Why does Mason need a new budget model?
Mason, like all institutions of higher education, faces a dynamic and challenging future as a result of reduced state and federal resources. In 1985, the Commonwealth of Virginia contributed 67 percent of the university’s Educational and General Budget. For 2018, the contribution is 25 percent. Diversification of Mason’s revenues is essential for long-term financial health, and the new model is a proactive way to prioritize resources within a strategic plan. Another driver is the changing and more competitive landscape in the higher education marketplace. In addition, the new model will enhance transparency and accountability.
Can you clarify how this model is different from others?
Budget models come in several forms, from the top-down model in which the budget is controlled by a central administration, to Responsibility-Center Management (RCM) models in which you spend what you raise. Mason’s new incentive-based model combines the best of both models. The central administration and colleges work together to maximize revenue and control costs while promoting transparency around revenues and expenditures. In this model, each college will have a revenue goal. If that goal is exceeded, and expenses appropriately managed, the college will share in the gain with the university. If the goal is missed, the shortfall can be covered by other unit carry forward funds.
There are clearly initiatives we want to support that do not generate significant revenue, but we cannot support all those programs, hence this new model allows the central administration and colleges to work together to maximize and diversify revenues.
How was the new model implemented?
FY 2016 was the parallel year for Mason’s new incentive-based model. Throughout the fiscal year, a series of meetings were held with each college or school dean and associate dean for finance. The meetings clarified the calculations used in the model and provided college/school financial information at various projection points and at year-end. In FY 2017, we went live with the new model. Revenue and expense targets were provided during budget development; revenue projections were provided during each semester and year-end performance will be calculated in the new model, with carryforward and performance adjustments being made in early FY 2018. Many units are already seeing the benefits of the new model and will receive additional expenditure budget as a result of exceeding revenue targets.
What are next steps for the model?
The first phase of implementation included Educational & General funds. Next steps will be to include indirect funds (reimbursement for university overhead expenditures from research grants) and to review the treatment of multidisciplinary programs in the model. University-wide committees have been convened to address both indirect funds and multidisciplinary programs; once committee recommendations are made, we will establish the framework for inclusion in the budget model.