1. 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 Responsibility Center Management

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

3. Why RCM? 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 Overview

4. OldBudgetSystemOldBudgetSystem

5. RCMBudgetSystemRCMBudgetSystem Revenue - Tuition - Indirect Cost Recovery - State Appropriation Revenue - Direct Revenue (Grant, Gift, Sales, Fees, etc.) RC Units - Academic - Research - Auxiliary Direct Expense - Salaries, Wages & Benefits - Support - Debt service Central Budget Committee - Incremental funding decisions - $700k University Fund allocation - Service Unit Advisory Board subcommittee to review Service Units if necessary Institutional Overhead - Facilities - CIS - Student Affairs - VP Research - General Admin - Academic Affairs

6. RC Units Overview

7. 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 Overview

8. RCM Principles, cont. 7. 7.RCM principles/formulas apply to the RC unit level. 8. 8.RC units receive all revenue and are responsible for all expenditures generated by their activities. 9. 9.RC units carry forward excess funds from one year to next and manage reserves at the unit level. 10. 10.RCM is not a cost accounting model but rather a general incentive/allocation model. Overview

9. 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 issues. Comprised of Provost, 11Tenured Faculty, 2 Students, Chair of Academic Standards and Advising Committee Overview

10. 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 RCM (UMASS, UVM, URI, UCONN, UMAINE, UColorado at 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. Overview

11. Presentation Outline 1. Overview 2.Allocation Methodologies 3. Results thus far 4. 5 year review

12. Unit Financial Structure 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” Allocation Methodologies

13. RC Unit Revenues 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 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 Graduate tuition - based on enrollment State Appropriations (30%) - based on faculty salaries State Appropriations (30%) - based on faculty salaries Indirect Cost Revenue - based on actual indirect costs earned Indirect Cost Revenue - based on actual indirect costs earned Allocation Methodologies

14. RC Unit Expenses 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 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 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 Academic Affairs (Provost, Registrar, Financial Aid Office, Admissions) - based on prior year revenues and personnel expenses Allocation Methodologies

15. Reserves 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 Allocation Methodologies

16. “Balancing Adjustment” 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 Allocation Methodologies

17. Presentation Outline 1. Overview 2.Allocation Methodologies 3. Results thus far 4. 5 year review

18. Student Access 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 Results

19. Space Utilization 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 Results

20. Impact on Service Units 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. Results

21. Better Management 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 Results

22. Presentation Outline 1. Overview 2. Allocation Methodologies 3. Results thus far 4. 5 year review

23. Timeline 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

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

25. 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

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