Title: Responsibility Centered Management (RCM) Case Study: Engineering and Technology
1Responsibility Centered Management (RCM)Case
Study Engineering and Technology
- By
- H. Öner Yurtseven
- Indiana University Purdue University Indianapolis
- March 1, 2006
- Asian Institute of Technology, Thailand
2Indiana University
- Largest state funded university in Indiana
- Eight campuses with 92,619 students
- Two core and six regional campuses
- Indiana University, Bloomington (36,200 students)
- Indiana University Purdue University Indianapolis
(28,193 students) - Each campus has a chancellor reporting to Indiana
University President - IUPUI Chancellor is also Indiana University
Executive Vice President
3Indiana University -2
- Centralized budgeting and administration
- Vice President and Chief Financial Officer for
all eight campuses - Vice Chancellor for Administration and Finance at
IUPUI reports to the Chief Financial Officer and
also to the Chancellor of IUPUI - Similar arrangements are in place for Bloomington
campus and for all regional campuses
4Indiana University Purdue University Indianapolis
(IUPUI)
- Urban and research campus
- Comprehensive (liberal arts, business, medicine,
science, engineering and technology, etc.) - 16 Indiana University Schools
- 2 Purdue University Schools
- Merger of IU and Purdue 1969
- Over 180 degree programs are offered
- The second largest School of Medicine in US
- The largest School of Nursing in US
5IUPUI -2
- Each of the academic units has budget director
and/or assistant/associate dean for finances who
reports to dean of the school directly - They are liaisons to IUPUI Budget Office and to
University Budget Office - They meet monthly with Vice Chancellor for
Finance and Administration
6Purdue School of Engineering and Technology
- Degree programs
- 2 year AS programs in technology
- 4 year BS programs in engineering and technology
- MS programs in engineering and technology
- PhD programs in engineering
- Size
- 2,100 undergraduate and 200 graduate students
- 80 full-time and 75 part-time faculty, 30 staff
- Teach 48,000 credit hours/year with 3.5M annual
research - Organizational structure
- 3 engineering and 5 technology departments
- Centralized support services
7(No Transcript)
8Centralized Services in the School
- Research support
- Student Services (recruitment, internships)
- Academic Programs (admissions, registration,
graduation) - Computer Network Center
- Development and External Relations (fund raising,
alumni) - Finance and Administration (department accounts,
grants, contracts) - Associate Dean
- Budget Director
- Grants and Contracts Coordinator
- Human Services Coordinator
- Support staff
9Objectives for RCM
- Integrate and coordinate both academic and fiscal
planning - Decentralize the decision-making to the
responsible units - Match costs with benefits and responsibility with
authority - Increase awareness of costs and positive
incentives for income generation - Make the tradeoffs between choices more explicit
- Foster an information rich arena for discourse
on the budget - Reward multi-year planning with the carry-forward
of surpluses and deficits
10RCM does not
- produce more money for an institution or
- set academic priorities with its budget.
- Thomas Ehrlich - Former President of Indiana
University
11Basic Principles of RCM
- Assign all costs and income attributable to each
academic unit (income from fees and grants costs
of admission and library services) - Assign cost of a support unit to all academic
units (cost of computing services are divided by
all academic units using and sharing the
services) - Create appropriate incentives for each academic
unit to increase income and reduce costs to
further a clear set of academic priorities (allow
the academic unit keep the additional fees
generated by short courses)
12Steps to Establish RCM
- Identify RCM centers
- Create new accounts or consolidate existing
accounts - Attribute income to academic RCM centers
- Assign cost of support RCM centers to all
academic RCM centers - Build budgets
13Identifying RCM Centers
- Academic unit carries the academic mission of the
university by awarding degrees and bringing
income through student fees and research grants
and contracts (school of business, college of
arts and sciences, combined smaller degree
programs) - Support unit is responsible for providing the
services in support of the academic mission and
it does not offer degree programs and it usually
does not have core faculty (physical plant,
library, combined offices of registrar,
admissions, and financial aid) - Executive management coordinates and guides
planning efforts among academic and support
units, establish policies, and allocates
resources to the other RCM centers (chancellor or
presidents office, vice presidents,
institutional planning office)
14Standards for Defining RCM Centers
- Organizational structure
- Clear definition of management responsibility
- Number of centers to reflect size and complexity
- Approximate parity among units
- Intracenter decentralization at the discretion of
each center - Policy issues
- Inclusion of all fund groups
15Indiana University Operating Budget (2004-05)
- Income
- State appropriation (24) 530,565,000
- Student fees (27) 680,045,000
- Other income (49) 335,513,000
- Total 1,546,123,000
- Expenditures
- Compensation (64)
1,332,963,000 - Financial Aid (4) 86,195,000
- Other expenditures (32) 629,306,000
- Total 2,048,464,000
16IUPUI Operating Budget (2005-06)
- Income
- State appropriation (45) 208,249,464
- Student fees (41) 187,545,188
- Other income (14) 62,915,893
- Total 458,710,545
- Expenditures
- Compensation (63) 289,562,944
- Financial Aid (3) 11,853,328
- Other expenditures (34) 157,294,273
- Total 458,710,545
- General (instructional) Funds only
-
17IUPUI Budget Summary
- General Funds (458M)
- Academic Units 305M (67)
- Support Units 153M (33)
- Auxiliary Funds (502M)
- Grants and contracts
- Utilities
- Designated funds
18Academic Responsibility Centers
- Business (21M)
- Columbus (satellite campus of IUPUI-6.4M)
- Dentistry (29M)
- Education (5.8M)
- Engineering and Technology (13.3M)
- Health and Rehabilitation Sciences (3.1M)
- Herron Art and Design (5.7M)
- Informatics (6M)
- Journalism (0.7M)
- Law (16.4M)
19Academic Responsibility Centers - 2
- Liberal Arts (24.2M)
- Medicine (120M)
- Nursing (12.6M)
- Other Academic (4.4M)
- Labor Studies
- Library and Information Sciences
- Music
- Physical Education (3.8M)
- Public and Environmental Affairs (5.2M)
- Science (23M)
- Social Work (4.5M)
- University College (7.9M)
20Support Responsibility Centers
- Academic Support (27.5M)
- Administration and Finance (13.2M)
- Executive Management (26.6M)
- External Affairs (2.8M)
- Facilities Debt (18.4M)
- Library (8.6M)
- Physical Plant (41.3M)
- University Tax (14M)
- University Information Technology Services
(10.5M)
21School of Engineering and Technology 2005-06
Income
- Student Fees (53.2)
- Indirect Cost Recovery (1.8)
- State Appropriation (45)
- Assessment Revenue (29.1)
-
Total - Research Contracts and Grants
- Grand Total
- 9,817,507
- 350,000
- 8,276,130
- - 5,368,836
- 13,074,801
- 3,438,458
- 16,513,259
22School of Engineering and Technology 2005-06
Expenditures
- Compensation (64.4)
- General SE (3.1)
- Other (3.4)
-
Total - travel, capital, reserves, and transfers
- 11,894,956
- 556,239
- 623,606
- 13,074,801
23Income Types assigned to RCM Centers
- State support
- Student credit hour fees
- Course related fees
- Other fee income
- Indirect cost recovery income
- Rent income
- Interest income
- Gifts and grants
- Sales and service income
24Methods of Income Attribution
- State support Combination of a portion based on
central administration decision and a portion
based on specified performance indicators. In
practice, however, IUPUI started with 1987-88
levels funding levels and adjusted the increase
and decrease based on the original proportions - Credit hour fees Income goes to centers
according to courses taught - Course-related fees Income goes to centers
according to courses taught
25Methods of Income Attribution -2
- Other fees Continuing education course income go
to centers teaching them. Applications,
transcript, late charge income go to registrar
and bursar - Indirect cost recovery Income goes to RCM center
- Rental Income goes to center managing the space
- Interest income Goes to executive management
- Gifts and grants Income goes to centers
receiving them
26Methods of Income Attribution -3
- Auxiliary service charge Income goes to center
managing the services - Sales and service Income and other general
income go to centers generating the income or to
executive management if not determinable
27Examples of Income Attribution
- State appropriation
- Initial attribution was done in 1987-88 using the
existing distributions - Any change in State funding is carried on to RCM
centers using the same formula - Indirect cost recovery from research contracts
- Campus retains 20
- Schools receive 80
28Assigning Costs to RCM Centers
- Academic Support academic affairs, research and
graduate programs, learning resources, academic
personnel - Administration and Finance admissions and
registrar, student financial aid, bursar, non
academic personnel - Executive Management Vice president at IUPUI,
chancellor, and vice chancellors - External Affairs Community relations, alumni
29Assigning Costs to RCM Centers -2
- Facilities Debt Bonding for new buildings
- Library
- Physical Plant Buildings, utilities, maintenance
- University Tax Trustees, President and
university wide offices (research, international
programs) - University Information Technology Services
computer networks, computing infrastructure,
telecommunication
30Examples of Early Cost Allocation
- Library Weighted total for a center
- 1.00 x faculty FTE 0.05 x undergraduate FTE
0.25 x graduate student FTE - Academic computing
- Weighted total for a center
- (1.00 x faculty FTE 1.50 x student FTE) x 0.75
x - Physical Plant Assigned cost for a center
unit cost x assignable square feet
past unfunded usage for a center
total part unfunded usage for a center
31Examples of Early Cost Allocation -2
- Academic Support Distribute in proportion to
credit hour enrollment - Administration and Finance Distribute to centers
in proportion to total direct expense of general,
designated, and restricted funds - Executive Management Distribute in proportion to
total direct expenses of general, designated, and
other restricted funds as well as some auxiliary
and service costs
32Current Cost Allocation
- Assign the total cost of each support RCM center
to academic RCM center using the equal weights of - Student credit hours generated by the unit
- Total full-time equivalent of faculty and staff
members - Space in sq ft occupied by the unit
33Budget Process
- Academic RCM centers report projected student
credit hours for the coming fiscal year to campus
budget office (all types of fees) - Academic RCM centers also report projected
indirect cost recovery funds and other income - Campus budget office determines projected State
appropriations and expenditures for each RCM
center - Each RCM center is given a proforma budget based
on these projections and based on the assumptions
of tuition increases, salary increases, and
assessments - Each RCM center then plans for its budget using
the information on proforma
34Budget Process -2
- At the school level, department/program budgets
are built by using either a similar RCM
methodology or traditional budgeting - Total salary increase budget for faculty and
staff are given to chairs/directors to decide - Indirect cost recovery income is distributed
- 20 to PI and 20 to department
- 40 stays in the school
- Salary savings are distributed
- PI, department, and school share equally
35School of Engineering and Technology Assessment
Revenues
- Academic Support (22)
- Administrative Affairs (9.6)
- Exe Management-IUPUI (5.3)
- External Affairs (2.8)
- Library (8.2)
- Physical Plant (22)
- University Tax (10)
- UITS (9.5)
- Total
-
- 1,131,253
- 493,971
- 275,736
- 142,489
- 423,594
- 1,657,285
- 528,994
- 488,136
- 5,141,458
36Resources
- Responsibility Center Budgeting, Edward L.
Whalen, Indiana University Press, 1991 - RCM Review Reports, 1993, 1998, and 2003
- Conversations with Vice Chancellor for
Administration and Finance, and with Associate
Dean for Finance and Administration in the School