RCM Manual Web
RCM Operating Manual
1. General Information
1.1 Introduction
Welcome to the updated resource manual on Responsibility Center Management at . This manual is intended to assist deans, associate deans, chairs, directors, business officers and any other users involved in the RCM process by providing clear documentation and definition on the RCM process and related topics. This manual will be periodically updated and unit heads, business officers and FaSBAC members will be notified when revisions have been made. We hope that you find this manual informative and useful. Please contact us with any questions or comments.
Research, Planning, and Institutional Effectiveness
Wayne G. Schneider, Director
Office Phone: 330-672-8225
Fax : 2-3828
e-mail: wgschnei@kent.edu
RCM Planning Team
In order to provide comprehensive service to the University about RCM issues, a RCM planning team covering multiple divisions has been appointed. These members include:
Timothy R. Martin
Associate Vice President, Academic Budget & Resource Mgmt
Phone: 330-672-5800
e-mail: tmart1@kent.edu
Loren (Jeff) J. Milam
Executive Director, Academic Budget & Resource Mgmt
Phone: 330-672-2220
e-mail: jmilam@kent.edu
Wayne G. Schneider
Director, Research Planning and Institutional Effectiveness
Phone: 330-672-8225
e-mail: wgschnei@kent.edu
Denise Zelko
Associate Vice President, University Budget & Financial Analysis
Phone: 330-672-8621
e-mail: dzelko@kent.edu
1.2 Overview of RCM
RCM is a decentralized approach to budget allocation that assigns greater control over resource decisions to deans. Under this budget approach, revenue-generating areas are referred to as "responsibility centers" with all or most of the institution's revenues and support costs assigned to them. RCM's underlying premise is that the decentralized nature of the model entrusts academic leaders with more control of financial resources, leading to more informed decision-making and better results or outcomes for the University as a whole.
In centralized budgeting models, academic program decision-making is largely decoupled from financial responsibility. By allowing responsibility centers to control the revenues they generate, decision makers are better able to understand both the academic and financial impacts of their decisions. Academic planning and resource decisions are more transparent within the unit and throughout the institution. Armed with improved information and the potential to retain increased financial resources, decision makers at the college/campus level may leverage even limited resources more effectively, improving university accomplishments and outcomes.
1.3 History of RCM at
At the request of President Lester A. Lefton, David K. Creamer, Senior Vice President for Administration at the time, convened a broad-based university Budget Review Committee in November 2006 to study possible new approaches to the university's budget-planning process. This request was, in part, a response to the changing expectations of public universities by taxpayers and government; the reality that traditional revenue sources (i.e., state appropriations) no longer provide sufficient funds for fulfilling the multi-faceted missions of today's public universities; and the resulting need for public universities to proactively identify and generate new revenue sources.
No new budget approach alone is the answer to the complex financial issues confronting ; however, the Budget Review Committee concluded that RCM has the potential for enabling better resource allocation choices and, in turn, improved accomplishment of university priorities. In its review process, the committee found, for example:
- RCM is a highly flexible budget approach that can be adapted to unique circumstances or characteristics of a university;
- RCM is compatible with shared governance values;
- RCM aligns with unit (college and campus) planning; and
- RCM's effectiveness and efficiency has been demonstrated in university environments similar to (i.e., large universities where there is a growing dependence on revenue sources other than state support).
While the Budget Review Committee identified many potential benefits over the current budget model See Comparison Chart, significant changes would also be necessary to implement RCM successfully across the university. For example:
- New knowledge and skills would be required of deans, other academic administrators, faculty, and staff in the "responsibility centers" created through this approach;
- Improved planning would be required by each college and campus;
- A greater understanding of how to use financial, enrollment, and other information for decision-making and planning;
- Changes in the university's approach to support services and their funding; and,
- Greater accountability to accompany the increased responsibility and decision-making authority throughout the university.
More information about the Budget Review Committee and its recommendation can be found at: http://www.kent.edu/about/administration/business/rcm/
1.4 Kent State University Mission and RCM Vision, Goals and Principles (developed by the Budget Review Committee 2006-07)
1.4.1 Statement
The mission of is to discover, create, apply and share knowledge, as well as to foster ethical and humanitarian values in the service of and the global community. As an eight-campus educational system, offers a broad array of academic programs to engage students in diverse learning environments that educate them to think critically and to expand their intellectual horizons while attaining the knowledge and skills necessary for responsible citizenship and productive careers.
1.4.2 Vision of RCM
In 1980, more than 60 percent of 's unrestricted general operating budget was funded through state funds. Today, that figure is less than 28 percent. As the nation's public universities receive less state support, they are finding it necessary not only to develop new sources of funding, but to adopt new budget approaches that encourage greater academic planning by colleges; better align financial resources with priorities; and, that are consistent with the creative and entrepreneurial activities occurring on university campuses.
1.4.3 Goals for RCM Budget Model
1.4.4 RCM Principles
1.5 Units
Fundamental to implementing RCM is identifying the areas of the University that would become "responsibility centers". By definition, responsibility centers must generate revenues. Areas not generating revenues are considered part of the University support costs. If an area is identified as a responsibility center, that unit is responsible for all financial decisions as well as managing revenues, expenditures and fund balances. The following areas are identified as responsibility center units:
Kent Campus Colleges:
-
Applied Engineering, Sustainability & Technology
- Architecture & Environmental Design
- Arts & Sciences
- Arts
- Business Administration
- Communication & Information
-
Digital Sciences (School w/Provost Office)
- Education, Health & Human Services
- Nursing
-
Public Health
Regional Campuses:
- Geauga
- Stark
- Tuscarawas
, Undergraduate Studies and Graduate Studies
While the , Undergraduate Studies, and Graduate Studies generate revenue, they are considered academic support units because:
a. These units do not have sufficient capacity to generate revenue necessary to be treated as a full responsibility center.
b. These units provide university wide services and benefits and thus should be funded as part of academic affairs support costs or from central allocations.
Revenues generated from these units are allocated back to the Kent Campus Colleges. In most instances the revenue generated by these units is allocated back to the responsibility unit of the instructor generating the revenue. The remaining revenues (i.e., revenue earned by non-instructional staff members) are allocated back to all the responsibility centers based upon their proportion of total revenues. See the Revenues Allocation section of this manual for further discussion.
Military Science and Aerospace Technology
Military Science and Aerospace Technology are primarily funded through the U.S. Government; however, these units do generate some revenues for the University. The revenues generated by these units are allocated to the Kent Campus Colleges.
Auxiliaries
auxiliary operations already operate as responsibility centers. Their revenues and expenses are typically excluded from the Kent State RCM model, with the exception of the service charge paid for Kent State Services. This service charge is used to offset overhead expenses.
- Airport
- Dining Services
- Flashcard Operations
- Golf Course
- Ice Arena
- Intercollegiate Athletics
- Parking Services
- Recreational Services
- Residence Services
- Transportation Services
- University Health Services
2. RCM Oversight
2.1 Central Administration Roles and Responsibilities
Ultimately, the president and the board of trustees determine the university strategy and budget priorities. The office of each vice president provides oversight to the units reporting to it and ensures the unit budgets reflect priorities as described in the unit's and the University's strategic plans. Each vice president is a member of the President's Cabinet whose responsibilities include overall stewardship for the university's budget.
The Provost and Senior Vice President for Academic Affairs is responsible for leading the academic planning process and ensuring academic quality in all colleges.
The Vice President for Finance and Administration is responsible for ensuring all units are using resources efficiently and effectively and within designated authority. This is accomplished through various means including management reporting, the budget process, and mitigation planning.
2.2 (RC) Unit Roles and Responsibilities
Each RC unit is responsible for developing strategic and financial plans that fit within the overall academic and university plans. All operating decisions must comply with university policies and practices. The offices of the Provost and Senior Vice President and the Senior Vice President for Finance and Administration will provide budget modeling for the colleges.
Financial modeling for the college departments and for new and/or existing programs is the responsibility of the RC, with assistance from the RCM planning team. RC units are responsible for the overall fiscal performance of their college to include all funds assigned to the unit. RC's will have flexibility to implement incentives for improving fiscal performance provided that plans have been shared and approved by the Provost and Senior Vice President for Academic Affairs to assure consistency with the overall academic strategic plan.
RC's are held accountable for the effective and efficient management of their resources and are required to report periodically on the status of their unit. Units operating with financial difficulty are required to develop and discuss mitigation plans with the responsible vice president.
2.3 Business Officers
The business officers in the colleges exist to support the RC units in fulfilling their roles and responsibilities. These individuals are required to:
- Develop proficiency with the RCM tools, RPIE data and COGNOS reports
- Assist with budget modeling
- Track monthly expenses
- Project actual performance for the unit at key points in the year and compare the projections to the budget
- Identify areas where actual financial results are projected to vary from the budgeted financial results for the responsibility center and investigate the source of the variances
- Lead the process of identifying alternative courses of action to minimize unfavorable variances
Each responsibility center has an assigned business officer, although some business officers are shared between units.
2.4 University-wide consultation
The Faculty Senate Budget Advisory Committee (FaSBAC) was established to provide university-wide consultation and advice on budgetary issues at the university and division levels. The responsibilities of this committee are:
- Periodically review the impact of the RCM model's
- Effect on academic quality
- Effect on unit performance
- Allocation procedures
- Recommend funding priorities consistent with the University Strategic Plan
- Review requests submitted for subvention or investment funds
- Annually review the University's performance according to established measures
- Review enrollment projections used for budget modeling
- Review the final draft of the University operating budget
- Review the performance of non-academic service and support units
- Appoint sub-committees as necessary to improve aspects of the RCM model and its functioning, e.g., training
The committee is co-chaired by the Provost and Senior Vice President for Academic Affairs and the Senior Vice President for Finance and Administration. The committee is comprised of representatives from faculty, deans, chairs and directors and students. Faculty representatives shall be nominated by College Advisory Committees, the Regional Campus Faculty Advisory Council and the Faculty Senate. View the charter for this committee.
3. RCM Revenue Allocation Methodologies
3.1 Revenues generated from Instructional feesand State Share of Instruction (course completion component)
3.1.1 Undergraduate Revenues. Revenues are shared between the unit delivering the instruction (80%) and the unit in which the student is enrolled as a major (20%). If a student has a dual major, then the 20% portion will be divided equally with 10% of the revenues going to each major. Revenues are distributed based on current year enrollment data. The State Share of Instruction (SSI) is based on a two year average of eligible enrollments adjusted for course completions and weighted for at-risk factors. The two year average is based on the two prior years of enrollment data as reported to the State and course completion information for the prior three years.
3.1.2 Master's Graduate Revenues. Revenues generated from graduate instruction are distributed entirely to the college of the course taken by the student. Revenues are distributed based on current year enrollment data. The SSI is based on a two year average of eligible enrollments adjusted for course completions. The two year average is based on the two prior years of enrollment data as reported to the State and course completion information for the prior three years.
3.1.3 Doctoral instructional fees. Revenues generated from doctoral instructional fees are distributed entirely to the college of the students' enrollment. Revenues are distributed based on current year enrollment data. See section 3.3 below for information on the state's support of doctoral programs.
The degree completion component of SSI provided for baccalaureate and master degrees is allocated to departments using the State's formula. The SSI received for this component is first separated by level of degree. By level, each department's share of the total degree costs is calculated. This is completed using statewide average degree cost for the degree subject and the three year average of degrees awarded in that subject. The revenue is then allocated to each department based on its proportionate share of degree costs.
3.3 Doctoral Allocation from State Share of Instruction
The state allocation for doctoral programs is capped at a certain percentage of the State's overall amount of SSI. The revenue allocation follows the state formula which is comprised of four components. The first is historical enrollments, which in the RCM model is allocated based upon a 5-year weighted average of SSI eligible doctoral FTE enrollment. Another component is allocated based on degree completion. The third component is based on research activity and the last is a quality component. Currently, this component is allocated in the same proportion as doctoral degree completed component.
3.4 Revenues from non-centers
Revenues from areas not considered responsibility centers (e.g., and Undergraduate Studies) will be allocated to the instructor-of-record's unit. If the instructor-of-record is not from a responsibility center (e.g., an administrator from a support unit), the revenues will be allocated to all the responsibility centers based upon the proportion of an RC's revenues to total revenues.
3.5 Non-credit
Courses which do not have credit hours assigned, e.g., workshops, are not considered in the RCM model.
3.6 Adjustments to RCM revenues
Amounts from instructional fees will be used to fund the cost of debt issued in 2012 for major capital improvement. One percent of the instructional fee increase in academic year 2012-2013 will be permanently allocated to pay the debt (almost $2.0 million). The new per credit hour tuition for students enrolled above the full-time plateau will also be used to pay the debt service. These revenues will not be provided to RC's. The revenues are also not included in the base that is assessed 42.3% to fund institutional service and support (section 4.9).
4. Expense Allocation
4.1 Personnel—salaries and benefits
All personnel expenses are charged to the unit where the faculty and staff members are employed. This includes salaries, wages and fringe benefits. Units are responsible for covering benefits costs as well as salary costs for new positions. Units will fund salary and benefit increases for all positions charged to the unit. (The process for funding salaries and benefits is slightly different for overhead units. Overhead units must fund new positions and benefits through internal reallocation or through an allocation from the central operating budget).
4.2 Travel, equipment and supplies
These normal operating expenses are funded by the unit.
4.3 Facilities
For the RCM implementation, the Budget Review committee recommended that all space be allocated as overhead instead of allocating space by any square footage formula. Because of the extensive deferred maintenance needs, monies flowing to the investment/subvention pool can be used to provide improvements to the physical plant not covered under the capital budget. In addition, in FY12, a Campus Depreciation and Renovation reserve was established to assist with deferred maintenance needs and /or fund debt service on bonds issued for capital improvements. The contribution to the fund is deducted from RCM revenue. the annual amount of funding is $1.0 million in FY12, $2.0 million in FY13 and $3.0 million in FY14. At the end of this three year period, it was recommended that the adequacy of the fund's balance and the annual contribution rate be reviewed.
RC units will have to fund minor space renovations, such as paint, carpet, etc. Funding for larger building issues and requested renovations are determined for each project. RC units may be asked to assist in funding a portion of the project cost.
4.4 Tuition benefits for employees (excluding graduate assistants/teaching fellows)
A central pool funds tuition benefit expenses. All RC units fund a portion of the pool. Funds are transferred on a monthly basis to cover expenses incurred.
4.5 Tuition and health care benefits for graduate assistants/teaching fellows.
These are operating expenses funded by the unit.
4.6 Telecommunications pool
A central pool is used to fund expenses assessed by Telecommunications for line and network IP charges. All RC units fund a portion of this pool. As expenses are incurred, funds are transferred to cover the expenses.
4.7 contingency fund
A central pool is used to fund expenses for accommodations submitted and approved by the VP of Human Resources.
4.8 RC Unit Service and Support Expenses
Each RC center unit is likely to have college-specific service and support expenses. These expenses could include professional advisers, college-specific centers and institutes, unit administrators, etc. These expenses are supported by RC unit revenues.
4.9 Institutional Service and Support Expenses
Institutional support costs are comprised of non-revenue generating expenses and fall into two distinct areas: academic support and administrative support. Examples of these expenses are:
- Academic Support: Library, Research Planning and Institutional Effectiveness, Registrar's Office
- Administrative Support: Financial Aid, University Facilities Management, University Communications and Marketing, Alumni, General Counsel
Centers are not permitted to "opt-out" of services to reduce the service and support expenses charged to their unit. To provide support for institutional expenses, the RC units contribute 42.3% of net RCM revenues. Net RCM revenues are defined as instructional fees plus SSI less the sum of the following: scholarships and fellowships, collection costs, bad debt expense, bank services charges, contribution to campus depreciation and renovation fund (see section 4.3), 1% of the instructional fee increase in FY13, adjustments for pricing due to specific academic consortium or partnership agreements. Revenues from academic program fees, course fees and any other departmental revenues are not included in this net RCM revenue calculation. Tuition assessed to students enrolled in hours above the full-time credit hour plateau is not included in RCM revenues.
Responsibility centers are expected to operate within their budgets, to demonstrate efficiency, and to generate sufficient revenues to cover their costs. To address critical needs, a fund is available to address investment and subvention needs. Subvention funding refers to support for programs important to the university, and investment refers to seeding new programs.
The fund is created from two sources and then divided into three components. First, the amount generated from a 1.5% increase in the Regional Campus service charge was permanently allocated. The second source is a 0.5% charge against net RCM revenue. From this pool, monies will be allocated to cover deferred maintenance facility issues, central administrative initiatives, president initiatives and academic affairs initiatives. This methodology, which is summarized in the following table, was approved by FaSBAC at its January 7, 2009 meeting.
|
Source |
Allocation |
Contribution |
Notes |
|
FY10 increase in Service Charge assessed to the Regional Campuses |
: 33% Academic Affairs: 67% |
: $477,315 Academic Affairs: $954,631 |
Permanent allocation |
|
0.5% of net RCM revenue |
Facilities: 25% President: 25% Academic Affairs: 50% |
Facilities: $368,596 President: $368,5961 Academic Affairs: $737,190 |
FY13 Original Budget |
The need for subvention funding will be consistent with the academic plan and priorities and will be reviewed. FaSBAC reviews subvention and investment allocations in both academic and non-academic units. Units requesting subvention funding should first consider using any departmental reserves to cover deficits before requesting central support.
5. Reserves
5.1 Current Fund Reserves
Financial reserves are generated from unspent funds of the institution from current operating sources. Financial reserves allow the University to protect itself against funding shortfalls, unanticipated expenses and plan for investments in strategic initiatives. Financial reserves also allow the University to achieve greater debt capacity and maintain its bond rating. Fund reserves have been decentralized in the responsibility centers. Reserves accumulated in these funds can be used for one-time investments, protect against future downturns in revenues, or assist in the funding of general activities within the unit.
5.2 Gift/Grant Fund Reserves
Gift and grant funds are externally restricted and are held by the Kent State University Foundation. Gift funds must be expended in accordance with donor restrictions and grant funds must be expended in accordance with the stipulations in the grant/contract. Any reserve funds that exist can only be used for those purposes and cannot be used for general operations of the University. Gift and grant fund reserves should be part of an RC unit's financial plan and should be leveraged to the fullest extent possible to help reduce financial pressures on general funds. Gift/grant expenses covering faculty replacement costs, facilities, technology and other needed academic and administrative support services should be considered when seeking funding.
6. Indirect Cost Recovery
Indirect Cost Recovery (IDC) revenue comes to the University through agreement with external sponsors to help defray overhead costs resulting from research activities. IDC is allocated directly to the unit that generates the overhead costs in an effort to link the IDC to research activity, provide better incentives for conducting research, and make units responsible for their portion of overhead costs.
Indirect Cost Recovery Revenue is allocated to the responsibility center unit as follows:
RASP administration 43%
RASP Investment 20%
College 20%
Department 12%
Faculty Incentive 5%
7. Oversight for Operations in Financial Difficulties
Overseeing the financial operations of the University is primarily the responsibility of the President, Provost and Senior Vice President for Academic Affairs and Senior Vice President for Finance and Administration. Resolving operating deficits is a university priority and needs to be addressed in a timely manner.
The responsibility center dean is responsible for developing and updating a comprehensive mitigation plan for units in financial difficulty. The mitigation plan should describe what actions the unit will take to enhance revenues and/or decrease expenses, when those actions will occur and who is responsible for those actions.
Meetings will be periodically scheduled to review financial projections and monitor progress on the unit's mitigation plan.
8. RCM Data and Tools
8.1 Detailed RCM Data Base
All colleges are provided information on revenue allocations for each fiscal year. This information provides departmental and program/major data and is provided to each dean's office.
8.2 RCM planning tools
A series of planning data tools have been developed to help responsibility centers plan and be successful in RCM. A description of these tools is located in the RCM website.
http://www.kent.edu/about/administration/business/rcm/resources.cfm
9. Glossary
Direct Costs Costs of operation, such as salaries, fringe benefits, supplies, equipment, travel, telecommunication costs, printing and postage incurred by a responsibility center. These costs are within control of the responsibility center.
Direct Revenue Revenue from instructional fees, state appropriations, course and program fees, sales, investment returns, transfers from the Kent State University Foundation and other revenues that are credited directly to a responsibility center.
FTE (Full Time Equivalent) The FTE is how the state standardizes student credit hours for the purpose of funding. A full-time student, or a combination of part-time students, enrolled for a total of 30 credit hours over the course of one fiscal year equals 1 FTE. The fiscal year is defined as July 1 through June 30. The summer semester is the first semester of the fiscal year.
For example: Student "A" enrolled for 15 credit hours in the Fall semester and 15 credit hours in the Spring semester, for a total of 30 credit hours for the academic year would be considered generating one FTE.
Students "B" and "C" enroll for 5 credit hours each in the Summer and Fall semesters. Student "D" enrolls for 5 credit hours in the Fall semester and 5 credit hours in the Spring semester. The total hours enrolled for students "B", "C", and "D" total of 30 credit hours as well. Students "B", "C", and "D" combined equal one FTE.
Indirect Costs or Support Costs Costs such as facilities costs, administrative support, academic support, and all other support costs. RCM revenues are assessed at a rate to fund these costs.
Investment/Subvention Pool Responsibility centers are expected to operate within their budgets, to demonstrate efficiency, and to generate sufficient revenues to cover their costs. To address critical needs and in recognition of the diversity of academic programs, a dual-purpose pool was established to achieve the following:
- Provide targeted investments for the development of academic initiatives and other university priorities. Such funding would likely be provided for a specific period of time, after which the initiative would become self-supporting or the need for investment funding would cease.
- Address the impacts of differing unit costs within academic programs for which income is less than cost. Such circumstances might be intrinsically related to the nature of the academic offering or a planned feature of resource management. Like new investment initiatives, such programs would be aligned with university priorities. While in rare instances the funding for these activities may be permanent, generally there would be an expectation that such funding is temporary.
Restricted Funds Revenue that can only be used for a specified purpose. Research grants, scholarship funds, and some endowment donations can only be used for the purpose specified in their decree.
Responsibility Centers Responsibility centers are those areas that generate revenue. For 's RCM model, the responsibility centers will be the , the Regional Campuses and the and Regional Campuses Auxiliaries.
State appropriation (State Share of Instruction or SSI) Revenue received by from the state government to support a portion of the cost to educate students. The amount of money received is determined by several different factors including successful completion of courses (grade of "D" or better) by eligible students, degree completion and research activity.
Tuition Tuition is comprised of an instructional fee and a general fee. General fees are allocated to certain areas based upon a particular service provided to students, e.g., , Health Services, and Transportation Services. Tuition is assessed to students based on enrolled credit hours. In RCM instructional fees are allocated to the Responsibility Centers. However, the following expenses reduce the overall instructional revenue to be allocated to the responsibility centers: scholarships, collection costs, bad debt expense, and bank service charges.
University Strategic Plan The plan which guides , consisting of the Mission Statement, Core Values, and Strategic Goals. For details of the Strategic Plan, see
http://www.kent.edu/excellenceagenda/index.cfm
Unrestricted Funds Revenue from student fees, auxiliary unit sales income, investment return, state appropriations, and unrestricted endowment donations that can be used by a responsibility center for any allowable purpose, including salaries, general operating expenses, capital budgeting, and reinvestment.