rcm401presentation by p7wvLv


									        Responsibility Center Management

David Proulx, Assistant Vice President for Financial Planning and Budgeting
EMail: david.proulx@unh.edu

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
   Incentives for planning, cost effectiveness and revenue generation
   Local responsibility and authority
   Flexibility to match revenue streams with changing program
   Attentiveness to all categories of money
   Accountability at all levels of management
   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 Rev enue                          Department (Direc t)
                          - Tuition                                              Rev enue
 Old                      - Indirect Cost Recovery
                          - State Appropriation
                                                                         - Grant/Contracts
                                                                         - Restricted
                                                                         - Sales of goods/services   Overview
Budget                                                                   - Fees

                          Univ ersity Budget Panel
                             allocates revenue to
                          departments in form of $142
                              million E&G Budget

         Institutional Ov erhead                      UNH Div isions
             (Serv ice Units)                   - Colleges/Library
     - Facilities                               - Research and Public
     - CIS                                      Service Units
     - Student Affairs                          - Auxiliary Operations
     - VP Research
     - General Admin
     - Academic Affairs

                                  Direct Expens e
                           - Payroll
                           - Support
                           - Debt service

 RCM                      - Tuition
                          - Indirect Cost Recovery
                          - State Appropriation
                          Revenue                                                       Overview
Budget                    - Direct Revenue (Grant,
                          Gift, Sales, Fees, etc.)

                                  RC Units                            Central Budget
                             - Academic                                Committee
                             - Research                         - Incremental funding
                             - Auxiliary                        decisions
                                                                - $700k University Fund
                                                                - Service Unit Advisory Board
                                                                subcommittee to review
                                                                Service Units if necessary

               Direct Expense                Institutional Overhead
         - Salaries, Wages & Benefits      - Facilities
         - Support                         - CIS
         - Debt service                    - Student Affairs
                                           - VP Research
                                           - General Admin
                                           - Academic Affairs
                                RC Units                                  Overview

    Colleges and Related Service Units       Research and Public Service Units
 College of Life Sciences and              Cooperative Extension
  Agriculture                               Research and Public Service
 College of Liberal Arts                   New Hampshire Public Television
 College of Engineering and Physical       Institute for Earth, Oceans and Space
 Whittemore School of Business and
 School of Health and Human Services
 UNH – Manchester
 Library
  Student and Community Life Units            Governance, Advancement and
                                                     Infrastructure Units
   Student Affairs                         Facilities Services
   Housing                                 Computing and Information Services
   Hospitality Services                    General Administration
   Intercollegiate Athletics               Academic Affairs
   Whittemore Center Arena
               RCM Principles

1.   Create incentives for good management
2.   Fairness/Simplicity
3.   Unit plans must align with University’s mission and
     strategic plan
4.   Smooth transition - no redistribution of resources
5.   Credible governance mechanisms required to prevent
     unhealthy internal competition
6.   Same rules for all operations – academic, research,
     auxiliary, administrative

         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

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
   Advisory to Provost – monitors academic quality and curriculum
   Comprised of Provost, 11Tenured Faculty, 2 Students, Chair of
    Academic Standards and Advising Committee
                    National Context
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
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                  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

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
  Indirect Cost Revenue - based on actual indirect
   costs earned
             RC Unit Expenses                      Allocation

Direct Expenses - salaries, wages, fringe benefits,
supplies, other direct expenses.
Allocated expenses (overhead):
   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

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
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
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
                                     Budget System          RCM
        Direct revenues            $        1,000,000   $     1,000,000
        UNH budget allocation      $       19,000,000
        Allocated revenue                               $     27,000,000
        Balancing adjustment                            $      2,000,000
        Total revenues             $       20,000,000   $     30,000,000

        Direct expenditures        $       20,000,000   $     20,000,000
        Allocated expenditures                          $     10,000,000
        Total Expenditures         $       20,000,000   $     30,000,000

        Net                        $              -     $            -
         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
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
 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
Use of all funds not just general fund
More communication at all levels of
         Presentation Outline

1. Overview
2. Allocation Methodologies
3. Results thus far
4. 5 year review
Dec. 2004 – April 2005 – open
discussions with all RC units on RCM
April 2005 – August 2005 – Data
accumulation and review structure
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
Steering Committee and 7 subcommittees
          Employee Type         #        % of Total
    Library/Tenure/TT Faculty       27          48%
    Research/Clinical Faculty        5           9%
    Deans                            7          13%
    Staff                           17          30%
    Total                           56         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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