Budget process update and lessons learned after our first quarter with RCM


(This update is based on a presentation to the UAB Faculty Senate in January 2019.)


In October 2018, UAB began the first year of our three-year transition to a new responsibility center management (RCM) budget model. This update summarizes what we have learned so far in the first quarter of fiscal year (FY) 2019 — October-December 2018 — and the next steps in the process.

 

Participatory and paced

Recall that this transition is the culmination of nearly four years of work by committees and task forces with broad representation from across campus (see timeline here). All along, the goal in implementing a new budget model has been to distribute revenues and expenses in a more clear and fair manner across all units at UAB. The RCM model also gives leaders at all levels of the institution the data to drive decision-making and offers clear incentives for entrepreneurial, forward-looking decisions.

The pace of change has been deliberate. Based on feedback during FY2018, when the new budget model was “shadowed” alongside UAB’s traditional budget process, the Budget Advisory Committee determined that a three-year phased implementation plan was in the best interests of the institution. In this first year, 95 percent of applicable funds are being allocated using the historic budget methodology at FY18 levels; the remaining 5 percent, along with any incremental funds, are allocated using the RCM model. (Which funds are affected? Find the answer here in our FAQ.)

 

Lessons learned

What we have observed through the first quarter of FY2019:

  • no significant swings in any school’s budget
  • no substantive errors in the technical aspects of the model
  • no systemic problems have been reported so far; we are dealing with one-off and anecdotal reports of problems
  • school and central fiscal officers are meeting monthly to review progress and issues and receive training on UAB’s new budget reporting and tracking system, known as Axiom
    • all schools are using the new Axiom system, which replaces homegrown systems that often could not share information and ensures that everyone is on the same page
  • Financial Affairs is holding monthly calls with fiscal officers to discuss a myriad of topics that impact both the central units and schools; this includes discussion of RCM-related topics, including new Axiom reports that will be available for the FY20 budget season
  • as intended, the RCM model is increasing transparency and generating discussion: we are seeing better data, more dialogue and more focus on efficiency.

The RCM model was deliberately chosen to change “business as usual” behavior and put the focus on continuous improvement and we are encouraged to see this happening.

 

Strengthening interdisciplinary education and research

Throughout the new budget process, concerns have been voiced that the model will make interdisciplinary activities more difficult. Interdisciplinary activities are part of the DNA of UAB.

In December 2017, Senior Vice President and Provost Pam Benoit, Ph.D., convened an Interdisciplinary Education and Research Task Force. The group, chaired by Graduate School dean Lori McMahon, Ph.D., had a two-fold charge:

  • identify obstacles to both interdisciplinary education and research
  • make recommendations to overcome these obstacles in the short- and long-term

The task force (see list of members here) submitted its initial report in June 2018 and an addendum regarding university-wide institutional research centers (UWIRCS) and institutional cores in August 2018.

The task force observed that interdisciplinary activities are by their very nature more difficult because of the organizational structures of universities, no matter what budget model is used.

At a high level, their recommendations were:

 

For interdisciplinary education:

  • develop a virtual institute that houses interdisciplinary courses and joint programs, co-directed by Gregg Janowski, Ph.D., associate provost for assessment and accreditation, and Kent Keyser, Ph.D., associate vice president for research
  • establish a standardized formula university-wide for dividing tuition among units
  • recognize faculty participation in interdisciplinary courses in promotion and tenure discussions

 

For interdisciplinary research:

  • formalize indirect expense recovery (IER) sharing expectations across units
  • Grand Challenge will help facilitate interdisciplinary collaboration
  • recognize researchers’ participation in “team science” in promotion and tenure discussions
  • fund UWIRCs and institutional cores via a market share assessment of each school’s IER

 

Recommendations from the Interdisciplinary Task Force will be incorporated into FY20 budget planning.

 

Next steps: FY20 and beyond

In FY2020, the second year of the RCM phase-in, the portion of budgets based on historic levels will shift to 85 percent; the remaining 15 percent, and all incremental revenue, will flow through the RCM model.

Planning for FY20 begins in March and April, when the Budget Allocation Committee reviews and recommends central unit budgets. Other key milestones:

  • June - state allocation and tuition rates announced, and RCM assessments are released to schools
  • July - school budget meetings with SVP/Provost Dr. Pam Benoit and SVPFA Allen Bolton
  • August - budgets finalized
  • September - budgets reviewed and approved by the Board of Trustees

In FY2021, budgeting will be at 75 percent historic/25 percent RCM.

 

What happens after FY21?

Built into our three-year RCM glide path are a series of milestones to track progress. In the last quarter of FY2020 (summer and fall 2020), a formal evaluation will determine the post-FY21 plan: a full transition to the RCM model if we are ready, or additional implementation phases.

 

How to learn more

Stay informed with the budget model implementation process on this site. A good place to start is the list of frequently asked questions, which is updated regularly based on your feedback. If your question is not answered there, ask an expert or register a comment here or send an email to This email address is being protected from spambots. You need JavaScript enabled to view it..