Responsibility Center Management
David Proulx, Associate VP for Finance
EMail: david.proulx@unh.edu
Budget Office Website: http://www.unh.edu/vpfa/budget
RCM Website: http://www.unh.edu/vpfa/rcm
Presentation Outline
1. Overview
2. Allocation Methodologies
3. Results thus far
4. Implementation process
Why RCM?
Overview
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
Institutional Revenue
- Tuition
- Indirect Cost Recov ery
- State Appropriation
Rev enue
Old
Budget
System
University Budget Panel
allocates rev enue to
departments in form of $142
million E&G Budget
Institutional Overhead
(Service Units)
UNH Divisions
- Colleges/Library
- Facilities
- CIS
- Student Affairs
- VP Research
- General Admin
- Academic Affairs
- Research and Public
Serv ice Units
- Auxiliary Operations
Direct Expense
- Payroll
- Support
- Debt serv ice
Department (Direct)
Revenue
- Grant/Contracts
- Restricted
Gifts/Endow ment
- Sales of goods/serv ices
- Fees
Overview
Revenue
RCM
Budget
System
- Tuition
- Indirect Cost Recovery
- State Appropriation
Revenue
- Direct Revenue (Grant,
Gift, Sales, Fees, etc.)
RC Units
- Academic
- Research
- Auxiliary
Direct Expense
- Salaries, Wages & Benefits
- Support
- Debt service
Institutional Overhead
- Facilities
- CIS
- Student Affairs
- VP Research
- General Admin
- Academic Affairs
Overview
RC Units
Colleges and Related Service Units
Overview
Research and Public Service Units
 College of Life Sciences and
 Cooperative Extension
Agriculture
 Research and Public Service
 College of Liberal Arts
 Institute for Earth, Oceans and Space
 College of Engineering and Physical
Sciences
 Whittemore School of Business and
Economics
 College of Health and Human Services
 UNH – Manchester
 Library
Student and Community Life Units
Governance, Advancement and
Infrastructure Units
 Student Affairs
 Facilities Services
 Housing
 UNH IT
 Hospitality Services
 General Administration
 Intercollegiate Athletics
 Academic Affairs
 Whittemore Center Arena
RCM Principles
1.
2.
3.
4.
5.
6.
Overview
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
Overview
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. RCM is not a cost accounting model but rather a
general incentive/allocation model.
Shared Governance
Overview
Central Budget Committee
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The governing group on budget policy and financial planning for
the campus community.
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
Presentation Outline
1. Overview
2.Allocation Methodologies
3. Results thus far
4. Implementation process
Unit Financial
Structure
Allocation
Methodologies
Units receive direct revenues (fees, grants, gifts,
etc) as well as applicable allocated revenues
(net tuition, state appropriations, indirect cost
recovery, CBC allocations and hold harmless)
Units are responsible for direct expenses
(salaries, wages, fringe benefits, support) as well
as indirect expenses (facilities, general and
academic overhead)
Unspent funds at end of year are allowed to
drop to a unit “reserve”
RC Unit Revenues
Allocation
Methodologies
Direct revenues - fees, sales of goods/services,
gifts, grants/contracts, endowment income
Allocated revenues:
 Undergraduate net tuition - based on share of
weighted credit hours taught over prior two years.
Weights are based on historical average expense
per credit hour
 Graduate tuition - based on enrollment
 State Appropriations
 Indirect Cost Revenue - based on actual indirect
costs earned
RC Unit Expenses
Allocation
Methodologies
Direct Expenses - salaries, wages, fringe benefits,
supplies, other direct expenses.
Allocated expenses (overhead):
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Facilities Services (maintenance, utilities,
housekeeping, R&R) - based on net square feet
General Administration (President, Research, Finance
& Administration, Student Affairs, Academic Affairs)
Reserves
Allocation
Methodologies
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 – 6% to 10% of revenue.
RC units can access reserves above their minimum with RC
unit head approval and below their minimum with VP
approval.
Unit reserves reduce dependence on limited central reserves
Presentation Outline
1. Overview
2. Allocation Methodologies
3. Results thus far
4. Implementation Process
Student Access
Results
Improving access to classes for first year
students
College-based open houses to attract
undeclared students
Reviewing courses and curriculum to improve
the student experience
College based student retention effort
Space Utilization
Results
Colleges transferring ”college controlled”
classrooms to Registrar’s Office to be
available for University use
Review of lab utilization and the
reassignment of lab space at COLSA
and CEPS
Impact on Service Units
Results
Service units have become more
accountable and responsive to customer
needs:
Facilities – cost reduction efforts and service
provider agreements
Library – periodical budget/allocation review
CIS – Customer focus groups and Strategic Plan
that focus on service
Budget increases for the Central Administration
is lower than Colleges and Research Units.
Better Management
Results
Managers at all levels discussing financial
impacts of decisions – direct and indirect
Decisions being made with the long term
in mind vs. short term
Decisions aligning with goals in strategic
plan
Use of all funds not just general fund
More communication at all levels of
management
Recent RCM Review
Goals of review:
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Align RCM incentives with institutional goals
Identify source of central strategic funds
Simplify RCM as much as possible
Develop greater financial accountability for all RC units including central
service units
Implement strong incentives for net revenue growth
Changes/enhancements to be implemented in
FY12:
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Central administration funding formula
Credit hour weights/tuition allocations
Slight percentage change in F&A recovery
State funding allocation
Presentation Outline
1. Overview
2. Allocation Methodologies
3. Results thus far
4.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.
Click here to see the summaries of those site visits.
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 on-line
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/VPFA
FY09- second review – simplification and alignment with
mission
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.
Indirect cost return to PI’s. Kept historical allocation.
A Final Thought
From our prior 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.“
More Information
The RCM review report and other information
on RCM can be found at the UNH RCM
Website at www.unh.edu/rcm