New Virtual U

Virtual U Manual: Finance

What administrator doesn’t need to turn to this “bottom line” summary of how his or her institution is doing? The three-year financial projections (Figure 13) provide a detailed account of revenue and expenditures across all areas of institutional activity. This section of Virtual U, as with a real institution, requires a lot of study and attention. The majority of Finance screens are available and active during the entire school year. However, most of the main budget planning can only be handled during the annual budget-setting exercise, which takes place at the end of each school year.

Figure 13: The Financial Projections screen provides a detailed accounting of your past and present spending and income.

The Finance and Resource Allocation Screens

The finance and budget phase (also known as Resource Allocation) of Virtual U is perhaps the most important and difficult section of the simulation to master. Since budgeting involves so many critical decisions that affect the university, it can be the key to affecting the maximum change you are trying to obtain during your tenure as president. Additionally, the interface and the way the entire budget phase works are a bit more complex than other parts of the Virtual U software.

Tip:
The budget portion of Virtual U may take several games to understand completely. It has a multitude of possibilities so be patient and eventually you can master the budgeting phase like a real pro.

The Premise of Virtual U’s Finance Phase

Before you can really begin to master the budget and finance interface of Virtual U, you must understand the design premise behind it. The Virtual U budget process simulates the traditional give and take between a president who outlines priorities (some of which may be absolute and some relative) and a budget office that has to reconcile priorities and budget requests against the overall framework of the budget plan and balance sheet. In each of Virtual U’s actionable Budget and Finance screens, you first will set the desired budget increases or decreases. This will include setting a target value plus the upper and lower end of the acceptable range for the budget variable. Then you will set priorities for each budget element. Once this has been completed, you submit that outline to your “budget wizards” by clicking the optimize button that accompanies each screen. The budget department will check all the numbers and report back the approach that best meets your specifications.

As you will see, what you outline and what they deem possible will not be the same. You can accept their results and move on, or adjust the priorities and change items to induce the budget department to get closer to your pet priorities (while knowingly sacrificing other objectives).

While this process gives you less exacting control over the budget than you might like, the approach is similar to the real negotiation and priority setting that a true university budgeting process has to endure. With this description as a backdrop, you can better understand how to work directly with the budgeting interface.

Using the Finance Phase’s Interface

The finance section of Virtual U is entered in one of two ways. At any time during play you can click on the Finance menu and enter any and all of the screens related to finance (Figure 14). In addition, at the end of the fiscal year (August 30 for Virtual U) the board will always come calling (unless your have turned off the year-end financial report on the Menu screen, which we recommend not doing). This mandates that you run through the budget and set priorities for the coming fiscal year. Thus, whether you want to or not, you will be forced to look at these screens at least once a year. You may look at the screens anytime, but the main focus is at the yearly review.

Figure 14: When entering the financial section during normal course of play, you’ll find a menu at the bottom of each screen that makes it easy to move around the entire finance system of Virtual U.

When the yearly review occurs you will be greeted with a telephone ring and presented with a letter summarizing the board’s view of your management for the previous year. After reading through the letter you will automatically be shifted into the budget phase of Virtual U.

The first few screens of the budget phase will display the previous year’s budget vs. actual spending and balance sheets. This gives you a chance to review where spending levels have been and how they actually worked out over the previous year. Keep in mind as you look at this what the new year’s board letter outlined as your problem areas and priorities. (Hopefully you wrote them down or printed the letter out, although you can always go back and look at the letter once play resumes.)

Tip:
During each school year and as you examine the resulting Budget screens, you may want to keep good notes about areas you want to improve. If not, you may be left making poor decisions about the investment priorities in your budget. Which departments need more teachers than others? How much more money must you spend for a winning athletic program? Notes made during the year will play a big role in your year-end budgeting. Finally, use the budget adjustment features that are attached to specific departments of Virtual U that you encounter during play. By using the “promise for next year” or “consider for next year” functions, you can effectively embed desired changes in the budget ahead of time as you note them during the previous year’s time.

Once you are through looking at the reports, you will enter into the Resource Allocation for the Fiscal Year. This is the crux of your budget planning for the year. The budget planning process is broken down into three distinct sections:

Revenue and expenditure
Allocations
Faculty hiring

The planning process follows this order. The result of the first section influences the decisions that can be made in the following sections. This plays out in that the amount you grow or shrink the budget overall determines how much money there is to allocate for all the basic functions of the university. After that, the amount you put into faculty expenses in the Allocations budgeting section determines how much money there will be for the Faculty hires, which determines how many new hires overall you can allocate in the final phase of budgeting.

With the exceptions noted later, each of the three main Budget screens works in an identical fashion from the standpoint of the user interface. A slider control (an example of which is shown in Figure 15) is associated with each budget element. This slider contains a green vertical “crossbar” that lets you move it to represent the desired setting you’d love to have. Meanwhile, each slider also contains a horizontal yellow bar that is the part of the control that lets you define the upper and lower boundaries that you would accept during the optimization process (this bar only allows for an upper-end definition in the faculty hires screen).

Figure 15: The slider control used in Virtual U’s budgeting screens.

To slide the slider, click and drag the green crossbar to the desired location on the slider bar — a number that is close to the crossbar will change to highlight in text the setting you are choosing. To define upper and lower boundaries, click on the ends of the yellow bar and drag them left or right as needed to define your limits. When the mouse is properly positioned on the end of the yellow bar, the end will flash and change color - this will help you grab the correct part in order to make the change.

Note:
You can never slide a boundary above or below the setting of the green crossbar. You must move the crossbar left or right to obtain further room for your boundary setting.

To the right of each budget item are the priority buttons, labeled 1, 2, 3, and R. Click on each one for each item to define relative priorities for your budget office.

Note:
If you set all budget priorities to the same level, they will all be treated as equals no matter how high or low priority you set them as a group — thus it is important that you vary your priorities as much as possible in order to achieve maximum direction to your priorities when you click optimization.

Pressing R denotes an item as a restricted priority. That means that the optimization process will treat your budget directions for that budget line as nearly immovable. When you set a priority to R, it locks itself in. To change a priority to a number from an R setting, you must first deselect the R priority (by clicking on “R”) and then select a numbered priority. Once you are satisfied with your budget outline, click on the Optimize button at the bottom of the screen. The budget office will go to work and try to fulfill your plan. When the budget office returns with its results, you can click Next to accept them or you can further tweak your priorities and settings. Each time you change one variable after doing an optimization, you must then re-optimize to get a resulting budget closer to your goal and enable moving on to the next screen.

Tip:
Experiment with the budget interface the first time you play Virtual U. Learn how to set boundaries, settings, and priorities that result in emphasis on different budget decisions you most want made. The more you learn how to manipulate the budget interface, the easier you will find it to get the office to do what you want. As in real life, you need to know how to work things to your advantage during budget time.

Figure 16: The Budget Policies screen lets you set many macro-financial attributes for the University.

Completing the budgeting process requires moving through the three main Budget screens. Each item line on each screen has associated help, which can be accessed by pressing the corresponding ? icon located to the left of the budget line item. You may also hold the cursor over individual elements and context sensitive pop-up help will be display. Set each item and optimize as just instructed. When you are satisfied with the results, hit Next. The first screen — Budget Policies (Figure 16) — lets you set many macro-attributes for the University, including growth of tuition rate, financial aid, faculty salaries, and the real operating budget growth.

The next screen in the budget process is the Budget Allocation screen (Figure 17). It allocates the real operating budget growth (or reduction) among the various functions of the University. This gives you quite a bit of direct control over ten distinct areas of the college, from faculty expenses to the student life budget to the amount spent on general administration, that you will want to influence.

Figure 17: The Budget Allocation screen lets you make or break the budget for ten distinct sections of the University in the coming year.

The final screen in the budget process is the Faculty Hiring screen (Figure 18). This screen lets you disperse the total number of faculty your new budget lets you afford across all the active departments in your University. At the bottom of this screen is a slider that lets you increase the number of faculty you will hire beyond the default that was allowed by the previous budgeting process. This allows you to add some last-second hires as you try to eliminated understaffing problems in any departments. Note, however, that adding faculty may put your budget into deficit.

Figure 18: This Faculty Hiring screen allows you to disperse the total new faculty hires in your budget across all academic departments in your University. In case you need to add more faculty at the last second, a slider at the bottom of the screen lets you do so.

As you see, the financial modeling capabilities of Virtual U are both broad and deep. It takes some time to master their capabilities, but once you do you will find yourself a much better player. Table 7 provides a quick overview of all the finance screens and options in Virtual U.

Once you are complete with your faculty hiring and department allocations, you can click Next to return to play.

Note:
The Preference buttons have been removed from the Faculty Hiring screen. Virtual U sets the departmental priorities automatically, but you can affect the hiring pattern by changing the targets and limits.

Tip:

Upon returning to play in your university, it’s a good idea to stop the clock and check out all your graphs and set priorities before you get too far into the new year.

Table 7: Finance Variables

Button	Purpose	Variable	Notes
Budget vs. Actual (Standard)	Shows the budget vs. actual spending in various years.	Three-year financial projects for revenue as Gross tuition income Financial aid Net tuition income Sponsored research Gifts Endowment spending Intercollegiate athletics Other operating income Interest earned or paid on operating reserve State appropriation Total sources of funds Three-year financial projects for expenditures as Academic departments Sponsored research Libraries resources Information technology resources Student life Athletics Development and alumni affairs Administration Operations and maintenance Enrollment management Total operating expenditures Service on general plan debt Transfer to capital reserve Total uses of funds Surplus (deficit)	None of the variables shown in this screen can be changed. However, it’s important that you take notes or print these screens if you want to make a more careful analysis for changes in the subsequent actionable budget screens of Virtual U.
Balance Sheet (Standard)	Three-year balance sheets	Three-year balance sheets for assets as Operating reserve Capital revenue Endowment at market value Academic plant replacement values Residence halls Total assets Three-year balance sheets for liabilities including General plant debt Residence hall debt Total liabilities Fund balance Total liabilities and fund balance	The most important role of the balance sheet is to help you determine whether you are carrying too much debt for the University and whether the size of reserves and the endowment keep you solvent. If at any point the University can’t cover its debts, the simulation will end.
Budget Plan	Lets you set all facets of budget by increasing or decreasing last year’s budget +/- 0-5%	Real growth of tuition rate Real financial aid growth Endowment spending rate Indirect cost rate Real faculty salary growth Real staff salary growth Real operating budget growth Transfer to plant Surplus or deficit	The basic Budget Plan screen lets you set many macro financial attributes for your University. Be sure to use this screen to increase income and lower overall costs if your University is having problems balancing its books. In addition, you can use it to spur growth in the University, especially faculty growth, which can help you subsequently get individual departments the extra faculty and investment they need to improve themselves and the University as a whole.
Functions	Lets you spread and focus increases or decreases in the budget among various aspects of the University.	For allocation of net budget change Faculty expense Nonfaculty departmental expense Libraries Information technology Student life Athletics Development and alumni affairs Administration (G&A) Operations and maintenance (O&M) Enrollment management
Faculty hiring	Lets you set exactly which departments get new hires and how many.	Existing faculty, salary and target hires by department Number of new budgeted faculty positions Sum of departmental hiring targets Total number of faculty to be hired	New hires will grow departments and provide them (hopefully) with improved talents and results. Before you hire a large number of new professors, be sure that you’ve used the hiring priorities section of the Faculty screens to push on the university to hire new staff in line with your University vision.