1. THE UNIVERSITY OF ARIZONA | ELLER COLLEGE OF MANAGEMENT RCM BUDGETING AT THE UNIVERSITY OF ARIZONA OCTOBER 5, 2015

2. 2 Overview The Responsibility Centered Management (RCM) Budget Model is designed with the input of the University community to: 1)encourage revenue generation and cost effectiveness, 2)align authority and accountability at the local level, 3)provide transparency and flexibility in financial operations, and 4)enhance the ability for units and the institution as a whole to plan.

3. 3 Overview RCM provides a methodology for allocating both University revenues and costs to Responsibility Center Units (RCU) to provide a transparent budget process that is based on the level of activity within an RCU.

4. 4 Overview There two types of RCU within RCM: Revenue RCU Colleges, which are allocated funds based their levels of activity Large auxiliaries (Student Union, Residence Life, Athletics, etc.), which are mostly self-supported units Support RCU Units that support the primary missions of the university, including institutional administration, business services, student support, research support, public service and facilities

5. 5 Overview

6. 6 At the outset of RCM, the overall level of funding did not change within any of the RCUs as historical budgets where maintained at previous levels. All RCUs initially “HELD HARMLESS”.

7. 7 Overview The FY16 budget was the first year that RCM affected the level of spending in the RCU’s budgets based on changes in instructional and research activity. As we move forward each year, the RCM budget will be adjusted based on the activity that occurred in the prior year.

8. 8 Elements in the RCM Budget Model Undergraduate Tuition Allocation Undergraduate tuition revenue is pooled and allocated using average calculated values based on the following ratio listed below: 75% based on SCH taught 25% based on majors

9. 9 Elements in the RCM Budget Model Undergraduate Tuition Allocation College subvention related to the estimated cost of instruction. Factors (1.2, 1.0, or.8) that cause plus or minus 20% to be reallocated to colleges based on cost of instructional delivery. Eller College is classified as.8

10. 10 Elements in the RCM Budget Model Undergraduate Tuition Allocation 30.96% assessment for Support costs (FY16-FY18) 1.69% assessment for Strategic Investment Fund (increases from 2% to 5% over next four years) 4 year averaging of SCH only applied to initial allocation for FY16 budget

11. 11 Elements in the RCM Budget Model Graduate Tuition Allocation Actual revenue collected per student is allocated based on the following: 75% based on majors 25% based on SCH

12. 12 Elements in the RCM Budget Model Graduate Tuition Allocation 12.38% assessment for Support costs (FY16-FY18) 1.69% assessment for Strategic Investment Fund (increases from 2% to 5% over next four years)

13. 13 Elements in the RCM Budget Model Program Fees and Differential Tuition 100% to College charging Program Fee and Differential Tuition Revenue allocations reduced by 14% Regent Set Aside 12.38% assessment for Support costs (FY16-FY18) 1.69% assessment for Strategic Investment Fund (increases from 2% to 5% over next four years)

14. 14 Elements in the RCM Budget Model Facilities and Admin (F&A) Cost Recovery from Grants 100% allocated to College based on F&A distribution on Award 25% to be allocated quarterly throughout the year directly to departmental F&A accounts Remaining 75% to be allocated during RCM budget process to College RCUs 12.38% assessment for Support costs (FY16-FY18)

15. 15 Elements in the RCM Budget Model Facilities Related Costs FY16 rate per NASF - $25.19 (Future rates to be calculated based on total cost/total NASF) NASF is based on Census snapshot taken in October (Fall 15 to be used for FY17 rate)

16. 16 Revenues / Sources Outside of RCM Model Summer Session Revenue: Revenues flow to college, net of assessment of 30.96% for cost recovery of central services. Expenditures will be assessed a 1% administrative service charge. Executive MBA Program: Revenues flow to college, net of assessment of 10% for administrative service charge. Expenditures will be assessed a 1% administrative service charge.

17. 17 Revenues / Sources Outside of RCM Model Online Programs: MBA: Revenues flow to college, net of central assessment and charges to third-party provider (net to college is approximately 55%). Undergraduate: Net Revenues flow to college beyond breakeven point, net of central assessment charge.

18. 18 Revenues / Sources Outside of RCM Model Philanthropy: Revenues flow to college, net of assessment of university development fee (UDF) of 6%. The fee is not assessed against scholarship gifts or gifts less than $5,000. Eller Executive Education: Net revenues flow to college, net of 6% administrative service charge assessment.

19. 19 Implications The Eller College is not rewarded for its high proportion of out-of-state students The cost of instruction issue is mis-specified Generally not enough return from RCM to support new programs – still need to ask for funding from the Provost via strategic investment pool Baseline bias issue – fundamental structural imbalance still remains

20. 20 Going Forward Incentives – Grow our graduate programs Critical Issue – Implementation of RCM within the Eller College

21. 21 Summary RCM is an improvement: Incentivizing Transparent We are better off (but not enough) It needs to evolve and be refined over time