UNIVERSITY PARK, Pa. – Faced with outdated technology, changing demographics, and public demands for increased financial transparency, Penn State leaders are gearing up to change the University’s budgeting approach, which is at least six-decades old, in an effort to make the process more efficient and transparent.

The move -- just one component in a comprehensive long-range plan to create a more sustainable financial model – has been discussed with leaders across the University and will be shared in more detail with the Penn State community in the coming weeks and months. Faculty and staff will have their first opportunity to learn about the new budgeting proposal and other strategies for managing resources, and to ask questions at an upcoming Town Hall meeting at 2 p.m., Tuesday, Oct. 15, in 112 Kern Building on the University Park campus. The event will be livestreamed to all campuses. More information can be found here.

“The need for better financial controls that help to minimize tuition increases, create transparency, allow for more consistency across the University, and maximize the return on every dollar spent are driving our budget evolution, as well as our long-term overview of our operations for the coming years,” said Nick Jones, executive vice president and provost at Penn State. “In order to meet current and emerging needs our University must implement a new enterprise financial management system that allows better tracking, reporting and forecasting.

“This is just one piece of a long-term strategy to keep a Penn State education accessible and affordable to the families of the Commonwealth, while maintaining the quality for which we are known,” Jones said.

In December 2018, Jones and David Gray, senior vice president for Finance and Business, launched a Strategic Budget Task Force with members representing a broad swath of areas across the University -- including Faculty Senate, research, Commonwealth Campuses and academic colleges. Over a six-month period, the task force examined Penn State’s current budget processes, benchmarked best practices, scrutinized financial tools, and has now recommended changes to move the University into a more effective budgeting approach.

The task force report contains multiple recommendations in three key areas of the budget process that task force members indicated should be addressed University-wide. Most notable among the recommendations are:

• A shift to a multi-year budgeting method (five-year cycle) with a “bottoms-up approach” that takes into account opportunities for efficiencies; funding of strategic priorities; and appropriate allocation of resources to fulfill the University’s tri-part mission.
• Budgeting of all funds, and participation in a regular centralized process to review the budget.
• Elimination of the “permanent” and “temporary” categories in the General Fund budget.
• Allowing carry-forward balances to roll into subsequent years, with the establishment of clear principles and categories.

“The recommendations above are only a top-level look at what the task force determined needed to be done to advance our budgeting approach,” said Mary Lou Ortiz, University budget officer and chair of the task force. “The process to evolve from our current outmoded budgeting approach to one that will provide more flexibility, clarity and accountability will touch every area of the University and will be extensive.”

Ortiz said that while the task force was charged with “looking holistically at the budgeting landscape across Penn State,” there will now be four working groups formed to move forward deliberately, methodically and judiciously to delve into required policy changes, processes, the allocation of base budgets and possible implications for units. Ortiz said the working groups, like the task force itself, will have broad representation from across the University.

Jones said that the time is ripe to evolve Penn State’s budget approach and its financial landscape, as units can take advantage of the upcoming July 2020 implementation of SIMBA, a new online financial system that will provide the necessary tools to effectively integrate the University’s many legacy financial systems -- including Concur, Penn State’s employee reimbursement system, and the Integrated Business Information System, or IBIS, which was developed in the early 1980s.

SIMBA, or System for Integrated Management, Budgeting and Accounting, will be launched next July, although Jones warned that it would be a slow rollout, not all things would be immediately functional, and there would be training and a learning curve for users across the University.

“While we are attempting to implement new operations, there is a domino effect that must be surfaced and understood. For example, one recommendation from the Task Force is the elimination of the different employee categories of “standing” and “fixed-term,” which hinder accurate unit budgeting, hamper recruitment of qualified employees, and also is not consistent with peer institutions,” said Gray. “On this one recommendation alone, we have already identified 15 different University policies connected to just this terminology, as well as a number of state laws that also will impact how we transition.”

Ortiz agreed and said that while the Task Force identified “what” needed to change, it is now time to determine “how” to make those changes, in a “deliberate and thorough manner.”

“We have a lot of work to do to evolve from our systems that have served us well for six decades to a new way of tracking, data collection, and implementation of budgets overall,” said Gray. “This transformation is just one part in our long-term strategy to manage resources more effectively and minimize the impact on students. It is going to take time and the help of everyone at the University. We need to look more holistically across the University and implement more comprehensive change for a sustainable financial approach to keep education affordable for those we serve. As a public university, and as Pennsylvania’s sole land-grant institution, we have an obligation to offer the best and most affordable education to those who qualify.”

Gray urged faculty and staff to not only take part in the training that will be offered related to the new budgeting approach, but to also have conversations within their units about this component as well more permanent strategies for cost cutting, and to elevate potential concerns or questions so that they can be addressed.

Over the past several weeks, Jones and Ortiz have presented the budget task force recommendations to the Academic Leadership Council, President’s Council, the Board of Trustees Committee on Finance, Business and Capital Planning, and the University’s financial officers to engage leadership in the process of implementing the changes in the budget approach. Jones also mentioned the findings in the September meeting of the University Faculty Senate. Within the next few weeks the implementation working groups will begin to develop timelines, and policy and process reviews to put the task force recommendations into operation.

Gray, Jones and Ortiz all point to the Strategic Budget Task Force Report as one step, and the beginning of a road map for the transition of Penn State’s budget approach. All three urge all faculty and staff to review the report for more information on what has been recommended. The task force also has provided a list of Frequently Asked Questions for employees who want to know more and understand the reasoning that helped to form the task force recommendations.

“If we are to remain ardent stewards of our financial resources, including state dollars and tuition money, we must engage our entire University and put in place numerous processes that optimize every financial decision and open up additional opportunities,” Jones said. “We will be putting in place a variety of strategies, some short-term and specific, some long-term with larger impact – all that will come together as part of our overarching plan to find economies in how we do business so that a Penn State education remains within reach of Pennsylvanians.”