What is our current budget model?
UT currently operates under an incremental budgeting model. This model results in incremental base budget changes from a unit’s prior year base budget with limited revenue sharing.
Why are we changing to a new budget model?
Incremental budgeting provides little incentive to grow revenue or become more efficient with spending as there is no link between historical allocations and level of activity. The new Budget Allocation Model will align resources with university strategy, promote transparency and provide necessary information for responsible fiscal stewardship. The model aims to provide an enhanced tracking of how revenues and costs are generated across our campus units.
Who is on the Steering Committee?
Do we have an external party helping us with this transition?
Huron Consulting Group was engaged to assist us with the budget model redesign and software implementation. They have experience and expertise in helping large universities undertake budget planning and sustainability and provided support the steering committee by analyzing data, modeling budgets, sharing best practices and examining case studies.
What is the implementation timeline?
Have other universities done this?
Many universities, both private and public, use incentive-based budget models, including:
Will new reporting tools be available?
The university selected Workday Adaptive Planning through an RFP process. This software will provide information for decision makers to determine how to achieve strategic goals within their units. Implementation activities are complete. Reports and a formal training plan are currently under development by the Office of Budget and Finance and expected to be available in FY22.
How are the Institute of Agriculture and the Oak Ridge Institute treated in this model?
No decisions have been made at this time as the governance structure has not been determined.
How can I learn more about the Budget Allocation Model?
The October 22nd and January 28th Open Forum presentations are available at the Key Meeting Highlights link on this website. Huron engaged with the steering committee, Deans, faculty senate and campus fiscal officers throughout the project. We encourage associates to provide feedback to these parties or submit questions through this site
What will happen with Differential Tuition that colleges keep today?
Differential tuition is directly posted to the colleges to support their budgets and higher discipline costs. This will continue in the new model.
How will the strategic planning process and model be integrated?
Although the strategic plan has not been updated, we do know many of our high-level initiatives such a student success and incentivized research will be included in the plan. The model will be built to support these initiatives and its flexible design will allow for changes in metrics in future periods.
What lessons can we learn from institutions who have implemented similar models? What changes should we expect in how we operate and what are the potential negative outcomes?
The January 28th Open Forum presentation is available at the Key Meeting Highlights link on this website. This included a panel discussion with representatives from several universities who shared their experiences implementing similar models.
How does the model impact support units and how will their fiscal stewardship be evaluated?
The support units will operate in the new budget allocation model just as they do today by preparing annual operating budgets and obtaining preliminary approval through the applicable Vice Chancellor or Provost. Additional budget oversight is built into the model through a new governance structure. The model will include a Support Unit Allocation Committee, which will provide a forum for discussion about support unit costs, service levels, efficiencies and key resource needs. This committee will collectively review support unit budget proposals and submit recommendations to the Executive Budget Committee. More information regarding the governance structure will be provided once finalized by the Steering Committee.
There are many important and beneficial aspects of our university that cannot simply be quantified? How might a new budgetary model ensure that immeasurable assets are not harmed?
The Budget Allocation Model serves as a tool for decision making and provides insights into the consumption and distribution of resources. This includes supporting mission critical aspects of the University that are not easily quantified. The university will be able to invest resources where they are needed most or could have the greatest impact on our mission.
What plans will the university use to roll out a new system to hold important and effective units harmless in the first 1-2 years of implementation?
Senior university leadership will assess results after the initial transition period. The model provides transparency into levels of university funding (subvention) which are the funds used to offset (i.e., “top off”) financial shortfalls in the model. Some schools will likely require longer-term university funding (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. Senior university leadership will be responsible for making university funding (subvention) decisions in coordination with unit leaders.
Who will receive cost pool allocations in the model?
Support unit costs will be allocated to the colleges and auxiliary units (revenue generating units) based on defined metrics. Cost pools will not be allocated down to the department level in the model. Sponsored projects will continue to receive our federally negotiated F&A rate and will not be impacted by the budget allocation model. More information on the specific cost pools can be found on the Model Development page.
When will we begin using the model?
For FY21, we will continue to operate consistently with our current processes using the incremental budget in IRIS while transitioning into the new Budget Allocation Model. Once developed and approved, the new budget policies will become effective and the governance committees will begin to engage. Fiscal officers and Deans will receive training on use of the Workday Adaptive Planning software tool and the campus Office of Budget & Finance will generate reports showing what our budget would look like under the new budget allocation model. This will give us an opportunity to assess the model, analyze our performance under the model and make necessary adjustments to the design elements.