with additional UBIT information and links to the UBIT questionnaire, located on the Controller s webpage. Tax Compliance services will be holding a UBIT workshop to answer questions and assist with the questionnaire: Campus Support Complex Room CSC1123 Thursday, September 26 th (9:30 am 11:30am) Contact me at tax@fiu.edu or : Edgar Salazar, CPA Associate Controller Tax Compliance Services Office of the Controller CSC 319 T: F: E: edgardo.salazar@fiu.edu 35

36 Florida International University New Agency Policy and Accounting Topics September 24,

37 Agency Guidelines Agency Fund: A fund established to record the administration of monies for which the University acts as a fiscal agent on behalf of an outside Principal. Use of these monies primarily benefit the Principal and incidentally benefit the University via its affiliation to the Principal. Agency activities are not operating activities of the University. Agency funds are not considered University monies or charitable contributions to the University; outstanding agency funds are liabilities to the Principal and will be remanded to the Principal at their request or at the completion of the agency activity. Principal: A sponsoring entity outside the University that authorizes the University to act as its agent, subject to the Principal's general control and instructions as expressed through the Sponsor. Sponsor: a University faculty or staff employee authorized by the Principal to act on its behalf and who assumes responsibility for the proper administration and monitoring of the agency fund. The monitoring responsibilities of the Sponsor cannot be delegated. 37

38 Agency Guidelines The following constitute agency activities: Student organizations or clubs sponsored by a separate legal entity (e.g. fraternity or student chapter of national organization). Employee organizations (e.g. unions). Conferences or events offered by an outside professional organization and administered by the University on an ongoing basis, spanning multiple fiscal years or one-time events exceeding $7,500 in annual deposits. The following do not constitute agency activities: Fundraising activities. Revenue-sharing agreements between the university and outside parties. Student deposits for tuition or study abroad educational programs. Deposits wherein the University acts in a capacity of a bank, (e.g. FIU One Card balances due to students and employees). Withholding taxes or other amounts (e.g. sales taxes, insurance). Note that while these activities do not meet the criteria to be established as an agency, the outstanding balances do represent liabilities and should be accounted for as such in the corresponding fund which the activity supports. The exception above is fundraising and study abroad activities, which are auxiliaries and as such have revenues and expenses. 38

39 Agency Guidelines Financial Management and Accounting Principles 1.Disbursements of agency monies are subject to the University s prescribed procurement practices, including applicable competitive solicitation requirements and guidelines for allowable expenditures. 2.The resources of the University will not be used in support of the sponsoring entity without appropriate reimbursement for direct and indirect costs. In those cases where the use of resources of the University is not significant, the Office of Auxiliary & Enterprise Development may waive such reimbursement. 3.Campus service department recharges for goods and services ordered by and rendered to the Principal will be directly charged to the agency activity. 4. Agency monies cannot be used to compensate University employees. 39

40 Agency Guidelines 5. Residual balances for this fund group will be recorded as liabilities in account # Unexpended Agency Funds. Receipts and disbursements of these are accordingly classified as additions to, and deductions from, the liability account rather than as revenues and expenditures which will affect fund balance. The Office of the Controller will request that the Sponsor confirm that the liability balance in the agency activity is due to the Principal on an annual basis. 6. Agency funds must have a positive cash balance at all times. Accounting may enforce this provision by not processing a disbursement that will create or increase an overdraft. 7. The Sponsor will identify an alternative source of funds to cover any possible overdraft of agency funds when requesting creation of the agency activity. 8. No interest will be credited to outstanding agency cash balances. 40

41 Florida International University Business Services Update September 24,

42 Florida International University Reporting Tip September 24,

43 Florida International University Finance Managers Meeting September 24,