U of S an early adopter of resource allocation model

When the university embarks on its third integrated plan in 2012, it will also be implementing a new budgeting system that will clarify revenues and expenses, define budget responsibilities and provide incentives for co-operation and efficiency.

The Resource Allocation Project stems from the second integrated plan's financial resources commitment being co-led by Laura Kennedy, associate vice-president of finance, and Lou Qualtiere, associate dean in the College of Medicine. While not totally unique, the model being designed for the U of S will put the institution at the front of the pack, according to the provost, vice-president academic and executive sponsor of the initiative.

"We haven't just dreamed this up out of the blue," said Brett Fairbairn, "but that said, we'll still be among the early adopters in Canada of a full-fledged responsibility centre management system, which is what this kind of budget approach is called. It's an innovative thing to do at a university."

The project is being undertaken in three phases and is now at the end of the information gathering portion. Fairbairn said there has been a great deal of consultation on campus and with institutions that use similar models, particularly the University of Toronto and Iowa State University. The most important lesson learned from those universities, he said, is that using an allocation model "made resources clearer and it made expenses clearer so that deans, for example, would know that if they were going to put on a new section of a course what actual impact that would have on their budget."

Fairbairn made a clear distinction between financial management and budgeting which "requires an overview of all resources so that if I do X, the change to the budget is Y. That's not as clear in our current budget model. We have lots of information about budgets now, almost excess information. What we need is the simplicity and clarity. That's what this new model does."

While many details have yet to be settled – that is phase two of the project – the basic framework of resource allocation is set. Under the new model, all university revenue, with a couple of exceptions, will be allocated to colleges and units. The costs of operating the university – the library, the provost's office, student services, facilities maintenance and the like – will then be borne by those same colleges and units. By clearly indicating revenue and expenses to those responsible for budget, the model is activity driven and "is intended to provide incentives for doing things better."

Using physical space as an example, Fairbairn said a college or unit may have more than it needs but there is currently no incentive to be economical. Under the new model, "if they found it appropriate to use less (space), they would be in a position to pocket the difference and use the funds for something else." The result is that those responsible for budgets will have the information they need to "exercise that responsibility more effectively. The model will provide a relatively simple and clear way to define what resources the head of a unit has at their disposal and help them understand how those resources can change over time."

Fairbairn pointed out that the recent move toward tuition sharing with colleges is part of a resource allocation approach – "people know they get some revenue from increased enrolment or increased tuition."

The experience of other universities is that a clear picture of budgets not only improves decision-making but also encourages collaboration, said Fairbairn. "Do people co-operate better when they have incomplete info, are uncertain of what's what and are suspicious of who gets what and why, or do they co-operate better when everything is out in the open and it's all transparent?"

The Board of Governors gave approval in principle to the high-level design elements of the model at its May 10 meeting. Once the necessary refinements are complete, the model moves toward implementation in 2012 and Fairbairn said that process will include operating a shadow model alongside the current budget process as a test run.

"The concept is really simple but we're just really careful about how we apply it."

More information about the Resource Allocation Project can be found at www.usask.ca/resourceallocation
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