To: Dean De Rosa

From: Luis Schang, Chair

Date: June 24, 2024

Subject: FPC Annual Report

Committee Membership

Luis Schang, Chair (CVM)

Vanessa Bohns (ILR)

Donald Kenkel (CHE)

Francesca Molinari (CAS, CS)

Dan Luo (CALS)

Rebecca Slayton (CAS)

Muna Ndulo (LAW)

Annette Richards (CAS)

David Ruppert (CIS)

Nancy Chau (Johnson)

Gideon Saar (COB)

Dean Eve De Rose, Ex Officio

Associate Dean Chelsea D. Specht, Ex Officio

Vice President Laura Syer, Ex Officio

The Financial Policies Committee of the University Senate meets monthly or more frequently during the term or as required during the summer. The schedules include two meetings with the Provost and/or VP Budget and Planning per term, to discuss ongoing and predicted budgets, including Operating Budget, Capital Budget, the long term impact of inflation on affordability, and long term projections. The highly interactive and productive discussions provide University administration with Faculty feedback and questions regarding budgetary and other financial issues. Other themes pertinent to Cornell Financial Policies are discussed internally and with guests, which typically are from University administration of the Faculty body.

This year, the meetings were hybrid for the first half of the first term but had to be converted to fully remote when Day Hall security had to be increased. In person participants met in 305 Day Hall and remote participants attended via a secure Zoom meeting. Guests were offered the choice of joining in person or remotely for the hybrid meetings, which facilitates the attendance by members or guests who are not located in Ithaca. When the meetings transitioned to fully remote, all participants were provided a secure Zoom meeting link to join from a private setting.

After the COVID-19 focus of recent years, the FPC has now returned to the general themes that affect Cornell Financial Policies and their implementation, including Endowment management, Development, Contingency Funds, eCornell and other remote initiatives, and compliance. A summary of each meeting is provided below.

Monthly Meetings Summaries

Friday, August 25, 2-3pm

As the membership of the FPC had a significant continuity from last academic year, only the first part of the meeting was focused on the introduction of the new continuing members, and a brief overview of the FPC mandate. Then, the FPC established the agenda for the first term and set up the topics to be analyzed and discussed in the meetings with Provost Kotlikoff, VP Syer, and VP Van Vliet.

Friday, September 28, 2-3pm

The second meeting of the FPC was dedicated to a meeting with Provost Kotlikoff. The meeting discussed the central contingency funds, the separate funds for strategic initiatives, and the reserves at different units. The goal of the administration is to increase the contingency funds by 5M per year to reach a 50M total target. Another area of conversation centered on the SIP and tuition increases, which are linked. The significant inflation in 2022-23 eroded revenue and put pressures on salaries. SIP mostly follows ECI, which has a delay over CPI, and therefore salaries play catch up. SIP and tuition increases for the following calendar year are determined according to the projections of the CBO at the time when the decisions must be made.

Another area discussed was the management of the endowment, and the drastic positive change that has occurred of late. Cornell used to be towards the top among its peers in withdrawals and towards the bottom in performance, but the situation has now mostly reversed. eCornell and other non-traditional learning were also discussed in the context of their financial implications and demands on faculty.

The FPC also discussed with Provost Kotlikoff the financial commitments of Cornell towards the city of Ithaca, and the impact that it has on the affordability of the city for Cornell faculty and staff, in the context that Cornell provides its own services, valued at approximately $19M per year. Provost Kotlikoff was optimistic that the proposed financial agreement would be approved by the City, as it eventually was.

Another topic of discussion was the possible financial impacts of the then likely graduate student unionization, which has since been completed, with an emphasis of the neutrality of Cornell and faculty and staff and the importance of leaving academic matters out of labor issues.

Friday, October 28, 2-3pm

During the October 28 meeting, VP Laura Syer provided an overview of the updates on the budget 23-24, the projections for the 24-25 year budget and the early vision for the 25-26 budget. As always, Tuition and Fees are the largest source of revenue, close to 45%, and salaries, wages and benefits, of expenditures, close to 55%. Consequently, the major changes between FY23 and FY24 are in these two lines. The projections for FY25 are considering lower ECI and CPI and therefore lower increases in tuition and fees and SIP are anticipated. The implications of the current model to long term tuition rates and their sustainability were discussed.

 Friday, November 17, 2-3 PM

The November 17 meeting focused on discussing potential limitations or barriers to raising grant and contract funding that had been brought to the attention of the Chair by a number of faculty.

The main issues that have been raised appear centered mostly in non-standard funding sources, although some do affect mainstream ones as well. The FPC Chair conveyed the issues raised by Faculty and the committee discussed them and concluded that this was an issue that it would analyze in depth.

Friday, December 15, 2023, 2-3 PM

The December 15^th meeting was dedicated to gathering information about the processes that Cornell Faculty have to follow to secure grant and contract funding.  A number of non-FPC member faculty were invited to discuss the challenges and potential barriers. After the introductions, the invited faculty make brief presentations and then there was an active discussion.  The following items were highlighted by a number of faculty.

• There appears to be no optimized process to streamline the renewal of similar contracts, which must be renegotiated every time.
• F&A rates may be affected to the original source of the money paying a contract, but these sources can be difficult to track in some instances. Some examples were provided. Cornell’s F&A rate is typically higher than the standards in many fields, which can result in decreased competitiveness.
• Timing is critical, as some contracts are urgent (24 h to accept, for example), and there appears not to be optimized processes to deal with contracts in such a timeline.
• Contracts may involve software development, which requires participation of several Cornell offices for approval, which may not be entirely informed of the standards in the area.
• Another challenge resides in the requirement for line item budgets, which are not typical in some areas.
• There are different requirements between research from practice, although the tools used are the same.
• Some programs in health promotion started only in 2017, and there appears not to be optimized process to support raising grant or contract funding in this area. Main funding in the area tends to come from the State or other States. Contracts are typically small, by direct tendering, and F&A rates offered are typically only up to 20%.
• Some of the challenges include the requirement that Cornell owns all data. Cornell cannot own health data. Similarly, Cornell requires universal publication rights, but publication of analyses of health-related data most likely requires approval by the partner. There is also a lack of clarity regarding the potential requirement for IRB in analyses of public health data.

These and similar issues were raised by a number of faculty in different colleges and appear to be frequent and it is possible that a number of faculty may just not pursue these opportunities, do the work without requesting any funds, or do it as part of their consulting. All of these alternatives would result in lost revenue for Cornell, loss of the prestige associated with earning these contracts, and the loss of educational opportunities.

After the round table discussion, invited faculty left the meeting and the FPC charted a course of action:

• Continue gathering as much information as possible from different units.
• Meet with VP Van Vliet to get interiorized about OSP.
• Coordinate with other avenues being pursued to resolve these issues.

Friday, January 24, 2-3 PM

The January 24^th meeting was dedicated to discussing and analyzing the ongoing issues regarding compliance faced by Cornell faculty in their attempts to raise grant and contract funding and paying for services, as well as collaborating with researchers in other institutions, particularly overseas. New cases of challenges resulting from compliance issues were raised by Faculty of a number of Colleges or units, which were presented for discussion.

• Main topics discussed were:
  • Challenges have been identified in grant and contract submission, paying for services, establishing collaborations, in particular requiring exchange of personnel and reagents, technology agreements, risk assessments, transfer of reagents to Cornell by recently hired faculty, and other areas.
  • Several strengths were noted, including available information in the web, and the RASS system, which also can create some challenges.
  • OSP is the intermediary between faculty and all compliance related offices, including legal, safety, and others. Faculty interact with OSP, not directly with compliance when submitting grants or signing contracts or NDA/MTA.
  • It is not clear if the staffing levels of OSP are keeping up with the increase compliance requirements.

Friday, February 23, 2-3 PM

Continuing with the focus on the compliance issues faced by Cornell Faculty, the February 23 meeting had the participation of the VP Research and Innovation, Dr. Van Vliet. This meeting was focused in gathering a perspective of Cornell’s financial administration of the research endeavors.

After the introduction of the participants, Dr. Van Vliet provided a global vision of Cornell Research and Innovation.

• Research expenditures have increased by 47% in last 5 years. The last years Cornell has ranked around 12-15 in this metric in the Nation. Research expenditures are a measure of the volume of the research enterprise but not necessarily an appropriate measure of impact.
• Cornell excels in earning extramural funding from NIH and NSF, but not so much in DOD, DOE and others; there is room for expansion in the latter areas.
• Sponsored support is about twice as high as internal support.
• The growth in research expenditures has brough some challenges as well. For example, staffing at OSP and other units involved in managing the research and innovation enterprise has not grown at the level of the growth of the research expenditures. Of note, no indirect costs go to Research and Innovation, they go to the Colleges and other Units instead, and therefore the funding of Research and Innovation is not coupled to the level of research expenditures. Research Innovation allocation comes from the provost’s office.
• OSP structure and operations were discussed. The OSP director responds directly to the VP research and innovation. The research administration at Cornell is widely considered a national leader to the point that many other entities model themselves after Cornell. Of importance, OSP turnover is lower than national average.
• OSP has different structures in different units. Three colleges have Unit specific models, CALS, CVM and CHE, and do not participate in the Pro-team pre-award support model.
• As in most other Universities, OSP was built around federal grant funding, and its approach to risk assessment is influenced by this main focus.
• One area for growth is translation impact. Increasing translation impact will result in further success at raising funds and in strategic engagements.

The presentation was followed by a general discussion focused on some of the challenges Faculty face regarding raising funds and paying for services and goods.

Friday, March 24, 2-3 PM

The internal March FPC meeting was dedicated to discussion the compliance issues faced by Cornell Faculty, and in particular the input provided by Dr. Van Vliet regarding the issue. The second part of the meeting was dedicated to preparing for the upcoming meeting with Provost Kotlikoff.

The FPC members were most impressed with the meeting with Dr. Van Vliet. There was a general consensus that some of the questions will require a later follow up to get full clarifications. The FPC discussed how to proceed next, considering the possibility of proposing a Faculty survey. The FPC was of the general opinion that the current challenges may be in part a result of the approach to risk management currently used by Cornell. The potential implications of the current challenges regarding Faculty retention and recruitment were considered.

The FPC also decided on the issues to discuss with Provost Kotlikoff at next meeting, and issues for future meetings, including inviting CFO Ken Miranda next term again to continue the discussion about Cornell endowment.

Friday, April 26, 2-3 PM

The scheduled meeting with Provost Kotlikoff on April 26 had to be cancelled at the last minute due to the ongoing developments in campus demanding his immediate attention. The meeting was thus re-scheduled for May.

Friday, May 19, 1:45-3:30 PM

The May meeting was extended to accommodate the re-scheduled meeting with Provost Michael Kotlikoff and the previously schedule meeting with VP Laura Syer.

Provost Mike Kotlikoff presented a brief summary of Cornell’s financial situation and discussed some financial headwinds, including Medical School operating losses and debt, a financial aid challenge, and the post-COVID developments. Later in the meeting, he also added graduate student unionization.

The financial aid challenge resulted from the timing of a rapid but planned increase in the number of students enrolled with financial aid and slower receipt of gifts to fund that increase. Although there are enough pledged gifts, they are not in-hand yet. The plan for this year is to cover the temporary shortfall with funds from the center, protecting the Colleges.

Although during COVID Cornell did better than anticipated, and the worse case scenarios did not materialize, there has been an increase in personnel post COVID19, which has not been accompanied by an increase in revenues, so the surpluses have dwindled.

Graduate student unionization is expected to increase costs, which may cause challenges for the Colleges. Different units will have different approaches to address the challenge according to their different revenue sources and expenditure; some might might have to reduce the number of graduate students. The main priority is that discussions do not encroach on academic issues involving graduate students.

The plan to build a central contingency fund continues being implemented with $5 million added per year. The units also have reserves, which are a mixture of reserves with planned uses and pure contingency funds. They are trying to discourage individual faculty from accumulating and keeping large reserves with no plans for their use.

Over the past several years there have been improvements in compliance, specifically regarding the protection of intellectual property. Faculty can be frustrated when they see opportunities that are difficult or impossible to pursue.

After about 45 minutes, the Provost had to leave for another meeting and the committee met with VP Laura Syer. VP Syer presented detailed updated information about the current fiscal year budget and the 5-year plan, which were then both discussed with the committee.

2022-23, 2021-22, 2020-2021, 2019-2020, 2018-2019, 2017-2018, 2016-2017, 2011-2012,  2010-2011, 2009-2010, 2008-2009, 2007-2008, 2006-2007, 2005-2006, 2004-2005, 2003-2004