AGENDA ITEM NO: 9.3
UNIVERSITY COUNCIL
PLANNING AND PRIORITIES COMMITTEE
FOR INFORMATION ONLY
PRESENTED BY:
Bob Tyler, Chair, Planning and Priorities Committee
DATE OF MEETING:
May 19, 2011
SUBJECT:
Resource Allocation Update
COUNCIL ACTION:
For information only
CONTEXT AND BACKGROUND:
The purpose of this document is to provide University Council with an update on the
development of a Resource Allocation Model for the University of Saskatchewan, along with
plans for further development of the model and its implementation. University Council received
an interim report on the Resource Allocation Project as part of the Planning and Priorities
Committee mid-year report in February of this year.
DISCUSSION SUMMARY:
A key goal for the Financial Resources Commitment of the Second Integrated Plan is the
evolution to a new model for resource allocation. The intention is to move from the University’s
existing model for resource allocation, which is based primarily on historical allocations and
incremental budgeting, to an activity and strategy driven model, based upon the designation of
units as responsibility centres, either as revenue centres or support centres. The method of
allocating resources is a key component of financial management and stewardship practices at
the University, and the new model will support University priorities and improve the
transparency of resource allocation.
The Planning and Priorities Committee of University Council has played an important role to
date in the development of a new model. The input of the Committee has been sought several
times, and several members of the Planning and Priorities Committee, including the chair, are
members of the steering committee for the development and implementation of the model.
In 2010-11, the Planning and Priorities Committee received presentations and provided input on
the Resource Allocation Project on six occasions (September 8, December 8, March 2, March 16,
March 30 and April 20). These presentations examined the initial research carried out on
resource allocation models, key model concepts, critical design features, implementation plan
and timelines. Members of the Planning and Priorities Committee have participated in several
institution-wide consultations and workshops, including two recent events that discussed the
resource allocation models in general, along with the experiences of the University of Toronto
and Iowa State University in implementation of their models. Representatives from each
institution were positive and enthusiastic in recounting their experiences in developing and
introducing their resource allocation models, and supportive of the University’s desire to design
and implement its own model.
On May 10, the Board of Governors was informed about progress regarding development of a
Resource Allocation Model. The Board approved the principles and critical design features at a
conceptual level, allowing management to continue to pursue development of the model at a
detailed level and to begin planning for implementation.
A summary of the nature, timeline and salient features of the model is outlined in the attached
memorandum from the Provost and Vice-President Academic, Executive Sponsor of the
Resource Allocation Project. The memorandum was widely distributed on May 13, 2011, and is
also available on the University website at www.usask.ca/resourceallocation/documents/memo.pdf.
ATTACHMENTS:
Memorandum from the Provost and Vice-President Academic regarding “Update on Resource
Allocation Project” dated 13 May 2011.
The Provost and Vice-President Academic
107 Administration Place
Saskatoon, SK S7N 5A2
Telephone: (306) 966-8489
Facsimile: (306) 966-4316
MEMORANDUM
TO:
President’s Advisory Council, Planning and Priorities Committee of Council, Committee to
Review and Monitor Internal Controls, Board of Governors, Department Heads
FROM:
Brett Fairbairn, Provost and Vice-President Academic
SUBJECT:
Update on Resource Allocation Project
DATE:
13 May 2011
I am writing to inform you that the Board of Governors has provided in-principle approval for the
development of a new, transparent and accountable budgeting system for our university. The new system
for resource allocation will be developed in detail over the coming year based on critical design features
approved by the board at its 10 May meeting. This memorandum supplements the information which I
provided to you on 23 March.
Generally, the most important aspects of the new budget model are:
• the adoption of a responsibility centred approach (revenues are attributed to those colleges/units
primarily responsible for generating that revenue and expenses are allocated to those units that
benefit from the expenditures);
• transparency (it will be clear to everyone within the university who receives what budget
allocations and why); responsiveness (it will be clear how budgets are linked to activity levels and
can change over time); and
• accountability (it will be clear who decides on budget priorities, and that colleges and units will
have information and latitude to plan their budgets over multiple years).
These features represent exemplary practice among universities and are required for our university to
become the kind of institution we aspire to be. The University of Toronto, which has adopted a similar
system, has found that the clarity and information provided by a similar budget model has led to greater
collaboration between faculties, administrative efficiencies, more strategic use of resources to support
priorities, and more effective conversations with government about resources. We intend to see similar
gains.
Specifically, the Board of Governors has provided in-principle approval of the following elements in the new
resource allocation model:
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Update on Resource Allocation Project
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A set of principles to guide
development and implementation of
the model (see the list of principles at
www.usask.ca/resourceallocation,
under “Process”).
Responsibility Centre Management
(RCM) approach: In the future
university revenue will largely be
attributed to those units, or
responsibility centres, that generate
the revenue through activities such as
teaching and research. Expenses will
also be allocated against those
associated revenues.
Unity/entity structure: Responsibility centres, mirroring integrated-planning entities, will be
classified either as revenue centres (campus units that generate revenue such as colleges, schools
and major research centres) or support centres (campus units whose primary function is to provide
administrative or operational support to revenue centres, such as Financial Services Division and
Facilities Management Division).
Revenue Allocation: Initially the model will focus on attributing operating-budget revenue. Most of
the university’s operating revenue, provincial operating grant and tuition fees, will be allocated to
revenue centres.
o The model will attribute provincial operating-grant revenue to revenue centres based on
teaching activity and research activity (both tri-agency and non-tri-agency). The
Saskatchewan University Funding Mechanism (SUFM), the provincial formula used to
allocate funding to universities in Saskatchewan, will inform this process.
o The model will allocate undergraduate tuition revenue on the basis of enrolment and
instruction. In addition to enrolment and instruction, graduate tuition revenue allocations
will also recognize supervision.
Expense allocation: The model will also allocate to revenue centres the costs associated with
support centres and other institutional costs. Direct costs (salaries, benefits, supplies, etc.) and
indirect costs (grounds-keeping, legal fees, etc.) will be covered by revenues of the revenue
centres. Indirect costs will be amalgamated through cost bins (based on net approved budgets of
support centres, gathered in common groupings based on activities supported, such as student
support) and drivers (the measures for allocating costs of a particular bin, such as number of
students).
Central fund: The university will establish a central fund prior to allocation of revenue to revenue
centres. The central fund will provide support for strategic initiatives such as the Academic
Priorities Fund (APF), transition funding, and related uses which will be clearly articulated and
broadly communicated.
Governance: The Board of Governors and the Provost’s Committee on Integrated Planning (PCIP)
will continue to have the authority and responsibility to approve resource allocation decisions. The
model will be used to inform decisions, not to predetermine mechanistic adjustments. Where there
are differences between the model results and the current operating-budget allocations for
revenue centres, PCIP will use the information generated by the model to inform its decisions
about actual allocations from year to year.
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Update on Resource Allocation Project
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Transition period: The model will be implemented and will begin to inform decisions by PCIP in
2012. There will be a difference between what the model predicts and current budget allocations
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for all revenue centres. In keeping with the guiding principles approved for the project (in particular
those of informative and sustainability), the difference will be considered by PCIP and decisions
made regarding whether a budget adjustment is warranted and the amount of adjustment. Further
refinements and additional features will be required to make the model more comprehensive; we
expect the model to be fully implemented and integrated into our normal processes by 2014-15.
The board’s in-principle approval signals the end of the first phase of the resource allocation project and its
direction to proceed with phase two (Spring 2011 – Spring 2012) in which we will:
 further develop the model by refining critical design features;
 begin to address policies such as research overhead and fee-for-service; and
 further develop details of model revenue drivers (eg. teaching activity, student enrolment) and cost
driver information (eg. square meters).
The detailed development of the model in phase two will continue to be led by the Financial Resources
commitment co-leaders, Laura Kennedy and Lou Qualtiere, with the assistance of the Resource Allocation
Steering Committee and working groups. This phase of work will include running a simulation of the model
at a high level for units of the university. The commitment co-leaders will continue to consult widely and
gather input as they develop their proposals regarding the content of the model.
As executive sponsor, I will be looking to begin making arrangements during the coming year for the
implementation of the model in 2012. Various aspects will become clearer as PCIP and the board make
decisions about components and administration of the model.
Distribution of college and unit planning parameters for the third planning cycle in Spring 2012 marks the
end of phase two and the beginning of implementation, the third and final phase.
I am conscious of the change this new resource allocation process will bring to our institution and the
effects of this change upon colleges, schools and administrative units. Through this change it is important
to remember the positive benefits this new system will bring to the University of Saskatchewan:
 alignment of college and unit budgets with activities in a more transparent, comprehensive and
systematic way;
 a process to link budgets to cycles of integrated planning;
 a system to ensure resources are put behind strategic priorities; and
 a method to place responsibility for budgets at the appropriate college/unit and university levels.
I would be happy to come to your college or unit, at your invitation, to speak about the general goals,
significance and features of the emerging new budget model in the coming months.
I am grateful to commitment co-leaders, Laura Kennedy and Lou Qualtiere, as well as to the steering
committee and working groups, for their hard work and diligence on this important project. The project has
been strengthened with valuable input from deans, financial officers across campus, the Planning and
Priorities Committee of Council, the Committee to Review and Monitor Internal Controls, and others.
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Updates from me on the progress of the resource allocation model will continue. I encourage you and your
colleagues to visit www.usask.ca/resourceallocation for more information. As of today, you will find a copy
of the fact sheet from my March communication on this website. Over time, this website will be updated
and expanded as the resource allocation project evolves.
As a result of our discussions with other university individuals about impacts at their institutions, I am
confident that we have reason for optimism. In the meantime, if you have any questions or concerns,
please do not hesitate to email resource.allocation@usask.ca.
Sincerely,
Brett Fairbairn
Provost and Vice-President Academic
c: Financial Resources Commitment co-leaders
Resource Allocation Steering Committee
Resource Allocation Working Group