A special study, universities funding study

              State of Arizona
Office
of the
Auditor General
PERFORMANCE AUDIT
Report to the Arizona Legislature
By Debra K. Davenport
Auditor General
December 2000
Report No. 00-21
UNIVERSITIES
FUNDING STUDY
The Auditor General is appointed by the Joint Legislative Audit Committee, a bipartisan committee
composed of five senators and five representatives. Her mission is to provide independent and impar-tial
information and specific recommendations to improve the operations of state and local government
entities. To this end, she provides financial audits and accounting services to the state and political
subdivisions and performance audits of state agencies and the programs they administer.
The Joint Legislative Audit Committee
Representative Roberta L. Voss, Chairman
Senator Tom Smith, Vice-Chairman
Representative Robert Burns Senator Keith Bee
Representative Ken Cheuvront Senator Herb Guenther
Representative Andy Nichols Senator Darden Hamilton
Representative Barry Wong Senator Pete Rios
Representative Jeff Groscost Senator Brenda Burns
(ex-officio) (ex-officio)
Audit Staff
Donna Miller—Team Leader
and Contact Person (602) 553-0333
Copies of the Auditor General’s reports are free.
You may request them by contacting us at:
Office of the Auditor General
2910 N. 44th Street, Suite 410
Phoenix, AZ 85018
(602) 553-0333
Additionally, many of our reports can be found in electronic format at:
www.auditorgen.state.az.us
2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553 -0333 • FAX (602) 553-0051
DEBRA K. DAVENPORT, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
December 1, 2000
Members of the Arizona Legislature
The Honorable Jane Dee Hull, Governor
Dr. Linda J. Blessing, Executive Director
Arizona Board of Regents
Dr. Lattie Coor, President
Arizona State University
Dr. Peter Likins, President
University of Arizona
Dr. Clara Lovett, President
Northern Arizona University
Transmitted herewith is a report of the Auditor General, University Funding Issues.
This report is in response to Laws 1999, Chapter 1, requiring a review of three specific
funding matters at Arizona State University, the University of Arizona, and Northern
Arizona University. I am also transmitting with this report a copy of the Report
Highlights for this special study to provide a quick summary for your convenience.
My staff and I will be pleased to discuss or clarify items in the report.
This report will be released to the public on December 5, 2000.
Sincerely,
Debbie Davenport
Auditor General
Enclosure
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SUMMARY
The Office of the Auditor General has completed a study of three
specific funding matters of the state universities. This study was
conducted pursuant to the provisions of Laws 1999, Chapter 1,
§57, and provides information about the following three funding
sources:
n Policy initiatives (known as decision packages) that were ap-proved
by the Legislature for the fiscal years ended 1996
through 1999.
n Receipts from tuition and fees for the fiscal years ended 1990
through 1999.
n Student enrollment growth funding approved by the Legisla-ture
for the fiscal years ended 1990 through 1999.
Universities Used Decision
Package Monies as Intended
(See pages 9 through 14)
It appears that the universities spent or earmarked at least as
much as the Legislature approved on programs or services that
fit decision package initiatives and the outcomes were consistent
with the intent of each decision package. However, the universi-ties’
expenditures of decision package monies can be tracked
only to a limited degree because the universities often supple-ment
decision package funding with monies from other state-appropriated
dollars and sometimes do not separately account
for the initiatives.
In most cases, the funding appropriated for decision packages
was less than what the universities requested. The approved
funding for the 16 analyzed decision packages represented about
25 percent of the total dollars requested and 32 percent of the
Summary
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OFFICE OF THE AUDITOR GENERAL
total full-time equivalent employees (FTEs) requested. The fund-ing
for these decision packages accounted for 8 percent of the
total increases to the universities’ total appropriations among fis-cal
years 1996 through 1999.
Tuition and Fees Revenues
Substantially Increased
Over the Last Ten Years
(See pages 15 through 20)
A review of tuition and fees revenues from the universities’ au-dited
financial statements showed that they increased 79 percent
from fiscal years 1990 through 1999, gradually increasing as a
proportion of unrestricted revenues. In fiscal year 1990, tuition
and fees were 28 percent of unrestricted revenue sources and
grew proportionally to 31 percent in fiscal year 1999. During the
same period, state General Fund appropriations decreased in
proportion from 62 percent in fiscal year 1990 to 57 percent in
fiscal year 1999.
Expenditures of tuition and fees dollars cannot be isolated. Tui-tion
and fees are recorded in unrestricted current operating
funds, which also include state General Fund appropriations,
governmental and private gifts, grants, and contracts, and other
sources. Therefore, the universities cannot label certain expendi-tures
as coming from one funding source and certain other ex-penditures
as coming from other sources. However, expenditure
types by functional classification can be easily identified because
they are separately reported on the universities’ financial state-ments.
In each fiscal year of the ten-year period, over half of the
universities’ expenditures of unrestricted revenue sources were
made for instruction and academic support.
Student Enrollment Growth
Funding Appropriations Generally
Follow Changes in Student Populations
(See pages 21 through 24)
Actual amounts the Legislature appropriated for student enroll-ment
growth funding generally followed changes in enrollment
trends at the universities. However, the amounts appropriated
Summary
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have been less than that dictated by the “22-to-1 formula”—a
student-to-faculty ratio formula used to calculate student en-rollment
growth funding budget requests. The formula’s basic
premise is that for every 22 additional enrollments of full-time
students, the universities request one additional full-time faculty
position, a quarter-time secretary, a half-time support position,
plus associated support costs. The formula can also result in
negative funding shifts when student populations decline.
Although the universities did not always receive the full amount
dictated by the formula, from fiscal years 1994 through 1999, the
Legislature’s appropriated student enrollment growth funding
approximated the changes in student populations. For example,
full-time student enrollment grew 6.3 percent while total appro-priated
dollars grew 4.4 percent and total appropriated FTEs
grew 4.2 percent from student enrollment growth funding ap-proved
net increases. However, the appropriated growth fund-ing
did not equal calculated formula amounts. From fiscal years
1994 through 1999, universities received 91 percent of requested
increases in FTEs and 87 percent of requested increases in dol-lars.
Over the same period, when enrollments declined and the
universities requested decreases, overall the universities received
a 5 percent greater reduction in FTEs and a 2 percent greater re-duction
in dollars. However, when Northern Arizona University
requested reductions in fiscal year 1999, it received a 50 percent
greater reduction in FTEs and a 35 percent greater reduction in
dollars.
When the universities allocate total state-appropriated dollars
and FTEs, they cannot segregate student enrollment growth
funding increases or decreases in such a way to know exactly
which employees were affected. However, the universities’ ac-tual
FTE employees at December 31, 1998 and 1999 were about 3
percent less than the total state-appropriated FTEs for those fiscal
years.
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TABLE OF CONTENTS
Page
Introduction ......................................................... 1
Finding I: Universities Used Decision
Package Monies as Intended........................ 9
Legislature Approved and Partly
Funded Decision Packages................................................... 9
Decision Package Appropriations Can
Be Tracked Only to a Limited Degree................................ 12
Decision Package
Outcomes Are Diverse........................................................... 14
Finding II: Tuition and Fees Revenues
Substantially Increased
Over the Last Ten Years................................. 15
Proportion of Revenue from
Tuition and Fees Has Increased .......................................... 15
Expenditures from Tuition
and Fees Cannot Be Isolated
from Other Funding Sources ............................................... 17
Instruction and Academic Support
Expenditures Have Averaged
57 Percent of Operating Expenditures............................... 18
Finding III: Student Enrollment Growth
Funding Appropriations Generally
Follow Changes in Student Populations..... 21
22-to-1 Formula Provides Basis for
Calculating Budget Request................................................. 21
Universities Do Not Usually
Receive Dollars and FTEs
Dictated by the Formula........................................................ 22
Table of Contents
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TABLE OF CONTENTS (cont’d)
Page
Finding III (Concl’d)
Funding for Increased Staff
Followed Enrollment Trends ............................................... 23
Actual FTE Employees
Approximates the Total
FTEs Appropriated................................................................. 24
Agency Response
Appendices
Appendix A State University Funding Study
Decision Package Outcome Summary
Years Ended June 30, 1996
through 1999 ................................................. a-i
Appendix B State University Funding Study
Revenue Sources of Each University
Years Ended June 30, 1990
through 1999 ................................................. b-i
Appendix C State University Funding Study
Expenditure Functions of Each University
Years Ended June 30, 1990
through 1999 ................................................. c-i
Appendix D State University Funding Study
Summary of Functional
Expenditure Classifications
As of November 2000 ................................. d-i
Appendix E State University Funding Study
Student Enrollment Growth Funding
22-to-1 Formula
As of November 2000 ................................. e-i
Table of Contents
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TABLE OF CONTENTS (concl’d)
Page
Tables
Table 1 State University Funding Study
Decision Package Appropriations Compared
with Requests
Years Ended June 30, 1996 through 1999............. 11
Table 2 State University Funding Study
Student Enrollment Growth Funding
Years Ended June 30, 1994 through 1999............. 23
Figures
Figure 1 State University Funding Study
Revenue Source Comparison
Years Ended June 30, 1990 through 1999...... 16
Figure 2 State University Funding Study
Revenues by Source
Years Ended June 30, 1990 and 1999.............. 17
Figure 3 State University Funding Study
Expenditures by Function
Years Ended June 30, 1990 and 1999.............. 19
Figure 4 State University Funding Study
Expenditure Function Comparison
Years Ended June 30, 1990 through 1999...... 20
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INTRODUCTION
At the Legislature’s request, the Office of the Auditor General
has conducted a review of three specific funding matters at Ari-zona
State University, Northern Arizona University, and the
University of Arizona. In Laws 1999, Chapter 1, §57, the Legisla-ture
called for the Office of the Auditor General to review the fol-lowing
for each university:
n Policy initiatives (known as decision packages) approved by
the Legislature. The directive called for reviewing such initia-tives
from the year ended 1996, including identifying how
the money was spent and what outcomes resulted.
n Receipts from tuition and fees. The directive called for ana-lyzing
what each university received in such fees from the
years ended 1990 through 1999 and how the money was
spent.
n Student enrollment growth funding. This funding provides
monies for additional staff needed to meet enrollment in-creases.
The directive called for reviewing such funding from
the years ended 1990 through 1999 to determine how many
positions had been added with the monies provided.
Methodology and Limitations
Auditors encountered limitations in responding fully to the re-quest.
The main limitation was the universities’ legislative
budget process. The universities’ state-appropriated budget is
made up of two revenue sources, state General Fund dollars and
students’ tuition and fees. The state-appropriated budget does
not identify how much of each revenue source should be used to
support a specifically identified decision package or student en-rollment
growth funding budget appropriation, and the state
budget process does not require the universities to separately
track expenditures from these appropriations. Because the uni-versities
cannot match every expenditure to a specific appropri-ated
dollar or to either of the two revenue sources, auditors were
Introduction
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OFFICE OF THE AUDITOR GENERAL
limited in determining which expenditures were financed with
tuition and fees dollars and in determining how specific decision
package and student enrollment growth appropriations were
used. The following sections explain how the auditors conducted
the work and describes the limitations they encountered.
Analyzing Decision Packages
n Scope and Methods—This review focused primarily on the
decision packages identified by the universities. University
and Joint Legislative Budget Committee staff explained that
in university budgets, a decision package is defined as a writ-ten
request for an incremental change to the existing base
budget so that an identified policy initiative can be carried
out. The universities’ budget requests clearly indicate all de-cision
packages they proposed while the State of Arizona Ap-propriations
Reports normally do not identify additional ap-propriations
as decision packages. Audit staff compared
budget requests with State of Arizona Appropriations Reports
and selected for analysis each approved budget item increas-ing
the universities’ base budgets that matched a decision
package the universities requested.
Audit staff analyzed records including budget calculations,
entries, and reports, as well as expenditure records, and in-terviewed
the universities’ budget directors and department
heads to determine how the universities
Ø determine the objectives they want to accomplish in ac-cordance
with decision package guidelines,
Ø perform the allocation of the appropriated resources,
Ø record and track the associated expenditures, and
Ø monitor the outcomes.
n Limitations—Auditors were limited in determining the spe-cific
expenditures the universities made from the decision
package appropriations the Legislature granted. Because of
the budget process, universities pool appropriations for deci-sion
packages with other state-appropriated General Fund
and tuition and fees dollars to pay for these initiatives. There-
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OFFICE OF THE AUDITOR GENERAL
fore, it is not possible to identify which expenditures came
from the decision package appropriations. In addition, be-cause
many decision package requests are so functionally in-tertwined
with the universities’ primary missions of instruc-tion,
research, and public service, accounting records do not
capture expenditures related specifically to some decision
packages. In some cases, the universities were able to provide
specific records indicating total allocations and expenditures
to programs or services that fit decision package initiatives. In
cases where allocations and expenditures could not be sepa-rated
from other closely related activities, audit staff re-viewed
expenditures of programs, services, or departments
to determine whether they were at least as much as the
amount approved by the Legislature and whether at least the
same level of spending continued in subsequent years.
Analyzing Tuition and Fees
n Scope and Methods—To conduct the audit of tuition and
fees revenues and expenditures, auditors analyzed informa-tion
from the universities’ audited financial statements for the
fiscal years 1990 through 1999. The financial statements were
used because every fiscal year, the Office of the Auditor Gen-eral
conducts financial statement audits of each state univer-sity.
Those audits are conducted in accordance with generally
accepted auditing standards, and the universities have al-ways
received unqualified opinions indicating that their fi-nancial
statements are fairly presented in all material re-spects.
During the performance of those audits, tuition and
fees revenues are analyzed, and tuition and fees receipts are
sampled and tested for accuracy. In addition, expenditures
are analyzed and transactions are sampled and tested to de-termine
whether they are recorded for an accurate amount,
reflected in the proper functional classification on the finan-cial
statements, and appear to be necessary to accomplish the
universities’ primary missions.
The analysis of the financial statements encompassed only
revenues and expenditures of the general and designated un-restricted
current operating fund groups. Only these two
fund groups were included because they are where the uni-versities
record receipts for regular tuition for the fall, spring,
Introduction
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and summer sessions.1 The associated expenditures are also
recorded in these unrestricted current operating fund
groups.2
Tuition and fees revenues consist of charges to all students
for resident and nonresident tuition for regular and summer
sessions, student financial aid trust fund fees, the Arizona
Students Association fee, other special fees for campus rec-reation
centers, and the University of Arizona student radio
station. The revenues also include special class or programs
fees and charges for specific student services or activities.
However, for audit purposes, the tuition and fees revenues
analyzed consisted mainly of the resident and nonresident
tuition for regular and summer sessions.
n Limitations—From interviews with university budget direc-tors
and financial controllers, auditors determined that tui-tion
and fees monies are pooled with state General Fund ap-propriations
in the budget process and in the universities’ fi-nancial
records. In addition, the universities receive addi-tional
tuition and fees and other sources of revenue that are
not included in their total state-appropriated budgets and
these sources are also pooled. Because each expenditure is
not matched to a revenue source, auditors could not deter-mine
the specific expenditures derived from tuition and fees
revenues.
1 On the universities’ financial statements, unrestricted current operating
funds include three major fund groups: General Operating, Designated,
and Auxiliary. However, only the revenues and expenditures of the Gen-eral
Operating and Designated fund groups were included in this analysis
because the tuition and fees revenues recorded in these fund groups in-clude
the resident and nonresident tuition charges for the fall, spring, and
summer sessions. Auxiliary enterprise fund groups were excluded be-cause
their tuition and fees revenues include only special student fees as-sessed
for specific auxiliary services, such as special testing services, meal
plans, and student recreation centers.
2 Mandatory transfers for debt principal and interest payments and for stu-dent
financial aid matching requirements were included in the analysis of
operating expenditures because they are required disbursements from un-restricted
operating revenues.
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Analyzing Student Enrollment Growth Funding
n Scope and Methods—Auditors researched the history and
methods of the growth funding formula. They then inter-viewed
university budget directors and other staff to deter-mine
the methods used to allocate increases or decreases
from student enrollment growth funding. Budget allocation
records were reviewed and analyses were performed from
State of Arizona Appropriations Reports and from reports of full-time-
equivalent employees (FTEs) and student enrollments
issued to the Arizona Board of Regents.
n Limitations—Interviews with university budget directors
revealed that the universities cannot track specific individu-als
hired and their associated expenditures with specific dol-lars
and FTE employees appropriated from the student en-rollment
growth funding approvals. There are several rea-sons
for this, including the following:
Ø The monies are pooled with total state-appropriated dol-lars,
as are the FTE positions to be funded. It would be
impractical for the universities to track the enrollment
growth monies and corresponding FTEs separately be-cause
each is a small piece of each university’s total state
budget.
Ø Increases or decreases in staffing related to growth fund-ing
may be masked by normal turnover. The universities
combined have more than 35,000 employees. Because of
this large number of employees, there is a significant
amount of turnover occurring consistently over time. This
turnover can make it difficult to identify specific indi-viduals
hired with the growth funding.
Ø At times, it can take several years to locate, recruit, and
hire qualified faculty members, and their appointments
may involve other expenditures, such as specific labora-tory
or classroom equipment. Part-time graduate assis-tants
and lecturers are sometimes used until faculty posi-tions
can be filled.
Ø Establishing criteria for what constitutes an FTE can be
difficult. Universities have diverse employee populations,
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OFFICE OF THE AUDITOR GENERAL
ranging from full-time faculty and administration to part-time,
temporary positions filled by students. They are
employed for various lengths of time on both salary and
hourly bases.
Ø During the period examined, there were no uniform
guidelines for the universities to follow to calculate FTE
employees. Therefore, the universities used a variety of
methods. Starting with fiscal year 1996, the universities
were required by Section 114 of the General Appropria-tion
Act to submit FTE employee budgeted and actual
counts to the Director of the Joint Legislative Budget
Committee staff. However, these calculations were not
consistent between fiscal years and universities. Due to
limitations and differences in the universities’ payroll sys-tems,
consistently calculating FTE employees during the
ten-year audit period is not possible. However, starting
with fiscal year 1998, the universities’ capabilities and
methods were improved, but auditors faced severe limi-tations
in analyzing actual FTE employees.
Another limitation relates to the period that could be covered in
the analysis. The directive called for a review that included fiscal
years 1990 through 1999. While FTE employees requested and
appropriated could be compiled for the ten-year period, in fiscal
years 1990, 1992, and 1993, the State of Arizona Appropriations Re-ports
did not indicate the actual dollars appropriated for student
enrollment growth funding. Therefore, the analysis of student
enrollment growth funding was limited to fiscal years 1994
through 1999.
Campuses Covered
The analysis of all three aspects of funding covered the following
campuses and related activities of the three universities:
n Arizona State University (ASU)—Main Campus, West
Campus, and East Campus
n Northern Arizona University (NAU)—Main Campus, State-wide
Operations, and Yuma Campus
Introduction
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OFFICE OF THE AUDITOR GENERAL
n University of Arizona (UA)—Main Campus, Sierra Vista
Campus, Arizona International College, and Arizona Health
Sciences Center
The report presents findings in three areas:
n Universities used decision package monies as intended.
n Tuition and fees revenues increased substantially over the
last ten years.
n Student enrollment growth funding appropriations generally
follow changes in student populations.
The Auditor General and staff express appreciation to the staff of
the Arizona Board of Regents, Joint Legislative Budget Commit-tee,
Arizona State University, Northern Arizona University, and
the University of Arizona for their cooperation and assistance
throughout the audit.
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FINDING I UNIVERSITIES USED DECISION
PACKAGE MONIES AS INTENDED
In fiscal years 1996 through 1999, the Legislature approved 16
decision packages requested by the universities. In each case, it
appeared that the universities spent or earmarked at least as
much as the Legislature approved on programs or services that
fit decision package initiatives and continued to do so in subse-quent
years. However, the universities’ expenditures of monies
provided under legislatively approved decision packages can be
tracked only to a limited degree. The decision packages were
generally funded for less than the amount requested. The uni-versities
often supplemented the decision package amounts with
funding from other state-appropriated dollars and sometimes
combined the expenditures for the initiatives with expenditures
for related services or programs as well. As a result, expendi-tures
cannot be tracked to specific dollars and FTEs appropriated
for decision packages, and sometimes decision package initia-tives
cannot be separated from other programs or services. Be-cause
the 16 approved decision packages were so diverse, out-comes
were different for each.
Legislature Approved
and Partly Funded
Decision Packages
The 16 decision packages the Legislature approved represent
about 20 percent of the packages the universities submitted for
funding policy initiatives. For fiscal years 1996 through 1999, the
universities requested $133.8 million and 1,254 FTE positions to
fund 73 decision packages. The Legislature approved $14.5 mil-lion
representing 11 percent of all decision package dollars re-quested.
In addition, the universities received 233, or 19 percent
of the FTEs requested.
Decision packages fund policy initiatives—As used by the uni-versities,
decision packages are requests for additional funding
for identified policy initiatives. For example, ASU requested an
Finding I
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additional $4.3 million in fiscal year 1997 for an initiative to im-prove
graduation rates and increase undergraduate education
quality by creating smaller classes taught by full-time permanent
professional instructors. The majority of the money was for in-creased
instructional staff. If the Legislature decides to approve
funding for a decision package, the dollars and FTEs are speci-fied
in the State of Arizona Appropriations Reports. If a university is
designated funding for a decision package, that designation of
monies continues for that amount in subsequent years. The fund-ing
for subsequent years becomes part of the university’s base
budget and does not appear in the budget or appropriation as a
decision package. If any additional monies for that decision
package are approved in a subsequent year, only the additional
dollars and FTEs are specified in the appropriations for that deci-sion
package.
Legislature approved partial funding for 16 requested pack-ages—
From fiscal years 1996 through 1999, the Legislature ap-proved
funding for 16 requested decision packages.1 Table 1 (see
page 11), shows the 16 packages, by university, and the dollars
and FTEs requested and appropriated for each one. The ap-proved
funding totaled about $14.5 million and total FTEs ap-proved
were 233.2.
Approved packages received only partial funding—In most
cases, the funding appropriated for the 16 decision packages was
less than what the universities requested. The approved funding
represented about 25 percent of the total funding requested for
the 16 packages, and the approved FTEs represented about 32
percent of the total requested. As Table 1 (see page 11) shows, the
percentage of dollars approved ranged from 10 to 104 percent
and the percentage of approved FTEs from 10 to 106 percent.
Funding for these decision packages accounted for 8 percent of
the total increases to the universities’ total appropriations among
fiscal years 1996 through 1999. The other 92 percent of the in-creases
to the universities’ budgets was primarily for
1 In the fiscal year ended 1999, the Legislature approved a percentage of the
requested funding without specifying which decision packages should be
funded. For consistency in presenting the information, auditors considered
each of these lump-sum appropriations to be a single decision package.
Finding I
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continuation adjustments. Continuation adjustments are consid-ered
to be increases for ongoing operations and include such
things as salaries and employee related expenses and continued
academic and facilities support, improving technology, enhanc-ing
instruction, and student enrollment growth funding.
Table 1
State University Funding Study
Decision Package Appropriations Compared with Requests
Years Ended June 30, 1996 through 1999
Dollar Amounts FTE Amounts
Description Year Requested Appropriated Percentage Requested Appropriated Percentage
Arizona State University
Improving Undergraduate
Education
1996 $ 2,877,300 $ 1, 125,700 39% 52.00 23.00 44%
Undergraduate Initiative 1997 4,332,400 1,200,000 28 86.00 24.00 28
1998 2,839,400 1,013,400 36 51.00 19.00 37
Economic Growth and
Engineering Excellence 1998 1,500,000 1,009,500 67 14.00 14.00 100
Lump-sum decision package 1999 11,050,000 1,929,500 17 148.00 33.00 22
Lump-sum decision package
for the West Campus 1999 500,000 182,500 37 5.00 5.30 106
23,099,100 6,460,600 28% 356.00 118.30 33%
Northern Arizona University
Personalized Educational
Support Technologies 1996 1,915,100 600,000 31 10.00 3.00 30
Undergraduate Initiative 1997 423,200 439,000 104 8.50 8.50 100
Ecosystem Restoration Program 1998 507,100 251,300 50 11.35 7.40 65
Technological Retrofitting of the
Flagstaff Campus 1998 511,700 511,700 100 6.50 6.50 100
Lump-sum decision package
and additional funding 1999 8,205,800 1,720,900 21 62.75 40.00 64
11,562,900 3,522,900 30% 99.10 65.40 66%
University of Arizona
Arizona Health Sciences Center
(AHSC) Library/Learning
Resource Center 1996 1,196,100 500,000 42 19.00 3.00 16
New Learning Technologies 1996 4,520,700 939,900 21 55.00 11.00 20
Undergraduate Initiative 1997 2,969,500 300,000 10 42.25 4.30 10
Excellence in Undergraduate
Education 1998 1,500,000 600,000 40 26.00 12.00 46
Lump-sum decision package 1999 11,200,000 1,564,500 14 110.25 11.90 11
Lump-sum decision package
and additional funding
for AHSC
1999 2,150,000 625,900 29 28.25 7.30 26
23,536,300 4,530,300 19% 280.75 49.50 18%
Totals $58,198,300 $14,513,800 25% 735.85 233.20 32%
Source: Auditor General staff analysis of State of Arizona Appropriations Reports and Arizona State University’s, Northern Ari-zona
University’s, and the University of Arizona’s budget-request documentation for the years ended June 30, 1996
through 1999.
Finding I
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Decision Package Appropriations
Can Be Tracked Only to a
Limited Degree
Specific expenditures from the appropriations can be tracked
only to a limited degree. Because the universities generally did
not receive full funding of decision package requests, they sup-plemented
approved decision package dollars with other legisla-tively
approved dollars. Also, because State of Arizona Appropria-tions
Reports do not continue to distinguish decision package dol-lars
and FTEs beyond the year appropriated, the universities do
not track decision packages from prior years. For these reasons,
auditors were not able to determine specifically which expendi-tures
(such as salaries for specific positions) were paid from deci-sion
package dollars. Accounting records do not break down ex-penditures
by their source of appropriated dollars. Also, because
some decision packages were not accounted for separately from
a department’s other functions, auditors were not able to identify
specific expenditures for decision package initiatives. In all in-stances,
however, it appeared that the universities expended or
earmarked at least the amount the Legislature approved for the
stated purpose and continued to do so in subsequent years.
Combining additional dollars and FTEs with decision package
appropriations makes tracking difficult—Although some deci-sion
package initiatives are separately identified in universities’
accounting records, the appropriated dollars and FTEs are not
separately identified from other state-appropriated General
Fund and tuition and fees dollars. This makes it impossible to
determine which expenditures were paid from decision package
appropriations or from the other sources. In many instances, the
universities have specific accounts where they record decision
package initiative expenditures, but those accounts include reve-nues
from sources other than decision package appropriations.
Therefore, auditors could not match individual expenditures and
funded FTEs with the decision package appropriations. In addi-tion,
when the Legislature appropriates a portion of decision
package requests, it does not provide any specific guidance on
which aspects of the program should be funded but instead pro-vides
a very general description. For instance, in the fiscal year
ended 1997, UA’s Undergraduate Initiative decision package
appropriation was described as follows: “The approved amount
provides $300,000 and 4.3 new FTE positions to improve under-
Finding I
13
OFFICE OF THE AUDITOR GENERAL
graduate education through student learning strategies and
communication technologies.”
In some cases, difficulty is in lack of separate accounts—Apart
from problems with tracking specific decision package dollars
and FTEs, another problem is that some initiatives are so closely
tied with other efforts that they are not separately identified. For
example, in fiscal years 1996 through 1998, ASU received three
separate decision package appropriations for improving under-graduate
education. Since providing and improving under-graduate
education is always a basic function of the university,
ASU did not create separate accounts for these specific decision
package initiatives. The incremental appropriations for the deci-sion
package approvals were allocated to departments that serve
ASU’s undergraduate population, including the Office of Stu-dent
Affairs, College of Public Programs, College of Engineering,
and College of Liberal Arts. The total amount approved, $3.3
million, represents about 5 percent of these departments’ related
expenditures in fiscal years 1998 and 1999.
Overall expenditures exceeded amounts appropriated for deci-sion
packages—Since universities were not required to and did
not segregate specific decision package appropriated amounts,
auditors were not able to identify the exact expenditures paid for
with decision package dollars. When decision package initiatives
were separately identified in the universities’ accounting records,
auditors were able to determine that the universities spent at
least as much on the initiative as was appropriated. Following
are two examples of this situation:
n In fiscal year 1997, UA was appropriated $300,000 and 4.3
FTEs to improve undergraduate education through student
learning strategies and communication technology. No spe-cific
appropriations for this initiative were made in subse-quent
years, but assuming that the amount was built into
UA’s funding in subsequent years, UA received a total of
$900,000 for the three years covered in this review (fiscal
years ended 1997 through 1999). UA accounted for this initia-tive
in an account entitled Undergraduate Affairs—Teaching
Center. During the three-year period, UA recorded expendi-tures
of $1,855,405 in this account, about twice as much as the
partial appropriation. UA focused its efforts on upgrading
existing classrooms to a minimum level of technology.
Finding I
14
OFFICE OF THE AUDITOR GENERAL
n In fiscal year 1998, NAU was appropriated $251,300 and 7.4
FTEs to advance the science and application of ecosystem res-toration,
resolving conflicts between conservation and pres-ervation
and the use of natural resources in the forest envi-ronment.
No specific appropriations for this initiative were
made in subsequent years, but assuming that the amount
was built into NAU’s funding in subsequent years, NAU re-ceived
a total of $502,600 for the two years covered in this re-view
(fiscal years ended 1998 and 1999). NAU accounted for
this initiative in its accounts entitled Bureau of Forestry Re-search
and Office of Forest Ecosystem Restoration. During
the two-year period, NAU recorded expenditures of
$937,424 in these accounts which was about 85 percent more
than the partial appropriation. NAU focused its efforts on
expanding undergraduate research and instruction in its Eco-system
Restoration Program and founded the Ecological Res-toration
Institute.
In both examples, the additional dollars expended came from
other state-appropriated General Fund and tuition and fees dol-lars.
Decision Package
Outcomes Are Diverse
Because the 16 approved decision packages were so diverse, the
outcomes were different for each. However, each outcome was
consistent with the intent of the decision package. Appendix A
(see pages a-i through a-iii), lists each of the 16 initiatives and
summarizes the universities’ descriptions of the decision pack-age
outcomes.
15
OFFICE OF THE AUDITOR GENERAL
FINDING II TUITION AND FEES REVENUES
SUBSTANTIALLY INCREASED
OVER THE LAST TEN YEARS
During the fiscal years ended 1990 through 1999, the universities’
gross receipts from tuition and fees rose from $216.8 million to
$388.1 million. Although state General Fund appropriations still
constitute the majority of the unrestricted monies universities
received, tuition and fees now account for a slightly higher por-tion
than they did ten years ago. Universities are not required to
isolate their expenditures by revenue source. Therefore, it was
not possible to determine the specific expenditures that were
funded from tuition and fees. Because tuition and fees are com-bined
with state General Fund appropriations and other revenue
sources, audit staff could not determine which dollars paid for
specific expenditures. However, a review of the universities’ au-dited
financial statements showed that more than half of the ex-penditures
of unrestricted monies were for instruction and aca-demic
support.
Proportion of Revenue from
Tuition and Fees Has Increased
A review of tuition and fees revenues from the universities’ au-dited
financial statements showed that over a ten-year period
they increased 79 percent and have gradually increased as a pro-portion
of unrestricted revenues. The majority of the universities’
unrestricted revenues still consists of state General Fund appro-priations,
which have gradually decreased as a proportion of un-restricted
revenues.
Tuition and fees revenues rose 79 percent—As illustrated in Fig-ure
1 (see page 16), tuition and fees revenues have increased from
$216,782,000 in fiscal year 1990 to $388,110,000 in fiscal year 1999,
an increase of 79 percent. During that same period, state General
Fund appropriations increased 50 percent, and the universities’
total revenues increased 62 percent. Appendix B (see page b-i)
Finding II
16
OFFICE OF THE AUDITOR GENERAL
contains the revenue sources of each university for the ten–year
period.
Tuition and fees contribute about 30 percent of unrestricted
revenues—Over the same ten-year period, the proportion of tui-tion
and fees to state General Fund appropriations has shifted
slightly. Tuition and fees revenues have averaged 30 percent of
unrestricted revenues. As Figure 2 (see page 17) shows, the pro-portion
of tuition and fees increased slightly from 28 percent in
fiscal year 1990 to 31 percent in fiscal year 1999. During the same
period, state General Fund appropriations have averaged 58 per-cent
of unrestricted revenues and decreased in proportion, from
62 percent in fiscal year 1990 to 57 percent in fiscal year 1999.
Figure 1
State University Funding Study
Revenue Source Comparison
Years Ended June 30, 1990 through 1999
$ Million
$100 Million
$200 Million
$300 Million
$400 Million
$500 Million
$600 Million
$700 Million
$800 Million
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: Auditor General staff summary of audited financial reports of Arizona State University, Northern Arizona Uni-versity,
and the University of Arizona for the years ended June 30, 1990 through 1999.
State General Fund appropriations
Tuition and fees
Governmental and private gifts, grants, and contracts
Other sources
Finding II
17
OFFICE OF THE AUDITOR GENERAL
Expenditures from Tuition
and Fees Cannot Be Isolated
from Other Funding Sources
Because revenue from tuition and fees is combined with revenue
from other sources, it is not possible to label certain expenditures
as coming from one funding source and certain other expendi-tures
as coming from other sources. Tuition and fees are re-corded
in unrestricted current operating funds, which also in-clude
state General Fund appropriations, governmental and pri-vate
gifts, grants, and contracts, and other sources including in-vestment
income, and sales and services of educational depart-ments.
All of these revenues are pooled together and can be and
are used for supporting the universities’ primary and support
missions.
Figure 2
State University Funding Study
Revenues by Source
Years Ended June 30, 1990 and 1999
State General Fund appropriations
Tuition and fees
Governmental and private gifts, grants, and contracts
Other sources
Source: Auditor General Staff summary of audited financial reports of Arizona State University, Northern
Arizona University, and the University of Arizona for the years ended June 30, 1990 and 1999.
1999
57%
31% 7%
5%
1990
62%
28%
6%
4%
Finding II
18
OFFICE OF THE AUDITOR GENERAL
Instruction and Academic Support
Expenditures Have Averaged
57 Percent of Operating Expenditures
During the ten years included in this review, instruction and
academic support expenditures remained the largest percentage
of operating expenditures, averaging 57 percent since fiscal year
1990. That proportion has fluctuated slightly but has remained
consistent over the ten-year period, varying by less than 1 per-cent.
Overall, the percentage of all expenditures types has re-mained
fairly consistent, varying by only a few points.
Expenditures are reported by functional classification—The
universities report expenditures by functional classification type
because it is required by generally accepted accounting princi-ples.
For example, instruction is one type of functional classifica-tion
while academic support is another. Since certain functional
classifications represent expenditures for related purposes, audi-tors
grouped some classifications together to analyze and present
the information. Appendix D (see page d-i) briefly describes
these classifications and illustrates the classifications that were
grouped.
Uses of unrestricted revenues has remained consistent—An
analysis of the expenditures from the universities’ audited finan-cial
statements revealed that instruction and academic support
expenditures have averaged 57 percent of total operating expen-ditures
over a ten-year period. This indicates that a majority of
unrestricted operating revenues are used for providing instruc-tion,
academic materials, and direct support of instruction. The
next highest use of unrestricted operating revenues was for insti-tutional
support, operation and maintenance of plant, and debt
payments, averaging 23 percent of operating expenditures. The
remaining percentage of expenditures was for student services
and scholarships, averaging 11 percent and research and public
service, averaging 9 percent. As illustrated by Figure 3 (see page
19), the relative percentages of these expenditure classifications
have remained fairly consistent from fiscal year 1990 to 1999.
Finding II
19
OFFICE OF THE AUDITOR GENERAL
Instruction and academic support expenditures rose 58 percent—
Instruction and academic support expenditures have increased
from $440,203,000 in fiscal year 1990 to $694,113,000 in fiscal year
1999, an increase of 58 percent. During that same period, all other
operating expenditures rose from $331,279,000 to $521,977.000,
also increasing by 58 percent. Figure 4 (see page 20), illustrates
the ten-year trend in expenditures, and Appendix C (see page c-i)
contains the expenditure functions of each university over the
same period.
Figure 3
State University Funding Study
Expenditures by Function
Years Ended June 30, 1990 and 1999
Source: Auditor General staff summary of audited financial reports of Arizona State University, Northern Arizona Uni-versity,
and the University of Arizona for the years ended June 30, 1990 and 1999.
Instruction and academic support
Institutional support, operation and maintenance of plant, and debt service
Student services and scholarships
Research and public service
1990
57%
23%
10%
10%
1999
57%
22%
12%
9%
Finding II
20
OFFICE OF THE AUDITOR GENERAL
Figure 4
State University Funding Study
Expenditure Function Comparison
Years Ended June 30, 1990 through 1999
$ Million
$100 Million
$200 Million
$300 Million
$400 Million
$500 Million
$600 Million
$700 Million
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Instruction and academic support
Institutional support, operation and maintenance of plant, and debt service
Student services and scholarships
Research and public service
Source: Auditor General staff summary of audited financial reports of Arizona State University, Northern Arizona Uni-versity,
and the University of Arizona for the years ended June 30, 1990 through 1999.
21
OFFICE OF THE AUDITOR GENERAL
FINDING III STUDENT ENROLLMENT
GROWTH FUNDING
APPROPRIATIONS GENERALLY
FOLLOW CHANGES IN
STUDENT POPULATIONS
Actual amounts the Legislature appropriated for student enroll-ment
growth funding, while generally following changes in stu-dent
populations, have been less than the amounts dictated by
the “22-to-1 formula”—a student-to-faculty ratio formula used to
calculate student enrollment growth funding budget requests.
The universities use the formula as a general guideline to calcu-late
requested budget increases when there is a growth in stu-dent
populations or requested budget decreases when student
populations decline. Appropriated student enrollment growth
funding has generally been less than the formula amount, and
when there was a decline in student populations, the student en-rollment
growth funding reduction was sometimes greater than
that determined by the formula. However, over time the per-centage
changes in student populations result in somewhat simi-lar
percentage changes to state-appropriated dollars. When the
universities allocate total state-appropriated dollars and FTEs,
they cannot segregate student enrollment growth funding in-creases
or decreases in such a way to know exactly which em-ployees
were affected, but the actual FTE staffing at the universi-ties
is near the total appropriated.
22-to-1 Formula
Provides Basis for
Calculating Budget Request
The formula is not a statutory funding law but rather a conven-tion
to calculate a budget request. First used in 1959, the formula
was developed by the universities and the Arizona Board of Re-gents
with the agreement of the Joint Legislative Budget Com-mittee.
The formula’s basic premise is that for every 22 addi-tional
enrollments of FTE students, the universities request one
Finding III
22
OFFICE OF THE AUDITOR GENERAL
additional full-time faculty position, a quarter-time secretary, a
half-time support position, plus associated support costs. Be-cause
changes in student enrollments may not always be posi-tive,
the formula can result in negative shifts in funding requests.
Appendix E (see page e-i) contains detailed information about
how the formula is used to calculate budget requests.
Universities Do Not Usually
Receive Dollars and FTEs
Dictated by the Formula
An analysis of legislative actions on formula budget requests
shows that appropriated FTEs and dollar amounts are generally
less than the amounts calculated using the formula ratio and
methodology for establishing costs. When enrollments increased,
the approved increase was generally less than what the formula
dictated, and when enrollments decreased, the approved reduc-tions
were generally greater than the formula calculations. Table
2 (see page 23), compares the year-by-year formula and appro-priated
dollars and FTEs.
Universities received less than full request when enrollments in-creased—
Normally, the universities do not receive the full
amount of their enrollment growth requests, either in additional
FTEs or in related dollars. On average, from fiscal years 1994
through 1999, universities received 91 percent of requested in-creases
in FTEs and 87 percent of requested increases in dollars.1
The percentage varied between the universities, with NAU re-ceiving
the highest percentage overall and UA receiving the low-est.
Universities received larger reductions than dictated by the for-mula
when enrollments dropped—Because changes in student
enrollments may not always be positive, the formula can result
in negative shifts in funding requests. During the ten-year period
from fiscal years 1990 through 1999, the formula resulted in re-ductions
to appropriations in two years for ASU, four years for
UA, and two years for NAU. When decreases in funding were
1 The analysis was limited to fiscal years 1994 through 1999 for the reasons
explained in the Methodology and Limitations section on page 5.
Finding III
23
OFFICE OF THE AUDITOR GENERAL
Table 2
State University Funding Study
Student Enrollment Growth Funding
Years Ended June 30, 1994 through 1999
1994 1995 1996 1997 1998 1999
Arizona State University
Formula dollars 2,556,100 3,407,400 4,471,900 1,616,800 6,054,400 10,264,100
Appropriated dollars 2,549,200 2,721,200 3,477,700 1,602,500 6,054,400 8,315,300
Formula FTE 47.25 63.00 78.75 28.00 105.00 175.00
Appropriated FTE 47.30 54.70 67.60 28.00 105.00 150.00
University of Arizona
Formula dollars (119,400) 2,068,500 729,200 (780,700) (2,626,300) 1,127,400
Appropriated dollars (119,400) 1,652,900 556,800 (540,100) (2,692,500) 897,200
Formula FTE (2.00) 38.50 12.93 (13.88) (44.84) 19.01
Appropriated FTE (2.00) 33.30 11.20 (10.80) (45.00) 16.30
Northern Arizona University
Formula dollars 2,227,800 648,500 1,948,300 2,946,900 (276,700) (815,300)
Appropriated dollars 2,227,800 514,500 1,497,100 2,800,100 (276,700) (1,101,600)
Formula FTE 40.30 11.70 33.43 49.74 (4.48) (13.20)
Appropriated FTE 40.30 10.20 28.70 49.60 (4.50) (19.80)
Source: Auditor General staff summary of State of Arizona Appropriations Reports and Arizona State Univer-sity’s,
Northern Arizona University’s, and the University of Arizona’s budget-request documenta-tion
for the years ended June 30, 1994 through 1999.
determined, universities generally received a greater reduction
in FTEs and related funding than that dictated by the formula.
From fiscal years 1994 through 1999, the universities combined
received a 5 percent greater reduction in FTEs and a 2 percent
greater reduction in dollars. However, when NAU requested re-ductions
in fiscal year 1999, it received a 50 percent greater re-duction
in FTEs and a 35 percent greater reduction in dollars.
Funding for Increased Staff
Followed Enrollment Trends
Over time, the funding and staffing authorizations for increased
student enrollment were generally consistent with enrollment
trends at the universities. From fiscal years 1994 through 1999,
Finding III
24
OFFICE OF THE AUDITOR GENERAL
full-time student enrollment grew 6.3 percent while total
appropriated dollars grew 4.4 percent from student enrollment
growth funding. In terms of employee positions, the Legislature
appropriated 560 additional FTE employees, representing a 4.2
percent increase from fiscal years 1994 through 1999. In addition,
there was ordinarily about a one-year time lag for changes in
appropriations to reflect student enrollment changes.
Enrollment trends at the three schools varied considerably—
During the same six-year period, student enrollment increased
13 percent at ASU and 6 percent at NAU, while it decreased 2
percent at UA. Therefore, student enrollment growth funding
appropriated increases were primarily associated with ASU and
NAU. UA’s dollar appropriation was actually reduced by
$245,100, while FTE employees increased by three.
Actual FTE Employees
Approximates the Total
FTEs Appropriated
During the audit period, the universities used a variety of meth-ods
to calculate FTE employees because there were no uniform
guidelines, and they were faced with other difficulties discussed
in the Methodology and Limitations section on page 5. Due to
the limitations and differences in the universities’ payroll sys-tems,
auditors were also not able to consistently calculate FTE
employees for the period under review. However, starting with
fiscal year 1998, the universities’ capabilities and methods were
improved and more comparable. An analysis of the universities’
reported actual FTE employees to the Arizona Board of Regents
at December 31, 1998 and 1999 showed that actual FTE employ-ees
were about 3 percent less than the total appropriated
amounts for those fiscal years.
OFFICE OF THE AUDITOR GENERAL
Agency Response
OFFICE OF THE AUDITOR GENERAL
(This Page Intentionally Left Blank)
S:\Finance\Kathy\111500resptoAG.doc
November 21, 2000
Debra K. Davenport
Auditor General
2910 North 44th Street, Suite 410
Phoenix, AZ 85018
Dear Ms. Davenport:
We have reviewed the preliminary report draft of your funding study of Arizona
State University, Northern Arizona University, and The University of Arizona.
This study encompassed three specific funding matters for the universities—
decision packages, tuition and fees, and student enrollment growth.
The Arizona Board of Regents and the three universities wholeheartedly
embrace the report’s findings. We express our appreciation for the diligent
efforts of your office in conducting this study at the request of the Legislature.
Sincerely,
Linda J. Blessing
Executive Director
cc: President Lattie Coor, ASU
President Peter Likins, UA
President Clara Lovett, NAU
OFFICE OF THE AUDITOR GENERAL
Appendices
OFFICE OF THE AUDITOR GENERAL
(This Page Intentionally Left Blank)
Appendix A
State University Funding Study
Decision Package Outcome Summary
Years Ended June 30, 1996 through 1999
Arizona State University
1996 Improving Undergraduate Education and 1997 and 1998 Undergraduate Initiative
n The Office of Student Affairs developed the “Freshman Year Experience” program to increase ac-cessibility
to academic advising, writing centers, and tutors in resident halls. ASU is benchmarking
efforts through student surveys to determine effectiveness and has measured a 10 percent increase
in sophomore persistence from the participating freshmen. In addition, the Office has made ad-vancements
in technology for student services, including access to grade reports, financial aid, and
job search, and has made efforts to recruit top-scholar students to help maintain a balance between
the numbers of lower-division and upper-division students.
n The College of Public Programs focused on offering more classes for undergraduate students so
that class size is reduced and on providing quality instructors and improving advising services.
n The College of Engineering and Applied Sciences created new courses for undergraduates that are
taught by tenured faculty. The College has also developed a program where groups of about 30
new incoming freshmen are put into teams. These teams stay together in their undergraduate
courses, enhancing their support relationships and group cohesiveness and in turn enhancing their
learning ability and development. The College increased its undergraduate enrollment through hir-ing
employees dedicated to recruiting new enrollees and placing them in well-suited programs to
help ensure their success.
n The College of Liberal Arts improved the quality of entry-level math and English courses by hiring
more full-time professional faculty and offering courses that give the student greater learning abili-ties
and success opportunities. They have allowed students in need of additional instruction to
stretch the basic English course over two semesters, resulting in smaller class sizes and higher pass
rates. Overall the College is working to replace part-time faculty with more dedicated tenure-track
faculty and professional lecturers.
1998 Economic Growth and Engineering Excellence
n The College of Engineering and Applied Sciences created the Manufacturing Institute in collabora-tion
with ASU College of Business and Motorola. The Institute represents a new form of partner-ship
with Arizona’s manufacturing industry, one that advances the mutual goals of creating new
knowledge, innovative education, lifelong learning, and global partnerships. ASU determined that,
over the last four years, external support for research with potential economic impact grew 38 per-cent.
ASU noted that the strengthened research programs have yielded positive outcomes, includ-ing
an increase in freshman engineering students, increased persistence rate for freshmen students,
and an increase in lower-division classes taught by ranked faculty.
1999 Lump-sum decision package
n The College of Engineering and Applied Science hired new faculty and staff to support research in
the clusters identified by the Governor’s Strategic Partnership for Economic Development includ-ing
the Software and Information Industry, High Technology Industry, and Bioindustry. To sup-port
an undergraduate student population that has almost doubled in the past five years, the Col-lege
has hired temporary faculty while continuing its intensely competitive search for permanent
computer science faculty.
n The College of Liberal Arts and Sciences added faculty and staff primarily in the sciences and
mathematics to augment the interdisciplinary programs in biomedicine and environmental science.
The College was successful in hiring a member of the National Academy of Sciences. He plans to
bring an active research team to ASU to study the development of edible vaccines and to participate
in the rapidly growing academic programs in the biological sciences.
a-i
Appendix A (Cont’d)
State University Funding Study
Decision Package Outcome Summary
Years Ended June 30, 1996 through 1999
Arizona State University (cont’d)
1999 Lump-sum decision package for the West Campus
n The West Campus created the University College Center. This center was developed to enrich the
texture of undergraduate education, optimize student resources, and develop enrollments. The cen-ter
exists to help ease a student’s transition from the community college to university environment.
It also provides extensive advising services and access to collaborative programs, such as the Hon-ors
College and Writing Center.
Northern Arizona University
1996 Personalized Educational Support Technologies
n NAU used the monies for three major areas:
1) Modernizing student software systems and the hardware to support them
2) Improving disability support services and hiring an additional signer
3) Support of the Institute for Native Americans to support other campus units in recruitment and
retention of Native American students and to maintain strong tribal relations
1997 Undergraduate Initiative
n NAU used the majority of these resources for the School of Hotel and Restaurant Management to
establish a 12-month program, allowing summer classes to be held. NAU is also using a portion of
this funding to begin the process of updating its student information computer system.
1998 Ecosystem Restoration Program
n NAU expanded undergraduate research and instruction in the Ecosystem Restoration Program.
NAU developed a degree program that offers an emphasis in ecological restoration and has
founded the Ecological Restoration Institute. The Institute received the 1999 Governor’s Pride
Award and received approximately $2 million in federal grants. NAU’s program is recognized as
the nation’s leading Ecological Restoration Program and is attracting new faculty and graduate stu-dents.
1998 Technological Retrofitting of the Flagstaff Campus
n Extended network access to academic buildings and residence halls on campus to serve 6,000 resi-dence
hall students to improve their undergraduate experience. NAU created and now operates
student-worker computer help desks in residence halls and has updated technological equipment
to better serve student needs.
1999 Lump-sum decision package and additional funding
n The State of Arizona Appropriations Report stated that this appropriation was for enrollment funding
adjustment as well as various decision packages. About one-third of the monies was used to sup-plement
enrollment funding deficits from the student enrollment growth funding formula appro-priations.
The remaining two-thirds was used for developing NAU’s statewide academic programs
that provide educational opportunities to students throughout the state and for NAU’s technologi-cal
network that provides interactive instructional television, interactive conferencing for other state
government entities, and internet access for remote locations and community colleges in Arizona
a-ii
Appendix A (Concl’d)
State University Funding Study
Decision Package Outcome Summary
Years Ended June 30, 1996 through 1999
University of Arizona
1996 Arizona Health Sciences Center (AHSC) Library/Learning Resource Center
n AHSC improved operations of the library’s on-line catalog circulations system and new software
site license. The library employed an additional librarian and two support staff.
1996 New Learning Technologies
n UA incorporated state-of-the-art telecommunication technologies to improve the quality of under-graduate
education, faculty development, pilot courses, and new student orientation. Funding was
used to create shared resources available to the entire campus, through learning technology sup-port
units, expanding the electronic network, providing library support, software, and site licenses,
as well as for faculty development in technological areas.
1997 Undergraduate Initiative
n UA upgraded classrooms to a minimum level of technology, evaluating various technological ca-pabilities
such as, computer technology, lighting, and audio. In addition, it revamped older build-ings
to enable classrooms with projection capabilities, PowerPoint plug-ins, and video sources.
1998 Excellence in Undergraduate Education
n UA is making efforts to purchase and install an effective student information system that will en-hance
the students’ capabilities to get current and accurate information about their educational pro-gress
and financial standing.
1999 Lump-sum decision package
n UA implemented a new program called Pathways to Student Success that encompassed new un-dergraduate
curriculum and increased enrollment in the Colleges of Social and Behavioral Sciences,
Humanities, and Science.
1999 Lump-sum decision package and additional funding for AHSC
n AHSC used approximately half of the monies for enhancing library operations and focused the
remaining resources on public health needs and outcomes, establishing a Health Outcomes Project
in the Colleges of Medicine, Nursing, and Public Health, to study health care reform to link collabo-rative
research to rural areas.
Source: Auditor General staff summary of information provided by Arizona State University, Northern Arizona
University, and the University of Arizona.
a-iii
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Total
Arizona State University
State General Fund appropriations $188,902,000 $206,523,000 $205,027,000 $208,554,000 $213,928,000 $232,653,000 $245,281,000 $256,071,000 $279,145,000 $305,349,000 $2,341,433,000
Tuition and fees 97,537,000 110,712,000 111,962,000 113,350,000 127,167,000 137,638,000 148,124,000 160,934,000 175,109,000 181,326,000 1,363,859,000
Governmental and private gifts, grants, and contracts 9,865,000 12,117,000 12,028,000 13,084,000 13,937,000 14,186,000 16,409,000 17,449,000 19,067,000 19,935,000 148,077,000
Other sources 16,093,000 17,051,000 17,123,000 17,157,000 19,817,000 18,429,000 20,509,000 23,535,000 23,271,000 25,186,000 198,171,000
312,397,000 346,403,000 346,140,000 352,145,000 374,849,000 402,906,000 430,323,000 457,989,000 496,592,000 531,796,000 4,051,540,000
University of Arizona
State General Fund appropriations 230,678,000 241,145,000 241,157,000 243,886,000 243,706,000 259,367,000 271,590,000 281,453,000 297,030,000 313,366,000 2,623,378,000
Tuition and fees 87,570,000 98,215,000 102,775,000 102,881,000 114,506,000 118,458,000 122,855,000 129,805,000 135,766,000 144,747,000 1,157,578,000
Governmental and private gifts, grants, and contracts 34,860,000 44,237,000 42,404,000 42,424,000 45,368,000 47,559,000 47,885,000 49,381,000 53,289,000 64,572,000 471,979,000
Other sources 15,519,000 16,213,000 16,889,000 18,470,000 20,493,000 22,690,000 26,744,000 26,235,000 27,195,000 32,691,000 223,139,000
368,627,000 399,810,000 403,225,000 407,661,000 424,073,000 448,074,000 469,074,000 486,874,000 513,280,000 555,376,000 4,476,074,000
Northern Arizona University
State General Fund appropriations 62,647,000 67,984,000 70,503,000 73,489,000 75,531,000 81,583,000 86,473,000 90,922,000 98,146,000 103,318,000 810,596,000
Tuition and fees 31,675,000 35,923,000 39,146,000 40,871,000 46,492,000 50,147,000 55,642,000 57,680,000 59,807,000 62,037,000 479,420,000
Governmental and private gifts, grants, and contracts 875,000 1,156,000 1,571,000 1,821,000 2,278,000 2,676,000 2,990,000 4,174,000 4,072,000 3,741,000 25,354,000
Other sources 4,478,000 5,058,000 5,115,000 6,323,000 6,688,000 7,311,000 8,518,000 9,245,000 9,247,000 8,250,000 70,233,000
99,675,000 110,121,000 116,335,000 122,504,000 130,989,000 141,717,000 153,623,000 162,021,000 171,272,000 177,346,000 1,385,603,000
Universities Combined
State General Fund appropriations 482,227,000 515,652,000 516,687,000 525,929,000 533,165,000 573,603,000 603,344,000 628,446,000 674,321,000 722,033,000 5,775,407,000
Tuition and fees 216,782,000 244,850,000 253,883,000 257,102,000 288,165,000 306,243,000 326,621,000 348,419,000 370,682,000 388,110,000 3,000,857,000
Governmental and private gifts, grants, and contracts 45,600,000 57,510,000 56,003,000 57,329,000 61,583,000 64,421,000 67,284,000 71,004,000 76,428,000 88,248,000 645,410,000
Other sources 36,090,000 38,322,000 39,127,000 41,950,000 46,998,000 48,430,000 55,771,000 59,015,000 59,713,000 66,127,000 491,543,000
$780,699,000 $856,334,000 $865,700,000 $882,310,000 $929,911,000 $992,697,000 $1,053,020,000 $1,106,884,000 $1,181,144,000 $1,264,518,000 $9,913,217,000
Source: Auditor General staff summary of audited financial reports of Arizona State University, Northern Arizona University, and the University of Arizona for the years ended June 30, 1990 through 1999.
Appendix B
State University Funding Study
Revenue Sources of Each University
Years Ended June 30, 1990 through 1999
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Total
Arizona State University
Instruction and academic support $181,529,000 $200,428,000 $198,946,000 $197,446,000 $206,047,000 $231,894,000 $256,194,000 $270,567,000 $292,535,000 $314,363,000 $2,349,949,000
Student services and scholarships 32,610,000 41,582,000 44,121,000 45,207,000 48,847,000 50,179,000 52,306,000 56,777,000 65,283,000 71,086,000 507,998,000
Institutional support, operation and
maintenance of plant, and debt service 71,278,000 78,381,000 77,918,000 78,097,000 86,720,000 89,520,000 94,924,000 97,645,000 103,474,000 107,264,000 885,221,000
Research and public service 15,546,000 17,959,000 18,853,000 18,485,000 17,650,000 18,881,000 20,755,000 20,782,000 22,874,000 24,493,000 196,278,000
300,963,000 338,350,000 339,838,000 339,235,000 359,264,000 390,474,000 424,179,000 445,771,000 484,166,000 517,206,000 3,939,446,000
University of Arizona
Instruction and academic support 207,199,000 218,704,000 219,618,000 217,784,000 220,274,000 233,442,000 244,533,000 253,771,000 266,414,000 281,840,000 2,363,579,000
Student services and scholarships 29,710,000 33,770,000 34,591,000 33,316,000 33,998,000 35,234,000 37,272,000 44,950,000 47,351,000 50,287,000 380,479,000
Institutional support, operation and
maintenance of plant, and debt service 79,645,000 86,997,000 82,815,000 89,141,000 92,605,000 99,137,000 111,073,000 110,552,000 116,327,000 118,462,000 986,754,000
Research and public service 57,451,000 58,643,000 58,515,000 56,787,000 60,754,000 61,345,000 64,447,000 67,331,000 69,193,000 71,927,000 626,393,000
374,005,000 398,114,000 395,539,000 397,028,000 407,631,000 429,158,000 457,325,000 476,604,000 499,285,000 522,516,000 4,357,205,000
Northern Arizona University
Instruction and academic support 51,475,000 56,843,000 59,953,000 62,166,000 68,162,000 73,862,000 78,767,000 85,827,000 92,687,000 97,910,000 727,652,000
Student services and scholarships 11,072,000 13,167,000 12,924,000 13,737,000 14,569,000 15,839,000 17,090,000 20,740,000 23,055,000 24,705,000 166,898,000
Institutional support, operation and
maintenance of plant, and debt service 29,340,000 32,131,000 32,786,000 33,106,000 36,148,000 38,077,000 40,243,000 41,656,000 44,152,000 44,145,000 371,784,000
Research and public service 4,627,000 5,071,000 5,194,000 5,691,000 5,543,000 5,917,000 6,844,000 7,177,000 12,081,000 9,608,000 67,753,000
96,514,000 107,212,000 110,857,000 114,700,000 124,422,000 133,695,000 142,944,000 155,400,000 171,975,000 176,368,000 1,334,087,000
Universities Combined
Instruction and academic support 440,203,000 475,975,000 478,517,000 477,396,000 494,483,000 539,198,000 579,494,000 610,165,000 651,636,000 694,113,000 5,441,180,000
Student services and scholarships 73,392,000 88,519,000 91,636,000 92,260,000 97,414,000 101,252,000 106,668,000 122,467,000 135,689,000 146,078,000 1,055,375,000
Institutional support, operation and
maintenance of plant, and debt service 180,263,000 197,509,000 193,519,000 200,344,000 215,473,000 226,734,000 246,240,000 249,853,000 263,953,000 269,871,000 2,243,759,000
Research and public service 77,624,000 81,673,000 82,562,000 80,963,000 83,947,000 86,143,000 92,046,000 95,290,000 104,148,000 106,028,000 890,424,000
$771,482,000 $843,676,000 $846,234,000 $850,963,000 $891,317,000 $953,327,000 $1,024,448,000 $1,077,775,000 $1,155,426,000 $1,216,090,000 $9,630,738,000
Source: Auditor General staff summary of audited financial reports of Arizona State University, Northern Arizona University, and the University of Arizona for the years ended June 30, 1990 through 1999.
Years Ended June 30, 1990 through 1999
Appendix C
State University Funding Study
Expenditure Functions of Each University
Appendix D
State University Funding Study
Summary of Functional Expenditure Classifications
As of November 2000
Functional
Classification Description
Instruction
Activities that are part of an institution’s instruction programs for
credit and noncredit courses for academic, occupational, and voca-tional
instruction.
Academic Support
Support services that directly assist the academic functions such as
library and museum materials, audiovisual services, computing
support, course curriculum support, and academic administration.
Institutional Support
Activities of central management concerned with long-range plan-ning
of the entire institution, such as legal services, fiscal operations,
data processing, space management, personnel management, and
services for procurement, storerooms, safety, security, printing, and
transportation.
Operation and Maintenance of
Plant
Services and maintenance of grounds, facilities, and equipment as
well as utilities, fire protection, and property insurance.
Debt Service
Mandatory deductions from the current operating funds for legal
agreements related to financing, such as for debt retirement, inter-est,
and required provisions for renewals and replacements.
Student Services
Activities contributing to students’ emotional and physical well-being
and intellectual, cultural, and social development, such as
student newspapers, intramural athletics, student organizations,
counseling and career guidance, and student health services. Stu-dent
financial aid administration and the offices of admissions and
the registrar are also included.
Scholarships Grants, scholarships, and fellowships awarded to students, as well
as trainee stipends, prizes, and awards to students.
Research
Activities specifically organized to produce research outcomes for
individual and project research as well as that of institutes and re-search
centers.
Public Service
Noninstructional services benefiting external individuals and
groups, including community service programs and cooperative
extension services, such as conferences, general advisory services,
radio and television, institutes, and similar services to particular
sectors of the community.
Source: Auditor General staff summary of functional expenditure classification descriptions in Audits of Col-leges
and Universities issued by the American Institute of Certified Public Accountants, May 1994.
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Appendix E
State University Funding Study
Student Enrollment Growth Funding
22-to-1 Formula
As of November 2000
For every increase of 22 FTE students, the universities
request:
The dollars for the requested staff posi-tions
are determined based on:
1.00 Full-time faculty position
0.25 Secretary III equivalency for direct sup-port
0.50 Support position to cover increased
workload in areas such as library, com-puting
media services, telecommunica-tions,
academic facilities, testing, etc.
The universities’ current-year average sala-ries
for tenure track faculty, Secretary III
equivalents, or faculty support equivalents,
plus employee related expenditures (ERE)
using the Governor’s Office of Strategic
Planning and Budgeting Employee Re-lated
Expenditures Worksheet.
Universities also request support costs:
Amount for each
1.00 faculty
position
Amount for each
1.00 secretary and
support position
Professional and outside service costs $1,600 $ 0
In-state travel 300 0
Out-of-state travel 1,000 0
Other operating costs 1,800 1,800
Equipment 5,200 5,200
Since the early 1980’s, the formula has been based on a three-year weighted rolling average of FTE stu-dents.
The effect of this average is a two-year lag in funding increases or decreases. The lag mitigates
the effects of large swings in enrollments which enables the universities to plan for a reduction rather
than absorb an immediate reversion in the current year. The average consists of
n 25 percent of actual fall-semester FTE student enrollments for the current year,
n 50 percent of actual fall-semester FTE student enrollments for the prior year,
n 25 percent of projected fall-semester FTE student enrollments for the year the monies are being re-quested.
The increase or decrease in student enrollment is then determined by comparing FTE student enroll-ment
most recently funded with the FTE student enrollment calculation based on the formula for the
year of request. If the number of FTE students declined, these same calculations would be used to
compute funding decreases.
Source: Auditor General staff analysis of information provided by the Board of Regents.
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