OSUIT Recognized for Refocusing the Budget

OSUIT Recognized for Refocusing the Budget

OSUIT Recognized for Refocusing the Budget

OSU Institute of Technology was awarded the 2019 Best Practices Grand Finalist for its use of data analytics to refocus the budget at the Southern Association of College and University Business Officers (SACUBO) Annual Meeting in April.

The Best Practices category showcases the best of college and university business officers' efforts in creating better, more efficient and customer friendly business practices.

“It was standing room only when it was our turn to present,” said President Bill Path. “There were so many questions about our presentation that we ran out of time to answer them all. It was truly an honor. 

When OSUIT was presented with a financial analysis tool, it was unknown the impact on other universities to follow suit.

“We wanted to do what was best for OSUIT to save money, but with the least amount of impact to the departments,” said Dr. Path.

The tool was able to save about four million dollars and in the first year, the university saw an increase in contribution margin from -15.6 percent to a positive 4.8 percent.

The tremendous savings not only gathered the attention of SACUBO but also from other educational institutions who were looking for ways to effectively measure program success.

Sandra Hudgens, director of Accounting Services, and Michelle Canan, director of Institutional Research, prepared the proposal and presentation for the SACUBO entry that focused on the university’s efforts to refocus the budget.

OSUIT had been and is continuing to face many challenges that demand adaptations and solutions. Reduced appropriations from the state, a shrinking number of college students in the state and an increase in required salaries and benefits for quality faculty are all factors. At the same time, academic units need to be able to meet the needs of their students while limiting sacrifices in the form of budget reductions. Resources need to be allocated to maximize return while at the same time minimizing harm to the academic units in the reallocations process. 

Dr. Path was looking for a way to conduct a financial analysis of the academic programs when Jim Smith, vice president of Fiscal Services, learned about BKD’s Contribution Margin Analysis (CMA) tool in the summer of 2017.

“I kept thinking about what I saw and introduced the concept to Dr. Path,” said Smith. “He was immediately on board with pursing the CMA tool.”

Business officers often try to compare the cost of an academic endeavor with the value it adds to the world which has infinite variables. The CMA tool adds an analytical solution which calculates contribution margin, the actual net revenue generated from a class by comparing the revenue generated from each student in the class with the cost of the class. 

“The CMA tool has been able to give deans a tool to measure effectiveness of the programs and become more efficient in planning,” said Dr. Path. “In the past, decisions were based on trend data, now we are able to use financial analytics.”

Without this tool, the evidence is mainly subjective and anecdotal of the amount of resources each academic unit needs. This provides an objective way to evaluate performance of academic programs in order to reallocate resources. 

“In my whole career, I have never seen a better return on investment than this tool,” said Smith. “It has given specific answers to how well our programs are doing and allowed us to develop specific strategies for both revenues and expenditures to deal with the results.”

The implementation of this tool took approximately ten weeks before the first reports were presented. The strategies were developed and implemented within the next three months and will be ongoing as analysis continues. 

Once the initial analysis was completed, the results were immediately presented to each dean. They were then tasked to develop and action plan to increase their contribution margin to at least break even, if any programs had a negative contribution margin.

“OSUIT will continue to utilize the analysis each year to see how financially healthy our programs are,” said Smith. “This will allow the Deans to make valuable decisions as to changes to academic service fees, class sizes, course changes, etc. and also allow us to be very specific in pricing our tuition.