Legislation of the Commonwealth of Virginia in 2000, and expanded upon in 2002, authorized Virginia Tech to establish a self-supporting 'instructional enterprise' fund for selected new online programs.
Under the rules of the legislation, student tuition and fees for online courses, certificates and degree programs "primarily" at the graduate level would be distributed to support the direct instructional expenses and indirect expenses associated with such new online programs. These funds cannot be used by the state to offset other educational or general costs. Revenues in excess of expenditures are retained to fund the support of the entire IDDL program (see below under Surplus/Deficit).
The legislation also stipulates that only revenue from "eligible" students can be distributed. Eligible students are those who are not concurrently enrolled in a seat-based Virginia Tech course in the same semester or summer session as an online Enterprise Fund course. In other words, Enterprise Fund programs are for off-campus working professionals.
Virginia Tech has operationally interpreted the Enterprise Fund to include only programs, e.g., several courses which, when taken as a certificate, degree or other program "bundle", comprise a coherent body of knowledge. A single course has not heretofore been granted admission into the Enterprise Fund.
The language of the law indicates that Enterprise Fund programs are "primarily" graduate. As of Fall, 2010, only graduate programs have been accepted into the Enterprise Fund. Undergraduate certificates currently do not exist at the university, and since the Enterprise Fund is targeted toward off-campus working professionals and not traditional college-aged students, the structure of an undergraduate major or concentration does not lend itself to standing independently in the same way that Graduate Certificates (9 - 12 credit hours) do.
Traditionally, academic departments or programs in Virginia state institutions must seek financial support for proposed new programs from the very limited budget dollars the university has not otherwise obligated to other ongoing initiatives. For most new programs, certificates and degrees, financial support is a "zero-sum" game of competitive proposal writing.
The Enterprise Fund allows for a more entrepreneurial route to new program support. Funds are not 'budgeted' at a pre-fixed level, with little change over time. Rather, support for a new online program accepted into the Enterprise Fund is earned, based on actual enrollments. If a new online program is successful and grows, additional support is earned from the tuition and fees collected. This way, a successful program is not "starved" for needed additional funding. Likewise, if a program is not successful and enrollments are lower than expected, then funding is reduced proportionately and immediately.
An academic department or program completes the application
The application and business plan are reviewed by the Distance Learning Advisory Board. Criteria for acceptance generally surrounds the viability of the target student market - is it of sufficient size and scope to expect that the program will be successful and is the department and college committed to the program (which must include funding the first year's courses before being reimbursed at the end of the fiscal year)? If the program is new, without a preceding seat-based delivery of the same program, has the program gone through Governance and been completely approved by the Graduate School? And will interest in this new online program expand Virginia Tech offerings and total enrollments rather than cannibalize on existing offerings?
If an online program applying to the Enterprise Fund is not being offered in either a seat-based or online delivery format, and has not been for the past several years, there is no baseline. This is certainly the simplest scenario!
However, as interest in online delivery expands, it is very possible that a department may wish to add an online delivery format to the current seat-based delivery of an existing program. The idea of the Enterprise Fund is that it supports expansion of enrollment, rather than offering a more preferred delivery option to the same target market. Enrollments over the past year or two in the traditional, campus-and-seat-based delivery set a "baseline", with online enrollments that exceed that baseline being those "eligible" for being counted in the Enterprise Fund. If students self-select the online program at such a rate that seat-based enrollments decline, then sufficient enrollments from the online delivery will be subtracted so as to meet the seat-based baseline. That is the reason why total online enrollments may not be equal to "eligible" enrollments.
The department will offer courses in the new online program admitted to the Enterprise Fund according to the business plan submitted with its application to the Enterprise Fund. In the first year, there is no upfront financial support. The academic department must offer the courses from existing funds with the expectation that it will be reimbursed before the end of the fiscal year (Enterprise Fund revenue distributions are typically made once per year between April and mid-May).
In subsequent years, an "advance" is made by the university Budget Office in July of each new fiscal year in the amount of 75% of the previous year's reimbursement. This provides some/all up-front funding for courses to be offered before the department or program receives its distribution in the following April or May.
Note: the "Enterprise Fund year" is different from both the academic year and the fiscal year. It is: Summer I, Summer II, Fall, and Spring.
The following model outlines the financial operation of the Enterprise Fund:
Eligible revenue is that revenue which comes from eligible students. Eligibility is determined in two ways: 1) enrollments after satisfaction of any baseline requirements; and 2) enrollments by students who are registered only in online courses during the semester - if a student is enrolled in one or more online courses concurrently with one or more seat-based courses, the online enrollment is deemed ineligible, thus placing that student's tuition and fees into the university's general revenue pot, rather than in the Enterprise Fund.
Direct instruction costs are calculated as the Consolidated College Average salary of the online program's home college, divided by 8 "work units" to equal the average salary per course. To that figure are added applicable fringe and 4% for operating expenses. This is the amount which will be reimbursed to the department or program for each regular course taught, regardless of the course's enrollment (the exception is the case of a deficit - see below).
Independent study, thesis credit and other one-on-one instructional experiences are reimbursed at the rate of $100 per student enrollment (as of Spring 2010; could be subject to change).
Some programs utilize more "scalable" models to increase class size without placing an unwarranted burden on the faculty member. Examples include extra funding for a grader when class sizes exceed a pre-determined number, or the use of Distance Learning Instructors (typically Graduate Teaching Assistants, Adjunct Instructors or other non-PhD instructors).
University Overhead costs are calculated at 30% of total direct instruction costs per course. This amount is the only portion of "Total eligible revenue" which the university keeps.
IDDL Overhead costs are calculated at 10% of total direct instruction costs, and are paid to cover its share of electronic delivery, for maintenance of the IDDL and other distance learning websites, insuring that programs and courses are included in the VTOnline website, etc.
Surplus/Deficit are the remaining funds, after expenses, which pay for program growth, curricular enhancements and strengthening, faculty development for those teaching in Enterprise Fund programs, marketing, recruitment and promotion. They are distributed in equal thirds:
The Direct Instruction Costs and Indirect Costs cannot exceed the revenue collected. So if, when using the predetermined salary levels for the number of courses taught, a program incurs a deficit, that deficit reduces the distributions proportionately such that the Indirect Costs are still the same percent of Direct Instruction Costs and, together, they equal revenue collected.
Note about the nature of the funds themselves: Enterprise Fund dollars cannot be "blended" with state support dollars (E & G). They must be kept separate. They can carry forward from one year to the next without needing to request that they do so, and can be used for any purpose, except additional compensation to the faculty (for example, marketing and promotion, conference fees and travel, additional course development buy-outs, etc.).
Director of Operations
Institute for Distance and Distributed Learning
University Gateway Center, Suite 120 (0392)
902 Prices Fork Road
Blacksburg, Virginia 24061