Transcript Transforming the MUSC Financial Management System Why Transform ?  Necessary for MUSC to realize its Vision  Promote an Incentive Based System.

Transforming the MUSC
Financial Management System
Why Transform ?
 Necessary for MUSC to realize its Vision
 Promote an Incentive Based System to adjust to
diminishing State resources
 Align revenues and costs for more informed decisionmaking
 Build a dialogue regarding strategic investments
MUSC Vision
“To be a leading and transformative
Academic Health Center”
President Raymond Greenberg, M.D., Ph.D
Academic Leadership Retreat- Feb. 2, 2011
Vision
Strategic
Plan
Integration
Financial
Management
System
South Carolina: Appropriations
• South Carolina has cut higher-education by 45+% in recent
years
• South Carolina has implemented a 20% budget reduction over
the last three years and is still facing a $1 billion budget shortfall1
• South Carolina is one of six states facing a budget shortfall that
equals or exceeds the state’s higher education expenditures2
• If South Carolina eliminated all state government except
education and Medicaid, the state would still face a budget
deficit 2
• State Medicaid payments and balance sheet obligations are
expected to continue driving out the “discretionary” budget
priorities (like higher education)
(1) Reuters, “South Carolina Scrambles to Deal with Budget Shortfall, January 5, 2011
(2) Quote from State Senator A. Shand Massey; Chronicle of Higher Education, Colleges to Confront Deep Cutbacks, January 3, 2011
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Funds Flow Committee Principles (2010)
1.
Transparency and Integrity (encompasses communication, clear definitions of
categories, commonly understood rules, timeliness, accuracy and completeness)
2.
Responsibility Commensurate with Authority
3.
Flexible, Scalable, Translatable (works in units of different size)
4.
Balance Between Central and Local Budget Authority (ensure institutional
priorities can be funded)
5.
Incentive Driven (enables entrepreneurism)
6.
Enables Forecasting and Strategic Planning
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Huron Consulting
• Huron participated in nearly 100 meetings and worked with over
35 MUSC stakeholders to gain an understanding of the
institution’s financial goals and objectives
• Consensus was identified for a model that is:
– Governed by the principles adopted by the Funds Flow
Committee
– Incentive Based
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Incentive-based: Strengths
•
Focus attention on revenues and revenue development
•
Fosters entrepreneurship and rewards departmental efforts
•
Matches revenues to costs, providing understanding of the
internal economy
•
Facilitates broader campus participation in decision-making
•
Aligns academic authority with budgetary responsibility
•
Encourages efficient and competitive administrative services
•
Quantifies and expresses the strategic plan, often through the
rationale for central strategic fund
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MUSC Specific Advantages for the New System
 Tuition and Fees: Distribution of all Academic Charges to
Colleges will dramatically increase College’s ability to price
strategically and plan for the future
 Academic Programs: Alignment of program revenues with
costs enables cost benefit analysis, prompting critical
discussions about program economic viability relative to
academic priority
 Indirect Cost Recovery: Full allocation of indirect costs and
attendant recoveries promotes informed negotiation with
sponsors and informed decisions to accept/decline grants
 Expense Controls: Deans will have the ability to more directly
impact their College’s cost structures and will have full
incentives to control costs
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Current Funds Flow Assessment
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* Includes transfers and pass through associated with MUHA and UMA
Proposed Funds Flow
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7 Responsibility Centers
1. College of Medicine
2. College of Pharmacy
3. College of Nursing
4. College of Graduate Studies
5. College of Dental Medicine
6. College of Health Professions
7. Auxiliary Enterprises (Wellness Center, Vending, Bookstore,
and Printing)
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8 Cost Allocation Methods
1. Expenses
2. Headcount – Total
3. Research Expenditures
4. Headcount (w/o Staff)
5. Enrollment
6. Square Footage
7. Appropriations
8. Gifts
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~17 Months Until Full Implementation
Implementation Progress
Completed/Underway:
Current State
Assessment
• Evaluation of current model incentives,
challenges and funds flows
Model
Development
• Identification of ARCs and development of
revenue and cost allocation rules
Communications
& Consensus
Building
Beta Testing &
Reporting
Implementation
• MUSC Leadership Approval of an allocation
methodology (February 2, 2010)
• MUSC Board of Trustees Approval (February
10, 2011)
• Development of an Oversight Committee
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~17 Months Until Full Implementation
Implementation Progress
Current State
Assessment
Model
Development
Communications
& Consensus
Building
Beta Testing &
Reporting
Implementation
Critical Next Steps:
• Develop pilot scenarios for current FY2011
operations and FY2012 & 2013 forecasts
• Calculation of investment fund for strategic
initiatives
• Development of five-year plans for ARCs
• Start implementation in 2013
• Creation of selected management reports for
education and training of ARC leadership
teams
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Final Takeaways
 Incentive based management system has been
implemented in over 40 of the top universities in the
country
 Colleges’ strategic priorities will be more tightly linked
with revenues and expenditures
 Implementation process will take 18 months with
constant evaluation
 Steps will be taken to educate people in how to operate
in the new system
Questions ??
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