Transcript Slide 1

Responsibility Center Management
Last updated 5/4/2004
David Proulx, Senior Financial Analyst - RCM Project Manager
EMail: [email protected]
Budget Office Website: http://www.unh.edu/budget
RCM Website: http://www.unh.edu/rcm
Presentation Outline
1. UNH Overview
2. RCM Model
3. RCM Implementation Process
UNH Background
UNH Overview
Public land, sea and space grant University
11,739 undergraduate; 2,324 graduate
students
Part of the University System of New
Hampshire (USNH) – separate board of
trustees
17% of current fund budget from State
50th in state support per capita
UNH Background, cont.
UNH Overview
University maintains own fund balance
$360 million current fund budget
$95 million – research expenditures
UNH Overview
VISION
The University of New Hampshire will be
distinguished for combining the living and
learning environment of a small New England
liberal arts college with the breadth, spirit of
discovery, and civic community of a land grant
research institution.
Vision
UNH Overview
Institutional
Effectiveness
Assessment Process
(Balanced Scorecard)
Evaluating Responsibility Centered Management
Evaluating Academic Plan
Monitoring Performance
Planning
Financial Perspective
Academic Perspective
Stakeholder Perspective
Innovation and Learning Perspective
Implementation
Unit budgets
Reserves
Central Budget Committee
Provost’s Strategic Planning Initiative
Private Giving
Academic Planning
Master Plan
Capital Campaign
RC Unit Planning
College/School plans
Technology Plans
Staffing Plans
Financial Plans
Outreach and Research
Professional Development
Resource
Management
Process Redesign (Business Service Centers)
Responsibility Centered Management
Financial Reporting Systems (BANNER)
Presentation Outline
1. UNH Overview
2. RCM Model
3. RCM Implementation Process
Why RCM?
RCM Model
Decentralization of Budget Authority
Increase:
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Incentives for planning, cost effectiveness and revenue generation
Local responsibility and authority
Flexibility to match revenue streams with changing program
demands
Attentiveness to all categories of money
Accountability at all levels of management
Decrease:
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Rigid resource allocation process
Involvement of institutional leaders in budgetary detail
Mystery and mistrust surrounding UNH finances
“Use it or lose it” mentality at all levels of management
The National Context
RCM Model
A survey completed in 19961 by NACUBO found:
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11% of Private Higher Ed institutions employ a decentralized budget
model (75 surveyed)
.06% of Public Higher Ed institutions employ a decentralized budget
model (160 surveyed)
A survey completed in 20002 by the Cornell Higher Education
Research Institute found:
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1
47% of Private Higher Ed institutions employ a decentralized budget
model (71 surveyed)
8% of Public Higher Ed institutions employ a decentralized budget
model (127 surveyed)
RCM as a Catalyst, NACUBO Business Officer. 8/1997
2 Survey of the Resource Allocation Methodologies Employed at Public and Private Research and
Doctoral Universities. Cornell Higher Education Research Institute, 1/4/2000.
Institutional Rev enue
- Tuition
- Indir ect Cost Recov ery
- S tate Appr opr iation
Rev enue
Old
Budget
System
University Budget Panel
allocates r ev e nue to
depar tments in for m of $142
million E &G Budget
Institutional Ov erhead
(Service Units)
UNH Div isions
- Colleges/Libra ry
- Facilities
- CIS
- S tudent Affair s
- V P Research
- General Admin
- Academic Affairs
- Research and Public
S erv ice Units
- Auxiliary Ope rations
Direct Expense
- P ayr oll
- S upport
- Debt serv ice
Department (Direct)
Rev enue
- Grant/Contra cts
- Restricted
Gifts/Endowment
- S ales of goods/ser v ices
- Fees
RCM Model
Revenue
RCM
Budget
System
- Tuition
- Indirect Cost Recovery
- State Appropriation
Revenue
- Direct Revenue (Grant,
Gift, Sales, Fees, etc.)
RCM Model
Central Budget
Committee
RC Units
- Academic
- Research
- Auxiliary
Direct Expense
- Salaries, Wages & Benefits
- Support
- Debt service
- Incremental funding
decisions
- $700k University Fund
allocation
- Service Unit Advisory Board
subcommittee to review
Service Units if necessary
Institutional Overhead
- Facilities
- CIS
- Student Affairs
- VP Research
- General Admin
- Academic Affairs
RC Units
RCM Model
Colleges and Related Service Units
Research and Public Service Units
College of Life Sciences and Agriculture
College of Liberal Arts
College of Engineering and Physical Sciences
Whittemore School of Business and Economics
School of Health and Human services
UNH - Manchester
Library
Cooperative Extension
Research and Public Service
New Hampshire Public Television
Institute for Earth, Oceans, and Space
Student and Community Life Units
Governance, Advancement and
Infrastructure Units
Student Affairs
Housing
Hospitality Services
Intercollegiate Athletics
Whittemore Center Arena
Facilities Services
Computing and Information Services
General Administration
Academic Affairs
RCM Principles
1.
2.
3.
4.
5.
6.
RCM Model
Create incentives for good management
Fairness/Simplicity
Unit plans must align with University’s mission and
strategic plan
Smooth transition - no redistribution of resources
Credible governance mechanisms required to prevent
unhealthy internal competition
Same rules for all operations – academic, research,
auxiliary, administrative
RCM Model
RCM Principles, cont.
7. RCM principles/formulas apply to the RC unit level.
8. RC units receive all revenue and are responsible for all
expenditures generated by their activities.
9. RC units carry forward excess funds from one year to
next and manage reserves at the unit level.
10. Each RC unit determines how to manage RCM within
their unit.
11. RCM is not a cost accounting model but rather a
general incentive/allocation model.
RC Unit Revenues*
RCM Model
Direct revenues - fees, sales of goods/services, gifts,
grants/contracts, endowment income
Allocated revenues:
 Undergraduate tuition - based on weighted credit
hours taught over the past two years. Weights are
based on historical average expense per credit hour.
 Graduate tuition - based on enrollment
 State Appropriations - based on faculty salaries
 Indirect Cost Revenue - based on actual indirect
costs generated
* Go to RCM Allocations for more details
RC Unit Expenses*
RCM Model
Direct Expenses - salaries, wages, fringe benefits,
equipment, travel, supplies, other direct expenses.
Allocated expenses (overhead):
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Facilities Services (maintenance, utilities, housekeeping, grounds
and roads, R&R) - based on net square feet ($15.40 per NSF)
General Administration (President, Research, Finance &
Administration, Student Affairs, and support units reporting to VP’s)
- based on prior fiscal year revenues and personnel expenses.
Average rate – 11% of total revenues.
Academic Affairs (Provost, Registrar, Financial Aid Office,
Admission and other units reporting to Provost) - based on prior
fiscal year revenues and personnel expenses. Average rate – 7%
of total revenues.
* Go to RCM allocations for more details
“Balancing Adjustment”
RCM Model
Major principle of RCM was that no unit would begin better
or worse off than they would have been under the old
system –thus they were ‘held harmless’
A "balancing adjustment" was used to bring Units into RCM
in a "revenue neutral" budget position
Balancing adjustments are permanent but not inflated
RC Unit FY01 Original Budget
Direct revenues
UNH budget allocation
Allocated revenue
Balancing adjustment
Total revenues
"Old"
Budget System
$
1,000,000
$
19,000,000
$
20,000,000
Direct expenditures
Allocated expenditures
Total Expenditures
$
20,000,000
$
20,000,000
Net
$
-
$
RCM
1,000,000
$
$
$
27,000,000
2,000,000
30,000,000
$
$
$
20,000,000
10,000,000
30,000,000
$
-
The University Fund
RCM Model
Balancing adjustments do not inflate and are funded from
state appropriations.
Inflation proceeds become the “University Fund”
“University Fund” is flexible central funding to allocate
based on strategic priorities of the institution
Managed by the Central Budget Committee (CBC)
Units make requests via strategic plans to their VP. VP
brings requests before the CBC. CBC decides to provide
permanent, one time or no funding.
Reserves
RCM Model
Under RCM, unspent funds at year end are automatically
added to the School/College fund balance. This required a
change in Board of Trustee policy.
RC units are obligated to meet an agreed upon minimum fund
balance level (initially 1% of prior year expenditures and
transfers).
RC units can access reserves – up to 1/3 of balance with
Dean/Director approval only; remainder with VP approval.
Unit reserves reduce dependence on limited central reserves
Academic Unit:
FY01 REVENUE:
Student Fees
Other Income
University "Block Grant"
Tuition
State Appropriations
Indirect Cost Revenue
Total Revenues
Less: Financial Aid
Net Revenues
RCM
Old
Budget
Budget
$
205,100 $
205,100
$
292,005 $
292,005
$ 25,722,273
$ 38,753,653 $
$ 5,456,715 $
$
779,103
$ 45,486,575 $ 26,219,378
$ 8,775,135 $
$ 36,711,440 $ 26,219,378
FY01 EXPENSES:
Salaries/Labor/Benefits
Repairs and Renovations (R&R)
Departmental Supplies and Misc Expense
Specific Charges/Transfers
Equipment
Subtotal - Personnel and Support
General Assessment
Academic Affairs Assessment
Facilities Assessment
Total Assessments
Total Expense
$
$
$
$
$
$
$
$
$
$
$
Net (Balancing Adjustment)
$
24,451,536
20,000
1,684,802
10,141
52,899
26,219,378
5,500,346
3,161,785
2,433,327
11,095,458
37,314,835
$ 24,451,536
$
20,000
$ 1,684,802
$
10,141
$
52,899
$ 26,219,378
$
$ 26,219,378
(603,395) $
-
RCM Model
Units in Financial Difficulty
RCM Model
Deans and Unit Directors as well as responsible
VP’s are held accountable for unit performance
Units that have operating deficits are required to:
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Submit a mitigation plan describing how they plan to
resolve the deficit over a defined period of time
Meet with the CFO and responsible VP on a quarterly
basis to provide updates
Presentation Outline
1. UNH Overview
2. RCM Model
3.RCM Implementation Process
The Process
RCM Implementation
Three years to implement
Coordinated by a Steering Committee – advisory to the
President.
12 Working Groups – each responsible for separate
component of RCM. Reported to Steering Committee.
Overall Composition of Steering Committee/Working Groups:
70% academic community members – 43% faculty and 28%
Deans. Go to Committee page for more detail.
Communications
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“We will meet with anyone, anywhere at anytime” to discuss RCM.
Multiple meetings with Trustees, Deans, faculty, staff councils,
students
Web site established to facilitate communication
Campus newspapers used as a communication tool. See articles
published in campus newspaper by clicking here.
Open forums held
The Process, cont.
RCM Implementation
Site visits to other Universities with decentralized
budgeting.
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Brought administrators, Deans and faculty to meet with
counterparts. Board of Trustee Policy communications
and support
Lots of financial modeling
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Very complex in the beginning, simplified before
implementation
Draft models shared with the community
Operating manual developed – hard copy and online
Shared Governance
RCM Implementation
Central Budget Committee
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The governing group on budget policy and financial planning for
the campus community.
Overall steward of RCM
Reviews fee increases
Comprised of President, Vice Presidents, 2 Deans, 4 Faculty, 2
RC Unit Directors, Student Treasurer
Service Unit Advisory Board
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Functions as subcommittee of the Central Budget Committee
University Curriculum and Academic Policies Committee
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Advisory to Provost – monitors academic quality and curriculum
issues.
Comprised of Provost, 11Tenured Faculty, 2 Students, Chair of
Academic Standards and Advising Committee
RCM Implementation
Academic Concerns About RCM
Concerns:
• larger class sizes/increased teaching loads
• grade inflation
• addition of courses by colleges solely for the purposes of revenue generation
• additional course fees
• reduced collaboration among colleges for academic and research ventures
• manipulation of credit hour system to “generate” additional revenue
• increased use of graduate students and adjunct faculty for instruction
• elimination of high quality/low revenue producing programs
• incentives for student advisors to act in the interests of the college rather than the
student for fear of losing tuition revenue
Response:
• Most of these consequences could occur under the old budget system
• Most of these actions taken by colleges would lead to short-term gain but would
have long-term negative consequences
• Development of policies, oversight mechanisms (UCAPC), institutional academic
plan, college strategic plans, ongoing reviews and University Fund allocations can
help to prevent these actions from occurring.
Reviews of RCM
RCM Implementation
Ongoing monitoring of budgets by the Budget Office.
Central Budget Committee is responsible for monitoring
RCM issues.
FY06 - comprehensive review of all aspects of RCM.
Committee appointed by the President and chaired by the
Provost.
June, 2006 – report due to the President
Keys to Successful
Implementation
RCM Implementation
Top-level support – without President/Provost and Board of
Trustee support, implementation will be unsuccessful.
Academic/research involvement in developing model – users
must be part of the process.
Communication – meet with anyone, anytime, anywhere. Use
the Web as a communication tool as well as campus
publications. Hold open forums.
Establish credible governance mechanisms – assurance that
RCM will be fair and equitable. Unhealthy internal competition
is monitored and academic quality issues addressed.
Automatic rollover of unspent funds for units – without this,
incentives of RCM do not work.
No budget reallocation – transition does not result in base
budget changes – “hold harmless” principle.
Keys to Successful
Implementation, cont.
RCM Implementation
Simplicity – most managers do not have financial
backgrounds and should not devote significant parts of their
time to their budget. They need to be able to understand the
model and understand the financial effects of decisions
quickly and easily
Full-time staff – dedicate full-time staff member to coordinate
project
Business support structure – each unit must have access to
financial expertise to be successful
Site visits – go see what others are doing and learn from their
experiences
Avoid using acronyms such as RCM, RCB, DBS – they take
on a meaning of their own and impede progress.
Timely and comprehensive management reporting.
What Would We Do
Differently?
RCM Implementation
We would not have named our system RCM. We would have
called it budget redesign or budget decentralization.
Simplification of assessments. Current methodology is too
complex. Lots of time being spent in this area by RC units.
Cost outweighs the benefits.
We would have addressed structural issues before
implementation.
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Urban campus was built into the model using different weighting factors
creating complexity in financial arrangements between campuses.
Library funding – treated them as a school/college rather than service
unit. Issues with rising periodical costs.
Athletics funding – space cost allocations comprise a significant part of
their budget (20%). This is a new expenditure for them under RCM.
A Final Thought
From our Provost, David Hiley in a letter to the University
community:
“We must remember that RCM is merely a tool. Like any tool it can be
used well or badly. It is not a substitute for decision-making, judgement
or leadership. It is merely an aid. The ultimate success of RCM depends
on the people who use it -- on how we at UNH choose to use it, how we
prepare ourselves to use it well, and how we are held accountable for
using RCM to achieve university-wide goals.“