Administrative and
Fiscal Officers Meeting
November 20, 2009
Massachusetts Institute of Technology
Administrative and Fiscal Officers Meeting
Welcome and Opening Remarks
Terry Stone, Executive Vice President and Treasurer
Budget Planning Update – Fiscal Year 2011
Rafael Reif, Provost
Institute-wide Planning Task Force – Update
Israel Ruiz, Vice President for Finance
Member of Task Force Coordinating Team
Acting on Task Force Ideas – Sourcing, Travel and Procurement Services
Leo McInerney, Director of Sourcing
What's New in Your 401(k) Plan Investment Options
Alison Alden, Vice President for Human Resources
Census 2010 – MIT’s Responsibilities and Challenges
Lydia Snover, Director of Institutional Research
MIT’s Written Information Security Program (WISP)
Allison Dolan, Program Director
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
Terry Stone, Executive Vice President & Treasurer
Welcome and Opening
Remarks
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
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
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
Rafael Reif, Provost
Budget Planning Update –
Fiscal Year 2011
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
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
Fiscal 2010 Expense Budget Reduction


Endowment payout the
same as that for FY09
Includes $27M for future
task force investments and
contingencies
($M)
Reduction Area
Cost Avoidance
Total compensation reduction
New recurring programs
Budget Cuts
Academic unit budget cuts
Administrative unit budget cuts
Other (e.g.: CRSP, renovation and renewal, utilities)
Total Fiscal 2010 Expense Budget Reduction
Massachusetts Institute of Technology
Savings
$11.3
$5.0
$10.5
$12.9
$18.6
$58.3
November 20, 2009
Administrative and Fiscal Officers Meeting
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
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
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
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
Budget Model Update – Before Budget Cuts
Endowment Return Case Scenario Analysis - FY11 Planning
0% Endowment Return in FY10 & 18% FY11 Endowment Payout Cut
$50
$40 $35.0
$30
Planning model
demonstrates the
effect of the following
factors:
$27.3
$20
$10
$0
($10)
($29.1)
($30)
($35.4) ($36.5) ($36.4)
($31.6)
($27.9)
($23.5)
($14.8) ($11.2)
($50)
($42.6)
($50.7)
($60)
($59.6)
($70)
($80)
• Impact of FY10 budget
cuts
• FY11 and beyond
actions not yet
incorporated
($31.5)
($40)
($65.6)
• 18% payout reduction in
FY11 with smoothing rule
thereafter
($74.3)
($90)
($83.8)
($100)
($93.6)
($110)
($106.5)
($120)
FY2019
FY2018
FY2017
FY2016
FY2015
FY2014
FY2013
FY2012
FY2011
FY2010
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
Massachusetts Institute of Technology
FY2020
($120.3)
($130)
FY2009
$ Millions
($20)
($18.2)
November 20, 2009
Administrative and Fiscal Officers Meeting
Budget Model Update – After Budget Cuts
$61M Budget Cuts
Endowment Return Case Scenario Analysis - FY11 Planning
0% Endowment Return in FY10 & 18% FY11 Endowment Payout Cut
$50
$40 $35.0
$27.3
$30
$21.7
$20
$6.4
$10
$0.7
$1.4
$10.9
$30.7
$15.8
($10)
($6.2)
($20)
Planning model
demonstrates the
effect of the following
factors:
• Impact of FY10 budget
cuts
$4.0
($13.5)
($21.8)
($30)
• FY11 budget cuts = 61M
($27.3)
($40)
• 18% payout reduction in
FY11 with smoothing rule
thereafter
($35.5)
($50)
($44.5)
($60)
($53.7)
($70)
($65.6)
($80)
FY2019
FY2018
FY2017
FY2016
FY2015
FY2014
FY2013
FY2012
FY2011
FY2010
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
Massachusetts Institute of Technology
FY2020
($78.4)
($90)
FY2009
$ Millions
$0
$1.0
$6.7
$26.1
November 20, 2009
Administrative and Fiscal Officers Meeting
Budget Reductions & Task Force Initiatives
Preliminary Estimates
Budget reductions
Fiscal 2010
Fiscal 2011
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,
$18M
utilities)
Task Force initiatives for near-term savings
Total
$12-27M
$58M
$51-75M
Fiscal 2012
$xM
$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
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
Israel Ruiz, Vice President for Finance,
Member of Task Force Coordinating Team
Institute-wide Planning
Task Force – Update
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
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’
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
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
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
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
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
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
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
Leo McInerney, Director of Sourcing
Acting on Task Force Ideas
Sourcing, Travel and Procurement Services
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
Themes
Evolving our Services
Acting on Task Force Initiatives
Community Engagement
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
Evolving Our Services
Procurement
Sourcing
Transactional
Strategic
Activity-based
Value Oriented
Data Starved
Data Driven
Generalists
Category Specialists
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
Acting on Task Force Ideas
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
List of Task Force Ideas >>
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
Acting on Task Force Ideas
Process Improvement
Strategic Sourcing Opportunities
Automate, streamline, and educate the
community on the procurement process
Computers & Peripherals
Sustainability
Lab Supplies & Equipment
Travel Reimbursement
Travel Management
Rebates
Gas
Efficiency
Contingency Workforce
Furniture
Printing
Office Supplies
Meetings & Video Conferencing
Spend Distribution >>
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
Acting on Task Force Ideas
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
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
Community Engagement

Reaching out

Awareness

Collaboration
 Leverage

Service

Feedback
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
Community Engagement
6.
Implement
Supplier
Contract
1. Gather
Data
5. Conduct
Additional
Bidding,
Negotiate,
and Select
Supplier
2. Select a
Procuremen
t Approach
4. Analyze
the Bids
Massachusetts Institute of Technology
3. Structure
& Issue the
Procurement
Document
November 20, 2009
Administrative and Fiscal Officers Meeting
Acting on Task Force Ideas – Category Mgmt Process
Contingent Workforce
Gather
Data
Approach
RFI /
RFP
Analysis
Negotiate
Implement
Travel
Gather
Data
Approach
RFI /
RFP
Analysis
Negotiate
Implement
Computer Peripherals
Gather
Data
Approach
RFI /
RFP
Analysis
Negotiate
Implement
Lab Supplies
Gather
Data
Approach
RFI /
RFP
Analysis
Negotiate
Implement
Printing
Gather
Data
Approach
RFI /
RFP
Analysis
Negotiate
Implement
Office Supplies
Gather
Data
Approach
RFI /
RFP
Analysis
Negotiate
Implement
Furniture
Gather
Data
Approach
RFI /
RFP
Analysis
Negotiate
Implement
Facilities
Gather
Data
Approach
RFI /
RFP
Analysis
Negotiate
Implement
Gases
Gather
Data
Approach
RFI /
RFP
Analysis
Negotiate
Implement
In Process
Massachusetts Institute of Technology
Complete
Not Started
November 20, 2009
Administrative and Fiscal Officers Meeting
Example: Travel Market Overview
CY2009 Market Share - Airlines
FY2009 Spend by Agency - $12.5M
United
Airlines
16%
14
$2.73
$12.47
12
American
15%
Other 44%
$1.08
8
$0.46
$0.43
US Air
10%
$7.77
Singapore
Air 8%
Lufthansa
7%
6
FY2009 No. of Bookings – Hotel 2,675
4
2
Marriott
535
20%
Massachusetts Institute of Technology
Total
Others
(22)
OT&T
Travel
Expedia.com
Carlson
Wagonlit
Travel
0
Travel
Collaborative
Millions
10
Kendall Hotel
294
11%
Others (70+)
1444
54%
Hyatt
187
7%
Hilton
214
8%
November 20, 2009
Administrative and Fiscal Officers Meeting
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
Massachusetts Institute of Technology
Contract in Negotiation
November 20, 2009
Administrative and Fiscal Officers Meeting
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
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
Alison Alden, Vice President for Human Resources
What's New in Your 401(k) Plan
Investment Options
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
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
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
Lydia Snover, Director of Institutional Research
Census 2010 – MIT’s
Responsibilities and Challenges
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
Allison Dolan, Program Director
MIT’s Written Information
Security Program (WISP)
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
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”)
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
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
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
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.
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
Contacts
Questions/comments?
Contact Allison Dolan adolan@mit.edu
Potential breach?
Email infoprotect@mit.edu
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
Additional Sourcing information
APPENDICES
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
Task Force Ideas
Cost Avoidance Program
1
Renegotiate and bid out contracts for goods and services
2
Leverage Facilities MRO purchasing power across campus
3
Increase P-Card rebate
4
Renegotiate VWR contract
5
Renegotiate other scientific supply contracts
6
Renegotiate contracts with ECAT suppliers
7
Establish direct contracts for air and hotels
8
Rebid office supply
9
VMS system
Continuous Improvement Program
10 Automate and streamline key processes
11 Promote sustainable purchasing practices
12 Develop creative solutions and fair practices
13 Reduce the number of fax machines on campus
14 Change P-card rules to allow computer purchases
15 Examine the impact of $3,000 capital threshold on computers
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
Source - Influence - Negotiate
25 Standardize on Dell configurations
26 Standardize on video and audio conferencing services
27 Purchase only MIT recommended desktop and laptops
28 Accelerating Green Procurement
29 Airgas proposal
30 Transition from laser jet printers to multifunction machines
Customer Relationship Management
31 Educate the community about procurement processes
32 Ensure that cost savings are not achieved at the expense of others
Supplier Rationalization
33 Reduce the number of purchasing choices
34 Consolidate purchases of design services for capital projects
35 Combine campus and Lincoln furniture purchases
36 Eliminate purchasing furniture from Office Depot
37 Consolidate travel agencies
38 Vendor consolidation for clerical temp help
Back >>
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting
Spend Distribution
Travel
$43,689,426
Professional Service
$43,391,408
Lab/Scientific Equip
$28,635,332
Computer Equipment
$25,037,485
Catering Services
$21,094,230
Laboratory Supplies
$18,410,879
Transportation Serv
MITemps
Printing
$12,681,156
$10,692,319
$9,350,698
R&D Service
$7,421,904
Furniture & Furnish
$7,398,795
Drugs
$6,840,439
Maintenance Contract
$6,827,605
Repairs
$6,436,520
Independent Contract
$5,776,541
Software Maintenance
$5,221,160
Chemicals
$4,229,215
Temp Help Services
$4,143,032
Communications Serv
Computer Supplies
Office Supplies
$3,459,840
$3,020,199
$273M in Spend
21 Categories
Task Force SPI’s $205M – 75%
Other $68M – 25%
$2,999,459
Back >>
Massachusetts Institute of Technology
November 20, 2009
Administrative and Fiscal Officers Meeting