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Virginia Commonwealth University’s current budget model relies primarily on incremental changes to past year allocations. Major academic units and central support units generally see small changes to their base budget each year.
Our redesigned budget model creates a clear connection between the revenues a unit generates and its budget. It ensures that central support units have the resources they need to deliver high-quality services, and enables them to benchmark their efforts against standards they help to establish. The central costs of the university are distributed across units using a set of metrics.
The redesigned model and budgeting process will enable VCU and its many units to engage in longer-range planning. The university will be better able to invest resources in strategic priorities, such as financial aid, faculty and staff development, and community-university collaborations.
At their heart, our redesigned budget model and process reflect our mission and core values. They are tools we use to accomplish our goals. You can expect the new model to:
Not much initially. The redesigned budget model and process is being implemented gradually. Currently, the universitywide task force and steering committee are making initial recommendations for the new model. In 2017-2018, VCU continues to operate under the current budget model, and a preliminary version of the redesigned model is showing comparative information. This information is being shared with unit leaders, faculty and staff. This will enable everyone to see how much revenue generated by each unit along with their share of the university’s costs. Changes will be made to this preliminary model if we discover significant issues we didn’t expect. We also will develop a process for regularly reviewing and revising the model after this initial period. The following fiscal year, 2018-2019, the redesigned budget model will be used. During this year, all units, both revenue generating and central support, will be kept in a “steady state.” Their budgets will be adjusted to maintain their funding at the previous year’s level.
Incentivizing entrepreneurial activity is a key feature of the Budget Redesign, which allocates revenue earned to the responsible unit. This ensures that activities that generate additional resources benefit the unit directly.
Similar to most institutions that redesign their budget model, a primary goal is to provide more accurate and transparent information about revenues and expenses. Recommendations by the university-wide Task Force includes some elements that appear in RCM-type models and other elements that do not. VCU's redesigned budget model is a hybrid that incorporates best practices customized to fit VCU’s priorities, needs and values. VCU's model does not require units to be self-sufficient.
The redesigned budget model shows the flow of funds throughout the university more clearly, as well as to and from units. It ensures that units receive more funding when they generate more revenue, such as by teaching more students. It allows units to have more control over their resources over time. And, the university will be able to invest resources strategically where they are needed most or could have the biggest impact on our mission.
The greatest change will be a reduction in uncertainty. Units will be able to predict how changes in their programs, enrollment and operations will impact their budgets in the years ahead.
The 14 schools and college are “revenue units” because they generate significant tuition and fees relative to their expenses. These include: Allied Health Professions, Arts, Business, Dentistry, Education, Engineering, Humanities & Sciences, Life Sciences, Medicine, Nursing, Pharmacy, Social Work, L. Douglas Wilder and the University College.
Central support units generally provide university-wide benefits and services that support the university’s mission, although they are not anticipated to produce sufficient revenue to substantially offset their expenses. This is unlike revenue units, including the schools and colleges, that generate significant revenue flows relative to their expenses.
Subvention funds are used to enable all units to help achieve the university's strategic priorities. Subvention is an annual adjustment of funds to bring that unit to a strategically-determined net financial position. Some schools will likely require longer-term subvention, because they are critical to the university’s mission but are not expected to fully cover their costs even with effective fiscal and strategic enrollment management. This is appropriate in a public research university, like VCU, with a diverse mixture of academic programs that require different levels of resources to deliver a high-quality academic experience for students. Senior university leadership is responsible for making subvention decisions in coordination with unit leaders. The University Priorities Fund is the source for subvention funding.
Educational and General (E&G) revenues are derived mainly from state appropriations and student tuition and fees. Educational and General Programs include all of the University's academic programs and support services.
Facilities and Administrative Cost Recovery (FACR) - sometimes called indirect cost - is funding received as part of a externally-supported grant or contract that is intended to offset the expenses incurred by the university to conduct funded projects.
The University Priorities Fund (UPF) is a central pool of E&G funding designated for subvention and strategic priorities identified by senior leadership. Schools and colleges contribute a portion of gross tuition revenue (not fees) to the UPF.
The University Budget Redesign initiative began in 2014 and will be carried out over several years. During 2017-2018, we are running the new model in parallel. This means the university is operating under the existing budget process while learning in real-time how revenues and costs would flow under the new model. Full implementation of the redesigned model is planned in 2019-2020.
The University Budget Redesign is occurring in several phases. During 2017-2018, we are in Parallel Reporting (4a) and Model Refinement (4b). Please visit the Timeline page for more information.
President Rao charged the steering committee with guiding the redesign. Following work by a university-wide Task Force, the UBR Steering Commitee has approved a preliminary version of the model, which was reviewed and approved by the president, cabinet and University Budget and Strategic Planning Committee. You can find more information about these groups on the Who We Are page.
Every dean and chief business officer has seen the results for their unit and all other schools and colleges. The president, cabinet and University Budget Redesign Steering Committee have also reviewed this information throughout the redesign process.
The University Budget and Strategic Planning Committee will be responsible for implementation of the model as a tool for budgeting. This includes the provost, vice president for health science, vice president for budget and finance, vice president for administration, and a representative of the president's office. The university budget development process, which involves the University Budget Advisory Committee, will continue and use information from the budget model as necessary.
The redesigned budget model stops at the school/college level. This is an identified best-practice. The budget model allocates revenues and costs to the school/college or administrative major business unit (MBU) level. Decisions within units regarding planning, budget development and resource management remains with the unit head (dean/director/vice president).
We continue to follow the Budget Redesign timeline presented last year to the Board of Visitors. In 2018-2019, units will develop “hold harmless” budgets - meaning there will be no significant changes barring a reduction in state funding. This allows two years for deans and senior leaders to see how the new model compares with current budgeting outcomes. Beginning in 2019-2020, the new model will be fully implemented. The provost and vice president for health sciences, as part of the University Budget and Strategic Planning Committee, will work with the deans to identify the level of strategic investment needed in each school/college based upon the university’s priorities. You can find a more detailed description of subvention above.
The university uses a July 1 to June 30 fiscal year (FY). For example, FY2018 runs from July 1, 2017 to June 30, 2018. The current budget development cycle begins in November, eight months before the start of a fiscal year. This provides time for robust planning. The same cycle will occur under the redesigned budget model and process. Initial planning and budget development will begin in the fall when enrollment data become available (Census II), and will continue through the winter and spring as units refine budget needs and state funding decisions are finalized.
Yes. In FY19, the redesigned budget model and process will be implemented. During this year, all unit budgets will be maintained in “steady state,” where adjustments will be made to bring revenue and central support unit budgets to FY18 levels. Full implementation of the redesigned model is planned for 2019-2020.
Unrestricted state general funds will continue to be received by VCU as a whole in support of its mission as a public research university. These funds will be distributed among all schools and colleges based on their relative share of the university's instructional activity, funded research and use of central support services. This method recognizes the importance of state support to all units and aspects of the university's operations and mission.
No. Some central units do generate revenue. Those sources and amounts vary, and include tuition, internal charges to other units and auxiliary revenue. Central support units will not be required to generate revenue beyond what occurs from their usual operations, but they will be encouraged to think in entrepreneurial ways. Revenue units are expected to generate revenue. These include the schools and colleges: Allied Health Professions, Arts, Business, Dentistry, Education, Engineering, Humanities & Sciences, Life Sciences, Medicine, Nursing, Pharmacy, Social Work, L. Douglas Wilder and the University College.
Unit leaders (deans/directors/vice presidents) remain responsible for decisions regarding faculty and staff hiring and compensation. The redesigned budget model and process gives them better information about the funding available for all purposes, including personnel actions. The Great Place: HR Redesign will enhance the ability of supervisors and unit leaders to effectively manage personnel in their areas. Learn more at the Great Place: HR Redesign website.
No. Salary adjustments will be handled under existing policies. The redesigned budget model and process will give deans and unit leaders better information about the funding available for all purposes, including compensation decisions.
Both the University Budget Redesign and the HR Redesign share several goals in common: better alignment between VCU’s strategic priorities and resources, improved and more transparent information to aid in decision making and an emphasis on forward-looking planning. However, the budget model only provides information about resource allocation and therefore, does not determine the outcome of any HR decision.
No. There is no implicit expectation that every school/college will reach a balanced financial position through tuition generation. The provost and vice president for health sciences will work with each dean to develop a business plan that supports the unit’s academic plan, research plan and other priorities. Decisions that support the unit’s plans and priorities, including those related to faculty workload, remain the responsibility of the dean and departmental leaders.
No, there will be no budget cuts related to the implementation of the model. The initial implementation in FY18 is for informational purposes only. Units continue to be funded under the current budget system and at current levels. Unit leadership and business officers are being provided data showing how the current budget compares with the results that would come from the new model. The new model will be fully implemented the following year, FY19, keeping units at a “hold harmless” or “steady state” level of funding. This will involve adjustments that bring school/college and central support unit budgets to FY18 levels provided there are no significant downward changes in state appropriations or university revenues. Should there be significant changes in revenues, university leadership will determine how to respond, as in the past. These decisions will be made independent of the implementation of the new budget model.
No. The university’s budget model, whether current or revised, does not change the total amount of funding available. It only helps to show and determine how revenues and costs are generated across units. The revised model aims to incentivize units to generate new revenue and control expenses. Under both conditions, a unit will see an increase in available funding.
The Budget Redesign will provide greater transparency regarding the costs and revenues attributed to each unit. Units will have more resources available when their activities increase revenues or reduce expenses.
No. The new model stops at the school/college level. This is an identified best-practice. The budget model will allocate revenues and costs to the school/college or administrative major business unit (MBU) level. Decisions regarding budget and resource management within units remains with the unit head (dean/director/vice president).
Units that do not generate significant tuition revenue are treated as central support units. For example, the Honors College is included as a central support unit.
Data reported by the units themselves through the university’s annual space survey will determine each unit’s assigned space.
The model will not change how classroom or other space is assigned. Space that is directly assigned to a specific unit for any purpose will be counted toward that unit’s space costs. Space that is not directly assigned to a specific unit will be included in the general space pool with the related costs distributed across all revenue units.
The best currently available university data allow for the calculation of a blended, average cost per square foot based on the costs of space across the entire university.
Units will be encouraged and allowed to maintain adequate cash reserves for planned strategic priorities and to effectively manage budget variances. The President’s Cabinet has approved a new process to ensure units see these funds at the beginning of the year.
Under the current budget model, most tuition and fee revenue is allocated directly to the university, then schools and colleges are provided with an expense budget that draws upon a portion of these funds. EPT agreements provide some units with a direct share of tuition revenue. Beginning in FY 2019, the redesigned budget model will replace these EPT agreements with a common, university-wide tuition allocation model that directs all tuition and fee revenue to the units.
There will be no change in the way that local funds are treated.
The initial budget for central support units will be based on their current levels of E&G funding. The costs associated with central university operations will be distributed across the schools and colleges (revenue units). A set of metrics related to the functions of each central unit will be used to allocate the cost. These metrics were proposed by the central support units and approved by the Steering Committee. For example, VCU Office of Human Resources costs will be distributed based on the faculty and staff head count of each revenue unit, and University Purchasing costs will be based on all expenditures (excluding grants and FACR) of each revenue unit.
The costs of all central support units will be pooled. Adjustments to central support unit budgets will be handled in two ways. First, annual adjustments to the pool at a predetermined rate will aim to cover required cost increases (i.e., changes in benefits, utilities, insurance). Units will be able to submit requests for additional funding from the central pool through a process similar to the current UBAC process. Additional adjustments may be made based upon the recommendation of the University Budget and Strategic Planning Committee.
Central support units will not be charged directly for baseline central costs, apart from space, which will be allocated by assigned square footage. Units may purchase additional services from other units. These internal charges will be treated as revenue for the central support unit providing the additional services. Auxiliary units (i.e., housing, dining, parking) operate differently, as they pay directly for the central services they use.
VCU has a complex tuition structure, and approximately two-thirds of university operating revenue comes from tuition and fees. The new budget model does not change tuition rates or fees, or the process for setting those rates. To keep the model simple and functional, tuition rates approved by the Board of Visitors for undergraduate/graduate resident students will be used as "base rates." The base rate will be split among the teaching (80%) and major (20%) schools. Tuition levels above or below the base rates (e.g., tuition "differentials" or unique tuition rates) will be attributed fully to the student’s major school. This allocation rule acknowledges that differential rates support specific instructional and student support costs associated with a particular academic program. Schools receive 100 percent of tuition revenue when teaching their own major student. Course fees will be allocated to the teaching school. Program fees are allocated to the student’s major school.
Tuition and fee revenue follow the student and where they learn under the Budget Redesign. Funding flows to the schools and colleges not to a particular campus. Changes in enrollment or tuition revenue attributed to a unit will result in changes to the unit's funding after the initial “hold harmless” period (FY19). No significant changes to unit budgets are anticipated in the near-term. Adjustments to budgets will be made strategically over time by senior leadership in consultation with the dean.
Tuition and fee proposals will be handled under the current policy. The Budget Redesign will not change tuition and fee rates or how those charges are determined.
Strategic enrollment management is a crucial component of academic and financial planning. The university will continue to establish university-wide priorities and targets for enrollment and academic programming. The budget model determines where new revenue from growth and expansion will be received (funding follows the student and where they learn). As now, new programs will require university and SCHEV approval, including review by existing faculty oversight bodies such as the University Undergraduate Curriculum Committee. Our focus will be on strategic growth where appropriate and necessary, and on maintaining our identity as public university.
Faculty and administrative curricular oversight are key to the success of the new model. Our existing unit- and university-level review committees will play a critical role in ensuring that proposed courses add to rather than duplicate current courses. Units will be expected to show how new offerings will enhance their academic mission. We will prioritize expanding opportunities for current and potential students to develop the skills and knowledge they need to succeed academically and following graduation.
The Budget Redesign stops at the school/college level, and it does not determine program start-up, change or closure. Deans remain responsible for resource and budget decisions within their units. The provost and vice president for health sciences will continue to conduct academic program reviews and to set priorities for strategic enrollment management in consultation with deans. Results from the budget model may be used to inform these unit- and university- leadership decisions.
No. Decisions regarding course offerings and program start-up, change and closure remain with unit and university leadership, as appropriate. The budget process and model are tools that support strategic decision-making and planning.
Differences in credit hours and tuition rates among courses are reflected in student billing data. The new model uses these actual data to determine what amount of tuition is distributed among the schools and colleges. The method of instruction is not a factor in the model, but may be accounted for by the specific fees and/or tuition charged. These are allocated as noted here.
The model attributes the student to the unit listed as home to their primary major in Banner. The split of tuition revenue is handled under the general rule. This issue is undergoing additional study (as of November 2017).
Base tuition is shared between the teaching school and the student’s home unit. This provides an incentive for schools to encourage enrollment in courses taught in their units. Deans may also reach revenue-sharing agreements that are promote interdisciplinary, cross-listed and co-taught courses.
The model is explicitly designed to provide flexibility in designing and offering these types of courses. Deans have the ability to create tuition-sharing agreements that support such offerings.
The new budget model encourages this practice in several ways. First, it ensures that the student’s major school/college receives a share of their tuition revenue no matter where the student is learning. And when courses are taken within different departments of the same school/college, all tuition revenue remains with the school/college. The model also allows deans to develop interdisciplinary activity among the participating units. Finally, the University Priorities Fund can be used to assist units in academic initiatives that may not result in increased tuition revenue but are important to student success. Deans will work with the provost and vice president for health sciences to develop these initiatives.
All fees will continue to be distributed to their assigned unit (see here). The online course fee will be used to support Online@VCU. The university is ramping up increased central supports for online course and program development and delivery. The new model results in all tuition revenue going directly to schools. This will increase the amount of resources available overall to schools and colleges than under existing, online tuition-sharing agreements.
Non-degree seeking students are currently enrolled in the College of Humanities and Sciences. This means that 20% of their base tuition revenue will remain with the College; 80% will flow to where the student takes courses. This issue is under further study as of November 2017.
This issue is currently under study by the provost's office. These courses - with any exceptions identified by the provost - will be assigned to an academic unit (school/college). The tuition and fees will then be handled under the general rules (see here).
The university has always budgeted for central research supports using a mixture of E&G and indirect cost (FACR) revenues. Examples include the Office of Sponsored Projects and debt servicing for capital investments such as BioTech I. The Budget Redesign does not change these central supports or their level of funding. Central research support costs will now be shared among the units that generate FACR based on each unit’s proportional share of the university's grant expenditures. The new model also provides schools and colleges with a share of state funds on the same basis. Units receive a greater proportion of FACR revenue overall under the new model than currently. Unit leaders are responsible for determining how to use that revenue and other forms of funding to support research.
The Budget Redesign does not change how grant funding is handled. Direct costs remain the responsibility of the investigator(s). There is no change in the indirect cost rate charged for sponsored projects as a result of the model. 66% of the indirect cost recovery funds (FACR) will be returned to the home unit for the grant or contract, with 30 percent retained by the university as required under state law plus 4% retained centrally in a Research Priorities Fund, which is managed by the Vice President for Research and Innovation. Unit leaders remain responsible for determining how FACR is used in their units, including any decision to distribute funds to the investigator(s).
FACR-funded central research expenses are distributed similarly to the E&G central cost allocation. FACR-funded expenses that provide a pan-university benefit, for example the Office of Sponsored Programs and the PERQ Awards program, will be shared across units with FACR revenue based on their proportional share of total university research expenses.
FACR-funded expenses that benefit a specific unit, including debt service, will be fully assigned to that unit. Debt service costs will be allocated proportionally by square footage among the units assigned to the space.