Board of Governors , March 30, 2000 - APPENDIX II, Annex 1
To: Property & Finance Committee
From: Ted Garrard, Vice-President (External)
Date: March 10, 2000
RE: Proposed Revision of Campaign Budget
I am pleased to submit to the Committee an update on the financing progress of Campaign Western as endorsed at the February meeting of the Development & Fund Raising Committee.
In terms of dollars raised-to-date, the Campaign has now exceeded the annual goal set for this fiscal period ($37 million) and our initial projections of campaign-to-date revenue ($123 million). It has also exceeded the gross total of the Renaissance Campaign ($126 million) and the net private funds raised from Renaissance ($91 million). We are at a critical juncture in the Campaign, though, as we near our public launch, and we have re-examined our financing plan to ensure that we can continue meeting the University's private sector funding needs. We have also begun to look forward to the post-Campaign period to an era where private funding needs now appear only to grow.
This document summarizes the mechanisms established to finance the Campaign, reports on progress against plan to date, requests a revision in the Campaign budget to fund select new expenditures, and proposes a model to support development at Western into the future.
Funding Campaign Western: Existing Mechanisms
Three mechanisms were established by the Board to fund Campaign Western:
It should be noted that under a separate agreement with Foundation Western, the Foundation contracts with the University to support major gift and annual fund activities to generate new alumni endowments to be held by the Foundation. The Foundation supports this contract through a similar levy structure on endowed alumni gifts.
The initial Campaign budget approved by the Board called for a total expenditure of $11.6 million to support Campaign staffing and related costs against total revenues of $17.8 million to be earned from the two levies and interest income. Once all Campaign pledges were collected and the levies applied (in 2008/2009), we projected a $6.2 million surplus.
Timing differences related to projected cash flows for revenue and expenditures resulted in the Campaign budget being in a net cumulative deficit position until 2004/05, with the peak accumulated deficit reached in 2000/01. Projected revenues, expenses, net position and accumulated net position for the campaign period are detailed in Appendix 1.
Progress to Date
The following data summarizes revenue and expense performance to date, with a projection to the end of the current fiscal year:
Summary of Revenue, Expenses, and Net Position, 1996/97 - 1999/2000
|Planned||Actual||Variance||% of Plan|
The net positive cumulative variance of $833,365 projected for the end of fiscal 1999/2000 will place our accumulated deficit at $244,000 versus a planned $1,078,000, significantly below initially projected levels. This difference has been realized for four reasons:
Updating the Campaign Budget
As we assess performance to date, evaluate strengths and weaknesses, and make adjustments to Campaign strategy, we have re-examined the budget for the balance of the Campaign period. Factors leading to changes include:
Specifically, we are requesting an increase in approved Campaign expenditures over the duration of the Campaign of $2 million, from $11.6 million to $13.6 million. Initially approved versus proposed new expenses are as follows:
Approved vs. Proposed Campaign Expenditures, 1996/97 - 2004/05 ($millions)
Appendix 1 fully shows the planned and proposed expenditure, revenue, net position and accumulated position for the Campaign period.
We note that, at this time, we are not revising our revenue projections for the balance of the Campaign period despite being ahead of plan on revenue generated by the levy by $175,000. If this trend continues, then obviously the projected accumulated deficit will not be as great and the accumulated deficit would be retired earlier.
Overall, the effect of our request will be:
To reduce the net positive "margin" generated by the Campaign from $6.2 to $4.4 million--a reduction of $1.8 million on known dollars;
To increase the maximum amount of accumulated deficit exposure to the University and shift the timing of its occurrence, from $1.5 million in fiscal 2000/01 to $2.3 million in fiscal 2003/04.
The proposed increased expenses can be summarized as:
Salary Costs: Net increase of $500,000 for the Campaign period.
Explanation: Elimination of four positions (three associate directors, one support staff) and addition of one Medicine Capital Campaign position, one additional campaign communications manager, one PeopleSoft report writing position, one desktop support specialist, one additional prospect researcher, two temporary proposal writing staff, and a part-time budget officer. PMA/UWOSA salary settlements and competitive re-positioning of salary structures have also increased costs, accounting for 20% of the gross added salary costs (before netting out savings from eliminated positions).
One of the major environmental changes that has occurred for the Campaign, and indeed the University, is the extent to which government matching fund programs and capital expansion requirements require rapid, short-time-period requirements to raise funds. The proposed staffing changes better enable the development team to meet the sophisticated, demanding and labour-intensive tasks of generating dollars for critical capital and programmatic needs.
Non-Salary Costs: Net increase of $1.5 million for the Campaign period.
Explanation: The largest items associated with the proposed expenditure increase are associated with controllable, discretionary recommendations to substantially increase spending on campaign signage, recognition, advertising, launch and other event costs. Experience to date also leads to our recommendation to increase substantially resources allocated to individual prospect research and travel to meet with prospective individual donors. Together, these two areas are proving to have had significantly lower resources allocated to them under the approved budget compared to what we believe will be necessary to effectively conduct our individual donor campaign (the projected source of 65% of the Campaign's fund raising revenue).
Training, human resource development, information technology, and physical plant (office accommodation) expenses account for the balance of the proposed budget increase.
It is important to note that should revenue from the campaign levy at any time fall short of expectations it is possible to scale back expenses.
One final note is that Unit overspending (negative carryforwards) is normally included in the University's net carryforward position and is not charged against unrestricted investment income (a concern raised by the Development & Fund Raising Committee). The carryforward reserve is included in Internally Restricted Net Assets (note 11 of the University's Combined Financial Statements).
A Model to Support Development in the Post-Campaign Period
It is appropriate now to be examining on what scale and in what manner the University should support its development activities following the Campaign. There can be no question that there will be ongoing demands to raise private funds following the Campaign and to effectively steward gifts that were made during the Campaign period. To this end, the following model has been prepared. It is proposed:
Appendix 2 details proposed revenue, expenditures, repayment of the accumulated deficit, transfers to the Alumni Relations & Development Department and transfers to the base budget of the University. The budget model assumes that revenue from the levies and interest is sustained at $2 million annually and that incremental development expenditures fall to $1 million annually. Given this model:
The Campaign accumulated deficit is retired in 2006/2007;
Alumni Relations & Development receives an enhanced budget outside of the base budget of the University;
From 2006/07 onward, $1 million annually flows back to the general operating budget of the University from the Development function, substantially reducing the existing Alumni Relations & Development Department base budget allocation from the University's operating budget.
(Appendix 1 and Appendix 2 are not available in electronic form)