Standards:

STANDARD NINE

FINANCIAL RESOURCES

 9 Description
	The university's financial systems have been operated on SCT's Financial 
Resources System since July 1, 1994, but beginning July 1, 1999, the CSU 
converted three of the eight fiscal modules to SCT's BANNER software. General 
Ledger, Purchasing, and Accounts Payable were the first operations to convert 
(along with Alumni and Development). These will be followed by Payroll and Human 
Resources, prospectively in late 2000.
	A single Operating Fund is employed for the management of the primary university 
revenues and expenditures. It receives the state's appropriation; tuition 
payments and fees from all students; Continuing Education fees; payments for 
Housing, Food Service, and other auxiliary services; grants and contracts; and 
interest earnings and miscellaneous receipts. Certain specified resources are 
managed in an Institutional General Welfare Fund and a Student Activity Fund. 
The latter is an agency fund. A Bond and Interagency Fund is used for management 
of funding for capital projects and other minor special projects. The university 
manages its own check writing for all nonpayroll accounts. The State Comptroller 
handles the check writing for the Bond and Interagency Fund accounts and 
payroll.
	The university organizes the fiscal functions of accounting and financial 
reporting, cash management, and audit under the Director of Fiscal Affairs, 
within the area of the Vice President for Finance and Administration. The 
Associate Vice President for Finance and Administration manages annual budget 
and Spending Plan development, and related reporting services.

9 Appraisal
Financial stability
	The university has worked diligently to achieve a measure of financial 
stability. While it has achieved modest surpluses in two of the past four years, 
it has done so with disciplined and continuous budget oversight. The 
conservative budgeting measures also precluded a number of non-teaching 
positions from being filled.  Table 1 shows the growing emphasis on 
instructional and student support spending.

Table 1: Analysis of E&G Spending by IPEDS Function 
(FY 1989 through FY 1999)

IPEDS

									

	The university's fund balances fall within the limits for fund balances as set 
by the CSU Board of Trustees.  The CSU Board requires each campus to maintain an 
undesignated fund balance at between 5% and 10% of a university's total budgeted 
educational and general expenditures and auxiliary services for the current 
year.  Table 2 shows the change, over time, of Eastern's fund balance.  It 
maintains a current reserve balance of $2,807,167 in unrestricted funds through 
June 30, 1999. From this amount, there has been no deduction for compensated 
absences, which amounted to $3,888,204 at June 30, 1999.  Eastern's June 30, 
1999 current fund balance equates to 6.6% of total budgeted educational and 
general expenditures and auxiliary services for the current year.
Table 2:  Eastern's Fund Balance

	Fund Balance		Plant Funds		Unrestricted 	       Total
	June 30, 1995	   $827,676	        $4,920,204	         $5,747,880 
	June 30, 1999	   $585,904 	        $2,807,167	         $3,393,071 

	Beginning in FY 95-96, the CSU formula for allocating Educational and General 
(E&G) funds was revised. While it was acknowledged that Eastern was one of two 
campuses receiving disproportionately lower funding than equity would have 
provided, the System Office originally decided that a gradual redistribution of 
funding between campuses would minimize disruption of services if implemented in 
increments over a ten-year period.  The CSU fund distribution formula did not 
reward enrollment growth that exceeded projections.  Eastern's consistent growth 
in full-time enrollment during this period led to the underfunding.
Since FY 95-96, the CSU budget also has provided the university with a special 
supplemental allocation for new faculty positions. The positions have helped it 
meet the demands of the enrollment increases and reduce the proportion of part-
time lecturers. The university becomes fully responsible for funding these 
positions beginning FY 00-01.
	After Eastern's concern in 1999 that the formula was adjusting too slowly, the 
Chancellor and the Board of Trustees adapted the formula funding for Eastern and 
one other campus that were historically underfunded. For Eastern, the amended 
formula allows speedier relief to its funding predicament by providing a 
significant two-step adjustment (in two successive years, FY 99-00 and FY 00-
01).  
	The Chancellor and university took the initiative with the state's Office of 
Policy and Management to secure a supplemental "new facility" appropriation of 
$736,000 beginning in FY 99-00 for most Personal Services and Operating Expenses 
for the new library. The figure increases slightly in FY 00-01 and is made part 
of the University's funding base.
	CSU Board of Trustees is in the process of implementing a new methodology that 
will increase the portion of CSU state support going to Eastern.  The increase 
in the state allocation is designed to reflect the growing enrollment at Eastern 
and to fully correct past distribution models that did not reward schools that 
exceeded enrollment targets.  Table 3 shows the level of state support since 
1997.  The figures for 2000 and 2001 are projected.   
Spending Plan
	The university maintains its resources focused on the institution's mission. The 
fees for housing and board programs have been established assertively each year. 
Operating incomes from auxiliary enterprises, net after transfers to plant 
reserves, are devoted to support the academic and support programs. The same is 
true of the major sources of income in the Other Revenue category (including 
commissions and interest income).
	The Connecticut State University (CSU) Board of Trustees establishes guidelines 
and the timetable for the Spending Plan methodology. A Tuition and Fee exercise 
provides the university an opportunity to formulate requests for certain fee 
changes. Revenue goals are partly determined by mandated enrollment increases. 
In turn, the distribution of the General Fund appropriation and tuition revenue 
are formula-driven.
	The narrative portion of the Spending Plan includes a detailed report on the 
status of achievement of the university's vital goals. Prepared by the members 
of the President's executive staff, the narrative addresses institutional 
effectiveness in each area and identifies adjustments in spending priorities. 
In February each year, the CSU System Office establishes Spending Plan 
guidelines for the next year. The CSU Board of Trustees approves the campus 
spending plans following the enactment of a state budget by the General 
Assembly. In both FY 98-99 and FY 99-00, tuition freezes were enacted to 
maintain tuition at the FY 97-98 level. This has helped ECSU in achieving its 
access goals. FY 99-00 annual tuition and other costs are $2,062 and $1,932 
respectively for in-state, commuting students and $2,062 and $7,486 for the 
typical residents on board and room plans. All full-time students pay the same 
campus fees, but the University Fee, which is assessed for retirement of bond 
funding for certain capital projects, differs by residency status. Tuition rates 
also differ by residency status. The CSU Board of Trustees manages the 
distribution of tuition and state appropriations, using full-time students 
enrolled as the basis for the distribution formula. Campuses retain revenues 
received from continuing education, fees, and auxiliary enterprise income. 

Budget Process
	The university establishes guidelines for spending policies, mostly related to 
an inflation factor, or for a standard reduction, depending on the positive or 
negative changes in the size of the state appropriation or tuition and fee rate 
increases being anticipated.
	In its activity-based budget process, the university provides each senior 
manager and director with a base-line allocation for each account in his/her 
responsibility area. These managers recommend shifts in their base-line 
allocations for operating expenses and part-time staff, recommend new 
initiatives and identify additional funding needs, and prioritize equipment 
requests. Budget reviews are conducted between the managers and their respective 
vice presidents to finalize the budget requests.
	At the same time, the senior managers are requested to indicate their priority 
needs above the baseline, and those listings are later summarized and reviewed 
in relation to other needs. Variations from the guidelines are permitted, based 
on level of priority determined for the activity--a goal-achievement set-aside 
program, a vital few, a new enrollment initiative, and so on.
	Budget issues are regularly reviewed with the Budget and Resources Committee, a 
committee of the University Senate. The Senate itself is briefed periodically by 
the Vice President for Finance and Administration. In addition, the status of 
major spending issues is discussed with the various other bodies of the senior 
managers--the Planning and Priorities Council, the Administrative Council, and 
the President's executive staff. 
	Funds are provided to senior managers for distribution areas. Historically, 
expenditure reports have been provided monthly to budget managers to show 
spending, encumbrances, and available balances. However, in this start-up year 
of BANNER implementation, reports were issued for the first time through 
February 29. In the future, budget managers will have online, read-only access 
to their accounts. A Contingency Account is maintained to handle unexpected but 
necessary expenditures, emergencies, or deferred maintenance. 
	Budgeting for capital projects is managed differently, though again, the CSU 
System Office guides it. It determines the shares for allocation, depending on 
the priority of projects of the four campuses, both for the general bond funds 
and CHEFA bonding. On campus, the office of the Vice President for Finance and 
Administration and the Office of Facilities Management and Planning provide the 
staff assistance to the President in the development of the Spending Plan, in 
accordance with the outline prescribed by the Master Plan. 

Financial Management and Reporting
	BANNER has prompted Fiscal Affairs to revisit all procedures to insure that they 
work efficiently and with full security. It is Fiscal Affairs' objective to 
provide the necessary financial services to the academic, administrative, and 
support offices. Operating expenses like postage, copier leasing, and travel are 
systematically charged back to appropriate departments. The University has 
arranged with an office supply vendor to do direct ordering, which saves the 
University from maintaining a large supply inventory. Many fiscal procedures 
were converted to the BANNER system, so the staffs selectively undergo training 
in order to implement the current and upcoming functions for their respective 
areas. 
	The Budget Office in conjunction with the Office of Fiscal Affairs, has begun to 
plan for the creation of a monthly expenditure reporting and variance 
recognition process.  The procedures will call for the notification of fiscal 
managers of potential fiscal problems and require an explanation or plan of 
action from the affected department.

Fundraising Efforts
	The ECSU Foundation, Inc., was incorporated in 1971 as a 501 (c) (3) not-for-
profit organization. The audited financial statements ending June 30, 1999, 
showed total net assets of $1,689,857, compared to total net assets of 
$1,129,456 at the close of FY 1998. FY 99 assets designated to the Foundation 
included temporarily restricted net assets of $244,170; permanently restricted 
net assets of $830,738; and total unrestricted assets of $614,949. Since 1993, 
all total funds raised (including academic grants to the university, the ECSU 
Foundation, and Alumni Association) increased 488 percent in five years. 
Fundraising costs of $11,337 in FY 99 are charged to support expense on the 
statement of activities. There is no charge back to the foundation for services 
provided by the university, except for an annual rental fee for space. These 
service arrangements are defined in the Agreement between the Board of Trustees 
and the ECSU Foundation, Inc. 1989, Board resolution #93-81. Fidelity Investment 
Services and Fleet Inc. Services provide investment services for the foundation. 
Fleet Bank and the Savings Institute also provide banking services to the 
foundation. The foundation's auditors follow current FASB guidelines 116 and 
117. As required by the Board of Trustees, the foundation is audited annually.
Effective January 1, 1998, the General Assembly began a state match program, 
whereby for every $2 raised, $1 is matched by the state, for permanently 
restricted (endowed) funds. Annual state contributions are capped at $2.5 
million for the 1998 calendar year. In FY 98, the foundation distributed $40,075 
to the university for academic purposes and the President's discretionary 
accounts and to student support for scholarship purposes. The foundation's 
largest fundraising event, the annual Fun*Ding concert raised a total of $96,951 
in net assets in FY 1998 for endowment. During FY 99, a total of $73,314 was 
raised in net assets for Fun*Ding.
	The Alumni Association is a separately incorporated entity. It operates its own 
treasury. Total net assets of the Alumni Association were $247,051 for FY 1999, 
compared to the total net assets of $244,542 in FY 1998. The Alumni Association 
raised a total of $77,707 in FY 99 for the Annual Fund and scholarships, with 
fundraising expenses totaling $16,337. The Alumni Association awarded $44,695 in 
scholarships and Alumni Program support for FY 99. Annual alumni giving in both 
1998 and 1999 was at 10 percent of Eastern's total alumni, based upon the total 
number of alumni solicited (good addresses). Current goals are to increase the 
number of alumni making annual donations. The primary alumni fundraising project 
is the annual Phonathon, raising operational support for the association and 
scholarship support for Eastern students.


Audits
	Audits are routinely performed. Program operations, financial aid, and 
intercollegiate athletics are all audited by the Auditors of Public Accounts. 
Continuing in FY 99-00, PricewaterhouseCoopers will perform the financial 
statement audit in accordance with established standards, audit the internal 
control structure, prepare the annual financial statements, and recommend 
procedural improvements in its Management Letter. The President's staff reviews 
the Management Letter, and the auditor's recommendations are implemented as 
appropriate. In recent years, the audits have generally been positive. The 
university takes seriously its responsibility with respect to audit findings and 
establishes an action plan to resolve them at the first available opportunity.

9 Projections
	For Eastern Connecticut State University, the new distribution model strengthens 
fiscal stability.  The funding reapportionment insures for Eastern a greater 
degree of operational flexibility and budgetary responsiveness to address 
various needs including increased staffing, improvements to support services and 
the introduction of academic program refinements.  The approval by the CSU Board 
of Trustees of the proposed new General Fund distribution model will increase 
state support by $2.7 million annually or about 10% of the previous state total.  
The revised distribution model will provide for the following:
¥ Base cost allocation to provide all campuses with identical allocations for 
core administrative and facilities support functions;

¥ Equal sharing of system office costs by all campuses;
¥ Distribution of the bulk of state support on the basis of full-time 
equivalent, full-time students;
¥ Full retention of student tuition and extension fees by each campus;
¥ Special state funding retained by the designated campus; and, 
¥ An examination of the need for tuition differentials between campuses.
	For Eastern, the new distribution model will guarantee an enhanced revenue 
stream.  The University will be able to capitalize on the enhanced operating 
support (Table 3), a continuation of the dramatic state commitment for new 
facilities and equipment, a student body growing in size and quality and the 
employment of additional full-time faculty and support staff.