Responsibility Center Management

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Responsibility Center Management
David Proulx, Assistant Vice President for Financial Planning and Budgeting
EMail: [email protected]
Budget Office Website: http://www.unh.edu/budget
RCM Website: http://www.unh.edu/rcm
Presentation Outline
1. Overview
2. Allocation Methodologies
3. Results thus far
4. 5 year review
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.)
Overview
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
Colleges and Related Service Units
Overview
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
Student and Community Life Units
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
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
Cooperative Extension
Research and Public Service
New Hampshire Public Television
Institute for Earth, Oceans and Space
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Governance, Advancement and
Infrastructure Units
Facilities Services
Computing and Information Services
General Administration
Academic Affairs
Student Affairs
Housing
Hospitality Services
Intercollegiate Athletics
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


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

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
National Context
Overview
47% of Private vs. 8% of Public Universities employ an RCM model
UNH Presented at EACUBO Annual Convention
Representatives from numerous institutions visited UNH to explore
RCM (UMASS, UVM, URI, UCONN, UMAINE, UColorado at
Denver,Southern Mississippi, Eihme University in Japan, Ohio
University, Queen’s University, Ontario, University of Alberta and
Universities from Russia, Switzerland and Pakistan)
Numerous consultations with other institutions (South Carolina,
North Texas, Idaho, University of Wisconsin, Iowa State, Pace
University, Kutztown University)
Wrote a chapter in a NACUBO book about RCM.
UNH RCM Website receives 10,000 hits per year.
*Survey of the Resource Allocation Methodologies Employed at Public and
Private Research and Doctoral Universities. Cornell Higher Education
Research Institute, 1/4/2000.
Presentation Outline
1. Overview
2.Allocation Methodologies
3. Results thus far
4. 5 year review
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 (30%) - based on faculty
salaries
 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) - based on prior year
revenues and personnel expenses
Academic Affairs (Provost, Registrar, Financial Aid
Office, Admissions) - based on prior year revenues and
personnel expenses
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 (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
“Balancing Adjustment”
Allocation
Methodologies
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
$
-
Presentation Outline
1. Overview
2. Allocation Methodologies
3. Results thus far
4. 5 year review
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
Presentation Outline
1. Overview
2. Allocation Methodologies
3. Results thus far
4. 5 year review
Timeline
Dec. 2004 – April 2005 – open
discussions with all RC units on RCM
April 2005 – August 2005 – Data
accumulation and review structure
development
August 2005 – January 2006 –
Subcommittee review and Steering
Committee recommendations
February 2006 – Central Budget
Committee Review and President decision
July 1, 2006 – Implementation of changes
Participation
Steering Committee and 7 subcommittees
Employee Type
Library/Tenure/TT Faculty
Research/Clinical Faculty
Deans
Staff
Total
#
27
5
7
17
56
% of Total
48%
9%
13%
30%
100%
17 meetings and 2 open forums for
information gathering/feedback. 2 open
forums for initial recommendations.
Review Results
RCM works well for UNH and should
remain as budgeting tool
Enhance communications in some areas
Allocation formulas changed to create
better incentives/more alignment with
Academic Plan
Elimination of hold harmless allocation and
review of assessment funded units
RCM should be reviewed again in FY11
More Information
The RCM review report and other information
on RCM can be found at the UNH RCM
Website at www.unh.edu/rcm
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