PerformanceBased Budgeting

1
Performance-Based Budgeting

• Implementing Performance-Based Budgeting Lessons
  Learned from the University of Cincinnati
• Larry Johnson
• Karen Sullivan
• Lee Mortimer
• Neal Stark

2
Overview of Presentation

• Description of the Model Larry
• Steps and Challenges Faced in Developing the
  Model Karen
• The Financial Structure of the Model (Template
  and Cost Transfer) Lee
• Our System for Tracking Progress Neal

3
Definitions for PBB

• A rational system that links budget allocation to
  performance
• There are many important indicators of
  performance but in this model we focus on revenue

4
Comparison of Budget Systems

• Historical Budget
• Project Growth Across Colleges
• Assign Cuts Based on Revenue Needs
• Exceeding Enrollment Targets does not Impact
  Budget Allocation
• Not meeting Revenue Targets can Result in a
  Midyear Cut and/or Cuts in the Subsequent Year

• Performance Based System
• Project Flat Growth Across Colleges
• Assign a Revenue Target
• Generate New Revenue
• Reduce Costs
• A combination
• Exceeding Enrollment Targets can be used to
  Offset Cuts
• Not meeting Revenue Targets can Result in a
  Midyear Cut and/or Cuts in the Subsequent Year

5
Our PBB Model
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Value Dimensions of PBB

• We need to be intentional about what we value
• We need to find the intersection between what we
  do well and value and what the consumer needs and
  values
• It is about a value proposition with our students
  and stakeholders
• Not everything has to be profitable but we need
  revenue streams to support what we value
• It is an empowering approach
• It requires creativity, quality, and prompt
  action

7
Levers of Revenue Generation

• Increase number of majors
• Increase student retention
• Increase classroom efficiency
• Increase number of courses students take in the
  college
• Increase external support for students
• Increase percentage of tuition students pay
• Increase offerings for non-matriculated students
• Develop additional services

8
Actions to Date

• Performance Based Budget Committee Formed
  (PBB)-Fall 2006
• Broad representation - Deans, Financial
  Administrators, Faculty, Students
• Committee charged to create PBB model
• Developed Guiding Principles
• Transparency, Consistency, Visibility,
  Simplicity
• Conference Calls and Site Visits (Winter
  2006/2007)
• Ohio State, University of Akron, University of
  Dayton
• Surveys to Deans and Key Administrators
• Knowledge Gains on PBB from Others
• Keep it simple
• UCs first round of PBB will be for General Fund
  only - approximately 500M
• Look at total picture - income, direct and
  indirect expenses
• Form smaller working groups

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Actions to Date

• First Draft Template Produced
• Based on FY 2006 actual data in NACUBO format
  (Summer 2007)
• Subsequent Templates Created
• Using 2007, 2008, 2009 actual data
• Integrated FY 2010 Budget Planning with PBB
  template
• Using permanent budget data (Fall 2008)
• Assigned 8 General Funds reduction by area
  (Threshold Share)
• Allowed academic and non-academic units to take
  cuts based on increased income, reduced
  expenditures or combination
• Activated incentive share plan
• Vetting Process Utilized Throughout
• Deans, Business Administrators, Committees, VPs
• Campus support for change unprecedented
• PBB Adopted
• Full component of FY 2010 budget plan

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Challenges

• Recording Tuition (home college vs. college of
  enrollment)
• Transfer price
• Subsidy Modeling by College
• Allocation of Indirect Expenditures
• Other and Unassigned Expenses/Revenues
• Central and departmental transfers in and out of
  other funds
• Debt transfers/subsidies
• Utilities
• Allocation of central budgets (fringe benefits,
  graduate scholarships, budgeted reserves)
• Double counting revenue (student fees, sponsored
  revenue)
• State Budget Challenges
• Campus Politics
• Blended Budget Approach (PBB Budget Version)

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Revenue Components of Model

• Tuition generated by home college
• Adjustments for Majors instructed by another
  college and Adjustment for other Majors
  instructed
• General Fees
• State Share of Instruction (SSI) generated by
  home college
• Unit Scholarships and Fellowships

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Revenue Components of Model, contd

• University Scholarships and Fellowships
• Adult and Continuing Ed. Distributed by
  instruction (Net tuition, general fees, SSI)
• Sponsored Revenue
• Other revenue

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Direct Expenditures

• All expenditures and net transfers directly tied
  to the colleges, including
• Academic Support
• Institutional Support
• Instruction
• Public Service
• Research
• Student Services
• Unassigned includes inter-fund net transfers

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Indirect Expenditures

• All expenditures and net transfers not directly
  tied to colleges, including
• Academic Support attributed to colleges by
  full-time faculty and staff headcount and major
  FTEs
• Institutional Support attributed to colleges by
  full-time faculty and staff headcount and major
  FTEs
• Instruction attributed to colleges by total
  instructional FTEs

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Indirect Expenditures, contd

• Operations Maintenance attributed using the
  proportion of square footage owned by the
  college
• Public Service attributed to colleges by
  full-time faculty and staff headcount and major
  FTEs
• Research attributed to colleges by full-time
  faculty and staff headcount and major FTEs
• Student Services attributed to colleges major
  FTEs
• Unassigned attributed to colleges by full-time
  faculty and staff headcount and major FTEs

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PBB Monitoring Template

• An essential ingredient of PBB is an efficient
  method to monitor progress throughout the year
• A system has been developed that gathers data
  from multiple management systems and compiles
  reports on a monthly basis
• These reports are pushed to a website that
  lives inside UCs main SAP portal (password
  protected)

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PBB Monitoring Template

• Reports are generated for each college that
  include the same rows as have been described, and
  columns that include
• The PBB Budget
• YTD Expected Revenue/Expenses (based on
  prior-year in/out flows)
• YTD Actuals
• Variance

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PBB Monitoring Template

• These reports have been reviewed in great detail
  with college personnel
• Quarterly meetings with the Provosts office and
  college Deans will take place to monitor progress

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Questions????

• FY 2010 Budget Plan www.uc.edu/af/budget/budget_p
  lanning.html