RCM 401

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Responsibility Center Management
RCM 401
David Proulx, Assistant Vice President for
Financial Planning and Budgeting EMail
david.proulx_at_unh.edu Budget Office Website
http//www.unh.edu/budget RCM Website
http//www.unh.edu/rcm
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Presentation Outline
RCM 401

• 1. Overview
• 2. Allocation Methodologies
• 3. Results thus far
• 4. 5 year review

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Why RCM?
RCM 401
Overview

• Decentralization of Budget Authority
• Increase
• 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
• 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

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• Old
• Budget
• System

RCM 401
Overview
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RCM 401

• RCM
• Budget
• System

Overview
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RC Units
RCM 401
Overview
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RCM Principles
RCM 401
Overview

• 1. Create incentives for good management
• 2. Fairness/Simplicity
• 3. Unit plans must align with Universitys
  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

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RCM Principles, cont.
RCM 401
Overview

• RCM principles/formulas apply to the RC unit
  level.
• RC units receive all revenue and are responsible
  for all expenditures generated by their
  activities.
• RC units carry forward excess funds from one year
  to next and manage reserves at the unit level.
• RCM is not a cost accounting model but rather a
  general incentive/allocation model.

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Shared Governance
RCM 401
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
• Advisory to Provost monitors academic quality
  and curriculum issues.
• Comprised of Provost, 11Tenured Faculty, 2
  Students, Chair of Academic Standards and
  Advising Committee

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National Context
RCM 401
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, Queens 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.

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Presentation Outline
RCM 401

• 1. Overview
• 2. Allocation Methodologies
• 3. Results thus far
• 4. 5 year review

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Unit Financial Structure
RCM 401
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

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RC Unit Revenues
RCM 401
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

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RC Unit Expenses
RCM 401
Allocation Methodologies

• Direct Expenses - salaries, wages, fringe
  benefits, supplies, other direct expenses.
• Allocated expenses (overhead)
• Facilities Services (maintenance, utilities,
  housekeeping, RR) - 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

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Reserves
RCM 401
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

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Balancing Adjustment
RCM 401
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

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Presentation Outline
RCM 401

• 1. Overview
• 2. Allocation Methodologies
• 3. Results thus far
• 4. 5 year review

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Student Access
RCM 401
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

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Space Utilization
RCM 401
Results

• Colleges transferring college controlled
  classrooms to Registrars Office to be available
  for University use
• Review of lab utilization and the reassignment of
  lab space at COLSA and CEPS

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Impact on Service Units
RCM 401
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.

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Better Management
RCM 401
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

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Presentation Outline
RCM 401

• 1. Overview
• 2. Allocation Methodologies
• 3. Results thus far
• 4. 5 year review

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Timeline
RCM 401

• 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

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Participation
RCM 401

• Steering Committee and 7 subcommittees
• 17 meetings and 2 open forums for information
  gathering/feedback. 2 open forums for initial
  recommendations.

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Review Results
RCM 401

• 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

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More Information
RCM 401

• The RCM review report and other information on
  RCM can be found at the UNH RCM Website at
  www.unh.edu/rcm