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Five Year Review of RCM


Dear Members of the University Community:

Over the past 18 months many of you have participated in a review of the decentralized budget structure we utilize to manage our financial resources, a structure better known as Responsibility Center Management or RCM. The review process, led by Provost and Executive Vice President Bruce Mallory and former Vice President for Finance and Administration Candace Corvey, was a very thorough and open one, providing me with a high level of confidence in the information that has been presented to assist with my decision.

I would like to extend my sincere gratitude to all involved in the review. You have taken the time out of your regular schedules to participate in a very important process, one that will help guide future decisions in achieving the goals outlined in the University’s Academic Plan.

As you well know, UNH is a special place, with ambitious goals and limited resources. Our success is a direct result of having a clear mission and a focused Academic Plan. This guides our decisions on resource allocations and priorities. RCM is the appropriate tool for UNH to help inform our resource allocation decisions; as with any tool, it must be used wisely. Therefore, the RCM model used at UNH should employ the following overarching principles (as stated by the RCM Steering Committee in their report to the Central Budget Committee http://www.unh.edu/rcm/steeringreport.htm):

  1. It should be as simple as possible to promote easy comprehension and efficient administration.

  2. It should produce results that are widely perceived as fair and in keeping with the core values of the institution.

  3. It should encourage behaviors on the part of faculty and staff that support the institution’s mission and academic plan.

  4. It should have strong governance and planning mechanisms in place to ensure that it is wisely used as a tool and does not become an end in itself.

After reviewing the RCM Steering Committee’s recommendations to the Central Budget Committee (CBC), considering discussions with the CBC, Faculty Senate and many others, and being mindful of the above principles, I have come to the following decision:

All recommendations set forth by the RCM Steering Committee will be implemented as described in their report of recommendations to the CBC (see the above web site for a full report) with three modifications:

  1. Indirect cost recovery will be distributed as follows:
    82% to the host unit* of the grant, 5% to the Vice President for Research and Public Service, and 10% to the Principal Investigator named on the grant. The decision on how the remaining 3% will be used will be made by me after a working group, led by Vice President John Aber, convenes and develops recommendations for its use.

    * the default split of the host unit share for faculty who have a different home unit than the grant host unit will be as follows: 6% home unit/76% host unit for research faculty, 18% home unit/64% host unit for split funded faculty and 30% home unit/52% host unit for instructional faculty. As before, these splits may be subject to negotiation among unit heads in order to address particular situations.

    The reason for the modification from the RCM Steering Committee recommendation is to provide as much of a financial incentive as possible to the unit that directly engages in the activity.

  2. Assessments will be allocated to units based on all revenue streams and personnel expenses. The RCM Steering Committee recommendation excluded sponsored program revenues and personnel expenses from the allocation base and instead recommended a percentage of indirect cost recovery allocated to central administration in lieu of the assessment. This would have the effect of subsidizing low indirect cost grant activity and removing incentives to review the financial structure of all grants prior to proposal submission. While we want to continue to expand our sponsored research activity at UNH, we need to do it in a way that is mindful of the strategic and financial impact on the institution as a whole.

  3. The UNH Library’s budget will be funded according to the following percentages: 50% from assessment applied to all RC units, 25% from all tuition revenues (undergraduate, graduate and summer) and 25% from state appropriations. This modification achieves the goal of providing a stable, predictable funding source to the Library as presented by the RCM Steering Committee while reducing complexity.

One topic that has arisen in every forum is how the “hold harmless” allocation will be applied. In order to maintain continuity for FY07, all units will receive a “hold harmless” allocation that will leave each unit in a resource neutral position from what the current structure would have provided on July 1, 2006. My view of the “hold harmless” allocation is that while it helped UNH make the transition from our prior budget system in FY01, the allocations were not strategic. During FY07, I will be engaging the President’s Cabinet, Central Budget Committee, individual units and others in a process to remove the hold harmless allocation for each unit and reallocate those funds in a deliberate and strategic manner for FY08 and beyond. This approach, I believe, is a much more thoughtful one than using a formula and one that will assure that our resources and mission-related goals are aligned in a timely manner.

The timing of the implementation of the allocation formula changes from the RCM Review including the calculation of the FY07 “hold harmless” allocation will be July 1, 2006 coordinated by the Office of the Vice President for Finance and Administration. Your unit financial managers will be receiving that information soon after the Central Budget Committee meeting on April 4.

There are numerous other policy and procedure recommendations presented in the RCM Review Committee’s report that will be addressed over the next two fiscal years. The Central Budget Committee will be responsible for monitoring progress on responding to these recommendations and will provide a status report to the community in FY07 and FY08. Another formal review of RCM will occur in FY11.

I will conclude by saying that I believe the changes to the RCM model place us in a better position to help achieve the goals outlined in our Academic Plan. RCM by itself will not accomplish this. It will be the management decisions that are made, based on the principles of shared governance and the tools provided by RCM, that will enable us to move forward.

For more information on RCM and the RCM Review, please visit www.unh.edu/rcm.

Ann Weaver Hart
President

(03/29/06)

 


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