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Employee Q&A: Senior VP for Business Affairs and CFO Milton Castillo
Castillo says the UA has the resources to give raises but that changes are needed before that can happen.
Name: Milton Castillo
Position: Senior Vice President for Business Affairs and Chief Financial Officer
Number of years at the UA: 1
Favorite thing about working at the UA: The people. I think we have a really good team. I also work with a lot of really smart people in the faculty and other areas. I haven’t really worked with people this much since when I was in consulting.
Favorite book: This might sound boring. I do a lot of investment research, so most of the stuff I read are investment research materials. I do a lot of research on equities, and most of the investments I do are options-related. So I spend a whole lot of my time reading nonfiction-related business stuff.
Milton Castillo began his career in accounting with the Illinois-based powerhouse firm Arthur Andersen, eventually moving to the Hartsfield-Jackson Atlanta International Airport, where as CFO he was busy working to build new runways and clean up the accounting books when the UA's recruiting firm came knocking.
Though Castillo has been at the University for only a little more than a year, he has quickly established himself as someone who is approachable and speaks frankly about the economic issues facing the UA. He has been visiting various employee governance groups, making presentations about the budget and answering questions about where money comes from to cover the University's various expenses.
He works long days and shakes them off by working out in the Student Recreation Center. He's also an avid fan of independent movies – in particular, Coen brothers films – and he likes to visit The Loft Cinema from time to time to get his indie film fix.
Castillo recently took time to talk with Lo Que Pasa about his job and how he thinks campuswide raises can be restored sooner rather than later.
What does your job entail?
The areas that report to me in the University are the centralized finance and accounting or the financial services office. That has the controller and the person that consolidates the information from the colleges, the budget department, (budget office Associate Vice President) Jim Florian and his staff of 12 people downstairs; the internal audit department; the Planning Design and Construction that builds all the buildings around here or oversees the management of them; Facilities Management; Parking and Transportation; Risk Management; the police department; (and) the real estate department that deals mostly with space and lease issues. ... I share responsibilities for HR (Human Resources) with the provost, so the VP of HR reports to both of us.
Is there any uneasiness about how things might shift once the new president comes?
To be honest, ever since (University President) Gene (Sander) came on board, (the attitude has been) "Hey, let's do the things that we have to do." ... His whole point has been, let's move forward and take care of the things that we need to take care of. So I don’t sense an uneasiness there. But having said that, if you look at the new administration coming in, we are going to have a new president. We also have an interim provost .... We also have an interim VP of health sciences. We have an interim VP of external relations, and we have an interim general counsel. So really in top administration the only permanent people are myself and the VP of research, Leslie Tolbert. ... There is the possibility of a lot of movement in the next few months. But we do have a good team now, and everyone is getting done what we need to get done. The issues like tuition, you've got to do what you've got to do. You can’t worry about what is going to happen a couple months from now because we need to make these decisions now.
How did you come into this position?
I’m a CPA. I followed the traditional finance and accounting ladder, but my previous job actually was a CFO at the Atlanta airport. And so we were actually building a new runway and putting out a lot of bonds and trying to clean up the books. When I first got on board we found some accounting irregularities, and we had to go back and restate like seven years of financial statements. And we got shut out of the bond market, so we were in the process of cleaning that up, and going back into the bond market to finish the international terminal we were building. So I was busy doing that and I got called out of that. I wasn’t looking or anything like that .... So I interviewed (at the UA), and the more I talked to the people the more I liked it, and so you never know how life is going to turn out.
What is the difference between working in the private sector and working in public?
Well, one of the differences is you have a lot more stakeholders. Normally in a company as long as you are increasing stockholder value and pursuing value you can do what you want and everyone gets in line. And in the public environment you have a lot more people you have to deal with, a lot of different people with different interests. It is not always what makes financial sense that is done; there is a higher calling than just making money so you have to take a lot of different perspectives into account.
How do you find yourself in this time of slim budgets, balancing what’s good financially with what people want?
I actually view this whole thing as an opportunity, because when times are good people are unwilling to change because everything is good. There is no need to do things differently or to go through times of change that people are going to feel uncomfortable with. But when money is tight, people are more willing to consider different ways of doing things. For example, the University has not given a University-wide raise in four years; this is going to be the fifth year .... I think if we did things differently and we freed up some resources in some areas we could take care of some of those issues. You know we have two big issues: One of them is salary, especially on the faculty side. Where the latest data, where you match us against our peers – we have less than about 35 universities that we consider our peers – we are about 10.2 percent below the median. We are actually in the lowest 25 percent. So we need to do something about that. We have been losing some good faculty, especially to the privates who do not have these budget issues so they can afford to write a check for somebody that they really want. And so we can’t really compete with that .... Another issue is facilities. We have a number of facilities that are nearing the end of their useful lives. Also we don’t, because of lack of resources, we don’t spend enough in facilities as we should. We actually hired a company ... that benchmarks facilities for higher ed and they have about 300 customers across the nation. Really interesting data, a couple things (they told us) that really stuck out was ... 47 percent of your facilities are nearing the end of their useful lives.
What needs to be done with our facilities?
They (UA buildings) need renovating or (we need to) build new stuff. The second part was that while we have the highest density out of 300 universities that they track – we have over 520 or 530 people for every 100,000 square feet; the average is like 320. While that is happening, the average university that they are tracking spends about 33 cents per square foot per year in maintenance; with our higher density we spend 9 cents. So we have more wear and tear, and we have to use less than one-third of what their average university does it with. Even though we have the highest density that they track. When you walk around our campus outside it speaks very highly of our Facilities Management people that they can do what they do when they have less than one-third the resources that they should have, if you benchmark us against the average university.
How do you fix that?
Well, there is only one way to fix that: Find more money. That’s basically it. You do what you can with what you have, and we’ve done a good job with that. But the only solution is finding money. As you know the state support from the beginning of 2008 ... we’ve lost about 40 percent. At the same time, enrollment has gone up from 34,000 to 39,000. So enrollment is up; your state support is down. ... We actually have less money now with more enrollment than we had in 2008 ... So when people complain, rightly so, about the (tuition) percentage increases, that is one part of the picture. The other side is that even with all those increases we still do not offset what we have lost on the state side. That is why people have not gotten raises in four or five years. And as you know that is unsustainable. People are just going to start to leave. So those are just some of the issues that we deal with.
Since you’ve gotten here you’ve been pretty frank about some of the University's shortcomings. Have you encountered a lot of resistance to the changes you’ve advocated for or tried to make?
No, I wouldn’t say that. I think that because of the financial situation we find ourselves in, people are open to try things differently and I think people agree we need to do things differently and I see a lot of opportunity. If we centralize functions, and business functions, we could save a substantial amount of money. That is not to say that I am criticizing the University of Arizona, because I am finding that (decentralization) the norm in most academic institutions. We are too decentralized, there is too much duplication of duties. IT, for example – we roughly spend short of $100 million in IT ... with about 50 percent of that being centralized and the other 50 not being centralized. ... If you go in the private side, everything is centralized because it makes sense and increases efficiencies. We run a lot of different email systems at the University. You go to a private company and you wouldn’t even think of doing that. Everyone is on the same system.
When you talk about centralizing, doesn’t that make people jittery about their jobs?
I think to some extent that always happens, but I have to look at what’s best for the institution, because when you actually look at our total costs for the 2011 report, 63 percent of all of the costs are just salaries and benefits. So when we talk about being more efficient and cutting costs, at some point you have to deal with the fact that means cutting people. Now, at that point you have to make a choice: Are we here to make jobs or are we here to run the University as efficiently as possible? I also realize that it is not always about cutting costs. ... That does not always mean that you will be laying people off, but people's jobs might change, yes.
How does that 63 percent compare with other similar institutions?
I'd say that is pretty much the norm. ... If it weren’t for the faculty and the staff it would be just a whole bunch of empty buildings. So like I said, on an operating basis, most of our costs will be salaries and benefits. I mean, we don’t manufacture stuff; we sell basically a product that has to do with intellectual capital. We provide knowledge. That is what we are selling.
In an institution the size of this one, how hard is it to change financial courses, in terms of implementation and culture shift?
It takes a while; you have to explain to people why it makes sense and how it will help you manage in the future. You have to build the infrastructure, and the culture has to change, and you have to reorganize. For example, (when) you talk about the business and financial people at the college, they don’t have to report to me. There is not even a dotted line report. The people that are doing finance and stuff are doing that for their school and that’s it. They don’t have any responsibility to me; just the centralized areas have reporting to me. And three quarters of what I do is operations so it's not even finance, it's accounting. Yeah, I deal with that, but it's maybe 20 to 30 percent of what I do.
The Mosaic project was already under way when you came in. What improvements has it made, specifically the business analytics component?
On the financial side we are working on the reporting; the implementation has gone well. It is a huge implementation and you are always going to have bugs and issues with a new system. And there is a lot of input from people and things that could be done better, but I think it is too early to say now. I think a lot of it has to do with training; people have to learn how to use it. You can go to classes and stuff like that but you don’t really learn it until you get to use it. ... We are working hard on that.
Considering all these moving parts between the tuition, financial systems, etc., what is the most important improvement that you'd like to see come about sooner rather than later?
The best thing I think we can do is actually define what our long-term goals are. And we do have our 2020 plan, and metrics and stuff like that. So we should define what our key performance indicators are and then align our resources to make sure we attain those goals. What I actually mean is be transparent, work with the colleges to set up long-term business plans for them that incorporate the vision the deans have, long-term, for their areas. And then look at the resources and align the resources with those goals, having a long-term financial plan or model to make sure they happen.