March 1, 2006
By Michael Newman
A new budget structure for Ohio University is being developed by members of the Vision OHIO Resource Implementation Team. Last year, a subcommittee of the Task Force on the Future recommended that the university consider adopting a new approach to organizing the budget, one which will accurately attribute both revenues and costs to responsible units. The Resource Implementation Team is acting on that recommendation.
Under the existing budget, resources are allocated using a historical, or incremental, approach. When using an incremental approach, a unit's budget is based on its budget from the previous year and little consideration is given to changes in the activities of that unit. The new budget model will be activity-based. It will be a system that takes into account revenues and costs. According to a slideshow presented at the recent discussion groups, the new budget will match resources with priorities and measure the costs and benefits of activities. At the same time, the budget will push decision-making, responsibility and accountability down to levels closer to where revenue is generated and spent.
"The budget is not going to determine how the university runs. It is an accounting tool. This budget approach should be a tool to help implement the provisions of Vision OHIO," said Phyllis Bernt, professor of Communication Systems Management and Faculty Senate chair, who is the co-chair for the Resource Implementation Team.
The university will implement Vision OHIO, its new strategic plan, with initial steps to be taken throughout this academic year and into the summer. The new budget approach will allocate resources based on the academic plan laid out in Vision OHIO.
"The new budget allows people to see the total picture…Right now there is no relationship between cost and revenue," said John Day, associate dean of the College of Business and chair of the support sub-group of the Implementation Team.
The details and major points are still being discussed. The committee has been at work studying other institutions, such as Indiana University, Ohio State University, the University of New Hampshire, and the University of Michigan, who already have activity-based budgets. The committee is also researching Ohio University's needs by collecting base data on current budgets, credit hours, head counts and degrees and by ensuring that the budget stays tied to the academic plan of the institution.
During the forums, the Implementation Team described a "highly simplified example of a budget for an academic area." The new budget model organizes the university into budget centers. These budget centers are either academic, such as the College of Arts and Sciences or the College of Business, or academic support, which includes virtually every other area on campus. The budget centers are further organized into direct and indirect centers. Direct centers are those that generate tuition or research dollars while indirect centers do not generate direct revenues. Tuition, research and subsidy money would likely be allocated to the academic units, with the units then charged a "tax" to generate funds to provide funding for the indirect and academic support areas.
The schedule of implementation for the new budget includes continuing research and policy formulation during winter quarter. Spring and summer quarters will be spent working on the processes needed to implement the new approach. During the 2006-2007 academic year, the new processes will run in parallel with the current budget so that "what-if" analyses may be done. A full-fledged process will be implemented for the 2007-2008 year.
According to the Implementation Team, the new budgeting process should encourage accountability and shared governance, while providing stability and linking fiscal activities to the implementation of the academic plan. Bernt stressed that units will be kept whole as the new budget system is implemented. This process is not related to the budget re-alignment currently underway.
"Our goal in this process is to do the right thing and to devise a budget process that helps the university make wise decisions that enhance our academic values," said Bernt.
Additional discussion groups will be offered to keep the university community informed about the project's progress. For more information, please visit the Web site which is accessible from the Provost's page, www.ohio.edu/provost/.
Michael Newman is a student writer with University Communications and Marketing