Board of Trustees Meeting Agenda | July 2021

in meal plans, however there are sustained cost savings from FY21 that should lead to a small positive operating margin and a debt service coverage ratio over 1.0 as required by our bond covenants. While this is certainly welcome news, the housing and dining system relies on positive net operating margin (revenues less expenses) of at least $3.0 million per year to fund renovation projects. This will likely be the third consecutive year where the long-term facility improvement plan is put on hold as this fund group is barely breaking even. Capital Development in FY21 saw the continuation of construction of the Health Sciences facility and the completion of a major renovation of the Stephens-Whitney residence hall that was underway prior to the pandemic. 1. What is a budget anyway? Too often a budget is confused with an allotment, or entitlement, or even worse an indication of stature in an organization. Very likely, a candidate for a management position will list on their resume “responsible for an annual budget of $XX million” as if to convey an impression of importance, yet with little indication of what activities were successfully performed. So, it seems important to ask, “What is a budget anyway”? One simple definition of a budget is “an estimate of income and expenditures for a set period of time”. Jim Collins puts it in plainer language, describing a budget as “a discipline to decide which arenas should be fully funded and which should not be funded at all ”. Unfortunately, at CWU and many other institutions, there is no consensus on the meaning or purpose of a budget. The spectrum ranges from an early estimate that means nothing whatsoever to an entitlement granted by state law, and everything in between. With all the attention that is given to budgeting, it will serve us well in the future to speak a common language about what budgeting really means at CWU. It is an estimate When it comes to budgeting at CWU the most misunderstood concept is that a budget is simply a well-designed, driver-based estimate. The budgeting cycle starts over six months from when the most critical budget driver is revealed – fall term enrollment, so it is clear that large swaths of the university’s operating budget are guaranteed to be wrong, and that’s ok. In fact, that is how the process is designed but it also places great emphasis on planning and measurement. If a budget is not associated with an effective plan and the plan is not measured, then the budget will be wrong without any identifiable reason why nor any pathway to respond. We use several key drivers such as enrollment projections, faculty/staff headcount and wages, etc. to estimate revenues and expenses. When we get to fall term and we know the actual levels of enrollment and staffing, we make adjustments to our forecast.

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