RCM 101

1
Responsibility Center Management
RCM 101
Budget Office Website http//www.unh.edu/budge
t RCM Website http//www.unh.edu/rcm
2
Why RCM?
RCM 101
RCM Model

• 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

3
The National Context
RCM 101
RCM Model

• A survey completed in 19961 by NACUBO found
• 11 of Private Higher Ed institutions employ a
  decentralized budget model (75 surveyed)
• .06 of Public Higher Ed institutions employ a
  decentralized budget model (160 surveyed)
• A survey completed in 20002 by the Cornell Higher
  Education Research Institute found
• 47 of Private Higher Ed institutions employ a
  decentralized budget model (71 surveyed)
• 8 of Public Higher Ed institutions employ a
  decentralized budget model (127 surveyed)
• 1 RCM as a Catalyst, NACUBO Business Officer.
  8/1997
• 2 Survey of the Resource Allocation Methodologies
  Employed at Public and Private Research and
  Doctoral Universities. Cornell Higher Education
  Research Institute, 1/4/2000.

4
RCM 101

• Old
• Budget
• System

RCM Model
5
RCM 101

• RCM
• Budget
• System

RCM Model
6
RC Units
RCM 101
RCM Model
Colleges and Related 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 Student Affairs Housing Hospitality
Services Intercollegiate Athletics Whittemore
Center Arena
Research and Public Service Units Cooperative
Extension Research and Public Service New
Hampshire Public Television Institute for Earth,
Oceans, and Space Governance, Advancement
and Infrastructure Units Facilities
Services Computing and Information
Services General Administration Academic Affairs

7
RCM Principles
RCM 101
RCM Model

• 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

8
RCM Principles, cont.
RCM 101
RCM Model

• 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.
• Each RC unit determines how to manage RCM within
  their unit.
• RCM is not a cost accounting model but rather a
  general incentive/allocation model.

9
RC Unit Revenues
RCM 101
RCM Model

• Direct revenues - fees, sales of goods/services,
  gifts, grants/contracts, endowment income
• Allocated revenues
• Undergraduate tuition - based on weighted credit
  hours taught over the past two years. Weights
  are based on historical average expense per
  credit hour.
• Graduate tuition - based on enrollment
• State Appropriations - based on faculty salaries
• Indirect Cost Revenue - based on actual indirect
  costs generated
• See appendix for more details

10
RC Unit Expenses
RCM 101
RCM Model

• Direct Expenses - salaries, wages, fringe
  benefits, equipment, travel, supplies, other
  direct expenses.
• Allocated expenses (overhead)
• Facilities Services (maintenance, utilities,
  housekeeping, grounds and roads, RR) - based on
  net square feet (15.40 per NSF)
• General Administration (President, Research,
  Finance Administration, Student Affairs, and
  support units reporting to VPs) - based on prior
  fiscal year revenues and personnel expenses.
  Average rate 11 of total revenues.
• Academic Affairs (Provost, Registrar, Financial
  Aid Office, Admission and other units reporting
  to Provost) - based on prior fiscal year revenues
  and personnel expenses. Average rate 7 of
  total revenues.
• See appendix for more details

11
Balancing Adjustment
RCM 101
RCM Model

• 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

12
The University Fund
RCM 101
RCM Model

• Balancing adjustments do not inflate and are
  funded from state appropriations.
• Inflation proceeds become the University Fund
• University Fund is flexible central funding to
  allocate based on strategic priorities of the
  institution
• Managed by the Central Budget Committee (CBC)
• Units make requests via strategic plans to their
  VP. VP brings requests before the CBC. CBC
  decides to provide permanent, one time or no
  funding.

13
Reserves
RCM 101
RCM Model

• 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

14
Units in Financial Difficulty
RCM 101
RCM Model

• Deans and Unit Directors as well as responsible
  VPs are held accountable for unit performance
• Units that have operating deficits are required
  to
• Submit a mitigation plan describing how they plan
  to resolve the deficit over a defined period of
  time
• Meet with the CFO and responsible VP on a
  quarterly basis to provide updates

15
Reviews of RCM
RCM 101
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.
• Spring, 2006 report due to the President

16
Current Status
RCM 101
Current Status

• Fourth year of RCM overall a success
• Increased discussion about budgetary impact of
  decisions among faculty and deans
• More collaborative budget process
• Has improved attentiveness to student needs
  more sections, new programs, restructuring of
  existing programs
• Faculty workloads and program reviews have
  occurred
• Service units more attentive to customers and
  redesigning processes to increase efficiency

17
Current Status, cont.
RCM 101
Current Status

• RCM has facilitated strategic planning at the
  unit level
• Institutional leaders focus on institutional
  strategic issues vs. small dollar budgetary
  requests
• Library reviewing journal collections and
  alternative forms of information services
• Unit budgets vary with activity (slide) some
  units in financial difficulty
• Reserves have increased significantly (slide)

18
(No Transcript)
19
(No Transcript)
20
A Final Thought
RCM 101

• From our 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.