ON THE ROAD TO RCM. EACUBO Annual Meeting October 20, 2014

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1 Rutgers Investor Update ppt\16 DEC 2013\7:05 PM\1 ON THE ROAD TO RCM EACUBO Annual Meeting October 20, 2014 J. Michael Gower Senior Vice President for Finance & Treasurer Rutgers, The State University of New Jersey Kimberley Cole Associate Dean for Administration and Finance Rutgers Business School Newark and New Brunswick

2 BACKGROUND AND RECENT HIGHLIGHTS History of Rutgers Rutgers is the only university in the nation that is a colonial college, a land-grant institution, and a leading public research university Rutgers is the nation s eighth oldest institution of higher learning One of only nine colonial colleges established before the American Revolution, and has a centuries-old tradition of rising to the challenges of each new generation Rutgers was chartered in 1766 as Queen s College, and renamed Rutgers College in 1825 In 1864 Rutgers became New Jersey s land grant university, as Congress established the nation s land-grant colleges in response to the Industrial Revolution In 1924, Rutgers College officially became Rutgers University In 1945 and 1956, state legislative acts formally designated Rutgers as The State University of New Jersey In 1989, Rutgers was invited to join the Association of American Universities, an organization comprising the top 62 research universities in North America Today, Rutgers has 28 schools and colleges, offering 100 undergraduate majors and more than 100 graduate and professional degree programs Rutgers has nearly 59,000 students and approximately 13,000 faculty and staff across three campuses in New Brunswick, Newark and Camden In 2012, the New Jersey Medical and Health Sciences Education Restructuring Act was passed by the New Jersey Senate and Assembly, and signed by the Governor The law integrated all units of UMDNJ, except University Hospital in Newark and the School of Osteopathic Medicine in Stratford on July 1, 2013

3 OPENING REMARKS AND STRATEGIC PLAN Latest Strategic Framework To be broadly recognized as among the best public universities: preeminent in research, excellent in teaching, and committed to community Themes for academic distinction Building on Faculty Excellence Transforming the student experience Collaborations and partnerships Enhancing our visibility Ethnicity, diversity and migration Creating a sustainable world.. Health and wellness in individuals and populations Educating citizens for a dynamic world Creative expression and the human experience Recruiting and retaining the strongest faculty Research facilities and infrastructure Breadth and depth of graduate education Professional education as a core strength Endowment support for academic effort Honors Colleges Learning environment Culture/social environment Student support services Faculty interactions Physical environment Transportation and access State (NJ) Business Alumni University Tech transfer Private-public Regional and national brand Public spaces Public image Prospective students and faculty Robust core of sciences and humanities Cohesive, vibrant, diverse, and inclusive culture Efficient and responsive processes, infrastructure, supporting staff, and leadership Financial resources sufficient to fund the aspiration

4 RUTGERS-UMDNJ INTEGRATION Rutgers Governance Rutgers has two distinct governing boards the Board of Governors and the Board of Trustees The 15 voting members of Rutgers Board of Governors are responsible for setting university policy and governing university operations The 59 voting members of Rutgers Board of Trustees serve primarily in an advisory capacity with certain fiduciary responsibilities over specific university assets. The UMDNJ Board of Trustees dissolved on June 30, 2013 Camden: Headed by a chancellor appointed by Rutgers President Has Rutgers Camden Board of Directors to provide general supervision of campus growth subject to Rutgers university-wide policies and governance of the University Board of Governors A separate Rowan-Rutgers Camden Board of Governors was created with responsibilities limited to new and expanded programs in the health sciences in Camden Newark and New Brunswick: Each headed by a chancellor appointed by Rutgers President Each has an advisory board that will work with the chancellor to implement the teaching, research, and service mission of Rutgers; strengthen the engagement of the campus with the region; and enhance academic excellence, access, and diversity Rutgers Biomedical and Health Sciences: headed by a chancellor appointed by Rutgers President Has a dedicated Board of Governors committee that works with the chancellor to implement the teaching, research, and service mission of RBHS and to perform the governance tasks required for certain healthcare units The Rutgers Board of Governors: This board was expanded from 11 to 15 members, with eight appointed by the New Jersey governor and seven selected by the Rutgers Board of Trustees

5 How Does RCM Work? Revenues are credited to the Responsibility Center that generates them Schools must then pay for their direct expenses as well as a share of the expenses to fund the Support Units REVENUE Tuition and Fees F&A Return Other Income RESPONSIBILITY CENTERS Schools Research Centers Auxiliaries DIRECT & INDIRECT COSTS Direct Expenses System-wide Support Units Local/ Regional Support Units 5

6 Current Budget Model All Funds Budgeting (AFB) was instituted at Rutgers in 2005 AFB is a modified version of RCM where flat overhead on tuition and F&A is used to support the local/ regional administration and systemwide administration costs not directly budgeted to the schools Legacy UMD units are on an RCM type model but different from AFB 6

7 New Budget Model The new RCM model will replace both the AFB flat overhead on revenues and UMD s current allocation methodology with more nuanced assessments to allocate costs to schools based on metrics that mirror usage 7

8 Why Switch to RCM? Academically Centered - Academics over Economics Provides schools with better data, more control, and greater flexibility over resource decisions Increased accountability and transparency Greater focus on long-range strategic planning RCM enables understanding of ROI and priority decisions given limited resources 8

9 Allocation of Costs System-wide Local/ Regional Costs that are incurred by system-wide support units providing services to all Costs that are incurred by support units providing services at the local/ regional or chancellor level 9

10 Allocation of Costs System-wide Cost Pools General Administration Academic and Student Support Libraries Research Support Information Technology Facilities 10

11 Metrics for Allocation of Costs Once the cost pools have been developed, they need to be allocated to the schools using a metric that best measures the activity The metrics used should be based on best practices, verifiable, easy to understand, and uniform Our model includes the following metrics: Unit Expenditures; Net Assignable Square Footage; Enrollment & Tuition data; F&A Return data; and Faculty & Staff FTE 11

12 RCM Project Committee Structure RCM Steering Committee Chancellors SVP for Finance SVP for Administration RCM Advisory Committee Faculty Deans Vice Presidents University Senate representatives RCM Technical Committee Key unit administrators from across the university 12

13 Time Frame DESIGN (FY13) -Read available RCM literature and researched RCM models at other universities -Determined indirect cost pools and developed methodologies to allocate these costs to the revenue generating responsibility centers PREPARATION (FY14) -Advisory committees formed to discuss preliminary RCM budget model -Develop preliminary budget model -RCM budget model is continually refined and fine tuned based on committee feedback TRAINING & TRIAL RUN (FY15) -Training will be provided through information sessions, small focus groups, hands on computer labs, and documentation -A trial run of RCM will be implemented on paper and run parallel to AFB -Assumptions will be tested and tweaks made FULL IMPLEMENTATION (FY16) -RCM will be fully integrated into the general ledger 13

14 ON THE ROAD TO RCM The Academic Unit Level 14

15 Background Rutgers Business School One School over Two Campuses Two State-of-the-Art Buildings 15

16 Logistics - Academics Undergraduates and Graduates at both campuses Most Faculty teach at both Newark and New Brunswick campuses Six Academic Departments on both campuses Some programs are restricted to one campus Research Centers 11 located in Newark, 2 located in New Brunswick 16

17 Logistics - Administration Dual Dean s Office Unbalanced time between two campuses Student Services on both campuses Unbalanced services between campuses Single administrative offices serve both campuses Office of Research Administration Located on New Brunswick Campus Ph.D. Office Located on Newark Campus Office of Part Time Lecturers Located on New Brunswick Campus 17

18 Pre-RCM Budgeting The Bucks Stop at the Top Dean s Level 55% of tuition received from Central (further split between teaching & enrolling) Currently at RBS, Academic Departments receive operating funds based on number of full time faculty. Faculty Research supplemented by Decanal Accounts based on productivity. Academic Departments receive % of summer/winter session for discretionary use. 18

19 How Far to Take RCM? Department Level Allocation of Revenues Percentage Enrolling Teaching Establish Dean s Assessment Basis Revenue $$ Expenditure $$ # of Students # of Faculty Departments Responsible for Payment of Campus Assessment 19

20 How Far to Take RCM? Department Level Allocation to Departments of RBS Support Services Establish Basis Fair distribution Resist spending if based on expenditures Diminished motivation if based on revenues Salaries of faculty teaching in other departments Shifting of courses Duplication of courses Distribution of Campus Assessments May be different assessment rates on each campus Who pays what, where? Dealing with Research Centers & Institutes 20

21 How Far to Take RCM? Department Level Issues and Concerns Lack of revenues to cover operating costs in some academic departments Pilfering students from other RBS students Resist spending if based on expenditures Disparity of resources between academic departments Duplicative Courses Business Law for Finance Majors from Finance & Eco. Dept. Business Law for Accounting Majors from Accounting Dept. Changing Course Requirements to increase revenues not to enhance academics 21

22 How Far to Take RCM? Dean s Level The Plan: The Bucks Will Still Stop at the Top RCM for strategic initiative decisions. RCM for hiring decisions. RCM for development of new programs & continuation of existing programs. Reserve the Right Allocate small percentage of revenues to Academic Departments Charge for space 22

23 RCM Looking Up to the Central Level Issues & Concerns Having less resources after paying all the campus assessments. Campus Assessments Newark Campus & New Brunswick -Different Rates Based on expenditures. Purchases done at campus with lowest assessment rate. Components of Cost Pools May not use all components of cost pools. (Animal Control) Employees on New Brunswick designated as Newark employees. 23

24 RCM Looking Up to the Central Level Issues & Concerns Quality of Central Support Services No input from academic units on quality of services received. Squeaking Wheel or Largest supporting school has most clout. Efficiency of Central Support Services Guaranteed funding from academic units. Not sufficiently funded by academic units to improve and/or update. Ability to Project Future Costs Stability of Assessment Rates Stability of Usage of Cost Pools with other Academic Units. 24

25 RCM Looking Up to the Central Level Issues & Concerns Schools hesitant to promote Interdisciplinary courses. Business Minor Other Schools Offering Similar Courses. Accounting for Psychology Majors in School of Arts & Sciences. Multiple Deals between Schools. Classes from other Schools in RBS Buildings. Custodial costs, etc. -- but no tuition revenue $$$. 25

26 ON THE ROAD TO RCM. THE BIGGEST RCM ISSUE FOR RBS. Having less resources after paying all the campus assessments.» THE ROAD CONTINUES 26