massachusetts institute of technology administrative and fiscal officers meeting november 20, 2009

Massachusetts Institute of Technology

Administrative and Fiscal Officers Meeting

November 20, 2009

Massachusetts Institute of TechnologyNovember 20, 2009



Welcome and Opening Remarks Terry Stone, Executive Vice President and Treasurer

Budget Planning Update – Fiscal Year 2011Rafael Reif, Provost

Institute-wide Planning Task Force – UpdateIsrael Ruiz, Vice President for FinanceMember of Task Force Coordinating Team

Acting on Task Force Ideas – Sourcing, Travel and Procurement ServicesLeo McInerney, Director of Sourcing

What's New in Your 401(k) Plan Investment OptionsAlison Alden, Vice President for Human Resources

Census 2010 – MIT’s Responsibilities and ChallengesLydia Snover, Director of Institutional Research

MIT’s Written Information Security Program (WISP)Allison Dolan, Program Director



Welcome and Opening Remarks

Terry Stone, Executive Vice President & Treasurer



Fiscal 2009 - Summary

Despite economy, MIT steadily navigated the challenges of FY09

Entered the year with expected consolidated operating surplus and balanced budget

Monitored expenses and liquidity carefully

Achieved operating surplus in line with plan

Secured long-term financing to complete major capital program• $610.0M in new, tax-exempt debt; $203.0M used to replace line of credit

financing

Put plans in place to operate with fewer financial resources• Financial planning tools readied to guide required adjustments



Budget Planning Update – Fiscal Year 2011

Rafael Reif, Provost



FY2009 and 2010 Budget Highlights

FY09 GIB achieved balanced budget Operating results include $35M for future task force investments &

contingencies

FY10 budget achieves reductions in GIB operating expenses of $58.3M

Endowment payout the same as that for FY09

Includes $27M for future task force investments and contingencies

Fiscal 2010 Expense Budget Reduction($M)

Reduction Area SavingsCost AvoidanceTotal compensation reduction $11.3New recurring programs $5.0

Budget CutsAcademic unit budget cuts $10.5Administrative unit budget cuts $12.9Other (e.g.: CRSP, renovation and renewal, utilities) $18.6Total Fiscal 2010 Expense Budget Reduction $58.3



Budget Planning Update

FY11 budget plan objectives

Absorb most of the effects of endowment decline in FY11 • Cut endowment payout to achieve distribution rates in the 5-5.25% range

– Modeled reduction of 18.0% from FY10 levels

• Reduce GIB by $60-70M through a combination of:– Task force-related recommendations– Academic and administrative budget reductions

Additional task force recommendations expected to yield further revenues/savings beyond FY11



Budget Model Update

Budget model update & assumptions FY11-FY20 projections use FY09 figures and FY10 budget

expectations

Assumptions for FY11 and beyond:• Endowment distribution reduced by 18% in FY11; smoothing distribution rule

thereafter • Tuition increase = 4.0% per year, up from 3.8% in FY10• MTDC increase = 3.0% per year• Utilities increase = 5.0% per year• Gifts to GIB = $9.0M per year• Gifts increase to endowment = 1.0% per year



Budget Model Update – Before Budget Cuts

Planning model demonstrates the effect of the following factors:

• Impact of FY10 budget cuts

• FY11 and beyond actions not yet incorporated

• 18% payout reduction in FY11 with smoothing rule thereafter

Endowment Return Case Scenario Analysis - FY11 Planning 0% Endowment Return in FY10 & 18% FY11 Endowment Payout Cut

($35.4) ($36.5) ($36.4)($31.6) ($27.9)

($23.5)($18.2) ($14.8)

($31.5)

($42.6)($50.7)

($59.6)($65.6)

($74.3)

($83.8)

($93.6)

($106.5)

($120.3)

($11.2)

($29.1)

$27.3$35.0

($130)

($120)

($110)

($100)

($90)

($80)

($70)

($60)

($50)

($40)

($30)

($20)

($10)

$0

$10

$20

$30

$40

$50

FY20

09

FY20

10

FY20

11

FY20

12

FY20

13

FY20

14

FY20

15

FY20

16

FY20

17

FY20

18

FY20

19

FY20

20

$ M

illio

ns

A: 0% in FY10, then 8.25% long term return B: 0% in FY10, then 7% long term return

C: 0% in FY10, then 5% long term return D: 0% in FY10, then 3% long term return



Budget Model Update – After Budget Cuts

Planning model demonstrates the effect of the following factors:

• Impact of FY10 budget cuts

• FY11 budget cuts = 61M

• 18% payout reduction in FY11 with smoothing rule thereafter

Endowment Return Case Scenario Analysis - FY11 Planning 0% Endowment Return in FY10 & 18% FY11 Endowment Payout Cut

$1.0 $0.7 $1.4$6.7

$10.9$15.8

$21.7$26.1

$4.0

($6.2)

($13.5)

($21.8)($27.3)

($35.5)

($44.5)

($53.7)

($65.6)

($78.4)

$30.7

$6.4

$27.3

$35.0

($90)

($80)

($70)

($60)

($50)

($40)

($30)

($20)

($10)

$0

$10

$20

$30

$40

$50

FY20

09

FY20

10

FY20

11

FY20

12

FY20

13

FY20

14

FY20

15

FY20

16

FY20

17

FY20

18

FY20

19

FY20

20

$ M

illio

ns

A: 0% in FY10, then 8.25% long term return B: 0% in FY10, then 7% long term return

C: 0% in FY10, then 5% long term return D: 0% in FY10, then 3% long term return

$61M Budget Cuts



Budget Reductions & Task Force Initiatives

Budget reductionsFiscal 2010

Fiscal 2011

Fiscal 2012

Total compensation reduction $11M $8-11M*

Academic units reduction $11M$12-15M**

Administrative units reduction $13M $14-17M

No new recurring programs $5M $5M

Other budget reductions (e.g.: CRSP/Renovation & Renewal, utilities)

$18M

Task Force initiatives for near-term savings $12-27M $xM

*Compensation reduction in FY11 also recommended by Institute-wide Planning Task Force

**GIB only; does not include effect of projected decreased Pool A payout

Total $58M $51-75M $xM

Preliminary Estimates



Institute-wide Planning Task Force – Update

Israel Ruiz, Vice President for Finance, Member of Task Force Coordinating Team



Task Force Process – To Date

The Working Groups (February-June) Working Groups met weekly to

• Review Idea Bank• Gather background and data (interviews, data group requests)• Draft working group report on their ‘ideas’

The Preliminary Report (June-July) Coordinators synthesized the working group reports into a preliminary

report with a set of recommendations for further action on each idea

The Comment Phase (August-October) Preliminary report released to the community Idea Bank re-purposed for soliciting input Coordinator ‘Road Show’



Task Force Process – Comment Phase

Communication efforts Institute-wide events and forums to disseminate the report’s ideas and themes Targeted presentations to different stakeholder groups Collected many comments and feedback from the community Very thoughtful responses from several groups

Feedback: Main areas Increasing undergraduate enrollment Housing and educational policies (i.e., 4-year housing, capacity, add/drop date) HR/Benefits recommendations

• Retirement benefits; details and assumptions• Provision for existing populations (i.e., “Grandfathering”)

“Softening” of faculty salaries Reduction of choice at the expense of MIT cultural values Criteria for deciding on which ideas to recommend and/or invest in Ensure transparency and inclusiveness



Task Force – The Final Report

The Final Report Phase (October-November) Will incorporate community input received from multiple channels Working Groups just submitted final versions of their reports Coordinators working to synthesize feedback and finalize the final report

Structure of the Final Report Final report structure largely unchanged

• Will update individual ideas to recognize feedback or further consideration• Will organize ideas around five themes

– New Revenue Enhancement and Educational Opportunities for MIT– Framework for Accountability and Transparency– Gaining Efficiencies and Supporting Standards– Process Modernization—Digital MIT– Modern Workforce Policies and Practices

• Will include recommendations for acting on each of the ideas• Will contain appendices with all the ideas, summarized feedback and the reports

of the working groups



Task Force – Roadmap for Action

Roadmap for Action Recommendations for action, investment and prioritization on the ideas

included in the Final Report will come from the Task Force Leadership

The Task Force Coordinating Team has been charged with:• Requesting execution plans from appropriate unit leaders with assigned ideas • Coordinating recommendations and implementation plans with operating unit leaders,

project teams and study teams • Reporting progress assessment to Senior Leadership• Working closely with co-chairs of working groups, now acting in advisory capacity,

during the implementation phase

Many ideas assigned to units in the Preliminary Report are being actively explored for implementation potential by their respective units



Acting on Task Force Ideas Sourcing, Travel and Procurement Services

Leo McInerney, Director of Sourcing



Themes

Evolving our Services

Acting on Task Force Initiatives

Community Engagement



Evolving Our Services



Review and analysis of 36 Task Force ideas

Ongoing meticulous evaluation of cost/benefit of each proposed change/idea

Task Force ideas divided into two main types: Process Improvement Strategic Sourcing Opportunities

Acting on Task Force Ideas

List of Task Force Ideas >>




Process Improvement Strategic Sourcing Opportunities

Automate, streamline, and educate the community on the procurement process

Computers & Peripherals

Furniture

Sustainability Lab Supplies & Equipment

Travel Reimbursement Travel Management

Rebates Gas

Efficiency Contingency Workforce

Printing

Office Supplies

Meetings & Video Conferencing

Spend Distribution >>



Redeploying resources to the categories identified in the Task Force ideas

Developed strategic category templates for eight initial categories

Developing a strategic sourcing implementation plan for each of the categories

Engaging you to work with us





Reaching out Awareness Collaboration Leverage Service Feedback



Acting on Task Force Ideas – Category Mgmt Process

In Process Complete Not Started



Example: Travel Market Overview

United Air-lines 16%

American 15%

US Air 10%

Singapore Air 8%Lufthansa 7%

Other 44%

CY2009 Market Share - Airlines

Marriott53520%

Kendall Hotel29411%

Hilton2148%

Hyatt1877%

Others (70+)144454%

FY2009 No. of Bookings – Hotel 2,675

Trav

elCo

llabo

rativ

e

Carl

son

Wag

onlit

Trav

el

Expe

dia.

com

OT&

TTr

avel

Oth

ers

(22)

Tota

l0

2000000

4000000

6000000

8000000

10000000

12000000

14000000

$7,770,000.00

$1,080,000.00$460,000.00$430,000.00

$2,730,000.00$12,470,000.00

FY2009 Spend by Agency - $12.5M



MIT Early Travel Initiatives

Contracts:

Air Agency Hotel Car

*Jet Blue *BCD Travel Marriott Avis/Budget

US Air OT&T *Starwood

American Sonesta

United

* - New Supplier Contract Finalized Contract in Negotiation



Modernizing MIT Travel

Pilot program now underway 45 travel credit card holders, their travel arrangers and approvers

Planning: On-line booking tool (integrated with expense reporting system) Payment: Travel credit cards (credit card expenses feed to Concur) Expense reporting: Automated (electronic workflow for approvals) Reimbursement: Out-of-pocket expenses via direct deposit (available spring) Training: In-person, on-line training portal, drop-in sessions

Early feedback is positive!

Pilot will continue through January

We will work closely with you

As we prepare for the Institute-wide rollout

Throughout the implementation phase



What's New in Your 401(k) Plan Investment Options

Alison Alden, Vice President for Human Resources



New Investment Plan Options More Choice

Life Cycle Funds: Automatically adjust the stock/bond mix over time New for participants who don’t select investments

Index Funds: Typically structured to mirror the performance of, for example, the S&P 500

Replaced underperforming funds

Most of the current choices remain

Added funds with lower expense for participants

Fidelity remains the administrator of our plan

What you should do Review where your 401(k) is invested Understand the new options

http://hrweb.mit.edu/benefits



Census 2010 – MIT’s Responsibilities and Challenges

Lydia Snover, Director of Institutional Research



MIT’s Written Information Security Program (WISP)

Allison Dolan, Program Director



Sensitive Data

Massachusetts requires notification if an individual’s

SSN, person credit card # or other financial account,

or driver’s license info is lost or stolen

> New category of sensitive data: PIRN (“personal

information requiring notification”)



Data Protection

Massachusetts requires anyone with “PIRN” to

have a “Written Information Security Program”

(WISP), with administrative, technical and physical

safeguards

> MIT will introduce a WISP in early 2010



Immediate Steps

If you don’t have it, you can’t lose it => know when

you need it, and ask questions if you aren’t clear

about the reason.

If you don’t need it, securely destroy it.



Contacts

Questions/comments?

Contact Allison Dolan [email protected]

Potential breach?

Email [email protected]



APPENDICESAdditional Sourcing information



Task Force IdeasCost Avoidance Program Source - Influence - Negotiate

1 Renegotiate and bid out contracts for goods and services 25 Standardize on Dell configurations

2 Leverage Facilities MRO purchasing power across campus 26 Standardize on video and audio conferencing services

3 Increase P-Card rebate 27 Purchase only MIT recommended desktop and laptops

4 Renegotiate VWR contract 28 Accelerating Green Procurement

5 Renegotiate other scientific supply contracts 29 Airgas proposal

6 Renegotiate contracts with ECAT suppliers 30 Transition from laser jet printers to multifunction machines

7 Establish direct contracts for air and hotels Customer Relationship Management

8 Rebid office supply 31 Educate the community about procurement processes

9 VMS system 32 Ensure that cost savings are not achieved at the expense of others

Continuous Improvement Program Supplier Rationalization

10 Automate and streamline key processes 33 Reduce the number of purchasing choices

11 Promote sustainable purchasing practices 34 Consolidate purchases of design services for capital projects

12 Develop creative solutions and fair practices 35 Combine campus and Lincoln furniture purchases

13 Reduce the number of fax machines on campus 36 Eliminate purchasing furniture from Office Depot

14 Change P-card rules to allow computer purchases 37 Consolidate travel agencies

15 Examine the impact of $3,000 capital threshold on computers 38 Vendor consolidation for clerical temp help

16 Order scientific equipment under $5,000 on ECAT

17 Institute a travel card

18 Institute an electronic expenses reporting system

19 Electronic travel reimbursements

20 Onsite life science operation

21 Office supplies update core list, implement $50 min per order

22 Reduce small dollar purchases processed by procurement

23 Employee job share bank

24 In House casual labor

Back >>



Spend Distribution

Travel

Professional Service

Lab/Scientific Equip

Computer Equipment

Catering Services

Laboratory Supplies

Transportation Serv

MITemps

Printing

R&D Service

Furniture & Furnish

Drugs

Maintenance Contract

Repairs

Independent Contract

Software Maintenance

Chemicals

Temp Help Services

Communications Serv

Computer Supplies

Office Supplies

$43,689,426

$43,391,408

$28,635,332

$25,037,485

$21,094,230

$18,410,879

$12,681,156

$10,692,319

$9,350,698

$7,421,904

$7,398,795

$6,840,439

$6,827,605

$6,436,520

$5,776,541

$5,221,160

$4,229,215

$4,143,032

$3,459,840

$3,020,199

$2,999,459

$273M in Spend21 Categories

Task Force SPI’s $205M – 75% Other $68M – 25%

Back >>

massachusetts institute of technology administrative and fiscal officers meeting november 20, 2009

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