Report of the Strategic Planning Task Force on Resource Allocation: November 1996

Preamble:

The strategic plan "Beyond 2000: Change" identified the allocation of resources as a primary Strategic Goal.

Allocate and develop resources on the basis of mission value and performance. Hold the community of students, faculty, and staff accountable for the success of the University.

The task force charged with the development of a model for the implementation of this strategic goal proceeded by first establishing a set of principles to guide the allocation of resources across the University. Using these principles, the group created a framework of an allocation model. This framework will be the structure for transforming the University's allocation, budgeting, and accounting processes.

In addition to centrally budgeted activities, the task force addressed three specific types of activities, entrepreneurship, research, and service centers, in some detail so that the appropriate procedures can be developed for each function.

Briefly, the model is built upon a block grant philosophy with decision making decentralized to as great a degree as possible and allocations linked to strategic priorities and performance assessment.

1. PRINCIPLES

1.1 The Allocation Philosophy will encourage

• Sharing and collegiality - Resource allocation must be viewed as the distribution of funds in the manner that is best for the institution, not as a competition for dollars.
• A client orientation - Units must be rewarded for their service to their clients - students, the general public, and university staff.
• Empowerment - Authority must be assigned at the lowest applicable level.
• Entrepreneurship - Units successfully taking the initiative, and risk, to generate external sources of revenue will benefit from their initiative.
• Humane decision making - Resource allocations must consider the human impact of decisions.
• Rewarding excellence - Both units and individuals must be rewarded for outstanding performance.

1.2 The Allocation Methodology will reduce

• Fund distinctions - limits on managerial and operational flexibility due to artificial fund distinctions must be removed.
• Significance of fiscal year boundaries - the operational significance of fiscal year boundaries must diminish although they should remain as a reporting parameter.
• Number of approvals - Approvals of expenditures must be tied to the organizational structure and with dollar limits established for the various levels; no more than two, and in many cases only one, signatures should be required to approve expenditures.

1.3The Allocation Model will be

• Dynamic - with the ability to reflect changes in institutional priorities or structure.
• Self-defining - all managers should fully understand the model and have access to all information.
• Data-based - the data elements of the model will be widely known and distributed.

• Both bottom-up and top-down - mechanisms will exist for input from all levels of employees and management.
• Dialogue-based - Establishing goals and evaluating performance will follow from open dialogues.
• Easy to apply - The model must be straightforward in its application.
• A decision-making tool - the model must support other decision processes including strategic planning, program expansion, rescissions, reallocations, etc.

1.4 The Allocation Process will support

• Planned Growth - Units targeted for expansion will receive multi-year resource commitments with clearly specified conditions.
• Short-term and Long-term planning - the process will respond to crises as well as multi-year plans.
• Accountability - units must comply with good accounting practices and align expenditures with unit mission and institutional priorities.
• Flexibility - managers must be permitted to fulfill their responsibilities without unnecessary constraints.
• Rational budgeting - budgets must reflect needs and available resources, not formulaic results.
• The timely allocation of funds - budgets must be established and funds allocated in a timely manner to allow proper planning.
• Open discussion - all members of the university community will have the opportunity to learn details of the budget and provide input into allocation decisions.
• Reviews and Appeals - an efficient process to communicate the outcome of the allocation process and hear appeals must be established.

1.5 Allocation Criteria will include

• Performance - units must meet or exceed well-defined performance criteria or be subject to an adjustment in their relative share of resources.
• Strategic Priorities - established, university-wide priorities will be factored into allocation decisions.
• Need - changes in staffing or demand will be reflected in the context of the above allocation criteria.

2. FRAMEWORK FOR RESOURCE ALLOCATION MODEL

2.1 Budget Development Process

a. All budget development should be a joint process that occurs simultaneously at the lowest level and at the Central Administration level. That is, each cost center would submit a request to the next level of authority with the final requests being matched against the available resources as projected by the Central Administration and program assessment. Final allocation decisions are made at the vice presidential level.

b. Units will be notified at the beginning of each fiscal year regarding the general fiscal parameters of the budget (i.e., percentage held back for reallocation, collective bargaining increases).

c. Budget allocation decisions will be linked to the assessment process presently under development.

d. Budgeting revisions - all budgets could be subject to revision by the central administration in consultation with budgeted units, during a fiscal year, due to unforeseen changes in the revenue stream (e.g., state recisions).

2.2 Decentralization of Spending authority a. Decision regarding expenditures should be made at the level that will benefit directly from the expenditure in a manner consistent with strategic objectives,. I.e., deans will determine personnel expenditures after receiving their budget allocation. b. Spending decisions must comply with Federal and State rules and regulations where applicable including fund source restrictions.

c. Once the Department budget has been determined, the Department Head will have authority for re-budgeting savings within parameters established at the dean's level. Deans will have authority to re-budget each new budget period.

d. Departments should have the ability to carry forward unused spending authority from one year to the next, up to an approved level so that prudent management is not penalized.

e. A department may maintain a contingency pool (funds not targeted for a specific purpose) during the fiscal year up to an approved level.

f. The Central Administration in conjunction with Deans, Directors, and Department Heads will be responsible for funding emergencies arising due to truly unusual circumstances.

g. Savings from personnel vacancies will accrue at the deans level for redistirbution according to staffing needs and program priorities.

2.3 Accountability

a. Funds should be expended according to the strategic priorities of the unit and University.

b. Units and their managers should be reviewed annually on both a financial basis and an objective accomplishment basis.

c. Accountability should be accomplished without creating additional burdensome procedures.

d. All budgets should be in balance on an annual basis.

2.4 Revenues

a. The Administration will develop a set of principles and policies regarding the expenditure of various revenue sources.

1. Centrally budgeted revenue

2. Service Center revenue

3. Entrepreneurial Activities revenue

4. Restricted Gifts and Sponsored Research revenue

b. The Administration will determine which activities fall under the above categories.

c. The Administration will establish equitable policies regarding charge-back/central overhead.

2.5 Reserves

a. The Central Administration will establish prudent levels of reserves for the University.

b. All current reserves at the University should be clearly identified as to amount and specific purpose.

c. Reserves should be categorized only as to specific purpose and subject to annual review by designated officials.

d. Reserves will be subject to policies which will designate an appropriate level commensurate with good business practices.

e. Reserves set aside for capital projects should be accounted for and reported separately from Operating Budget reserves.

2.6 Central Services

a. Should decide which central services are necessary to the operation of the University.

b. Need to identify a standard level of service and an adequate level of funding for those central services deemed necessary.

c. Funding for central services should be allocated to the service provider and not the individual users.

d. Charge-back systems need to be appropriate to the resources consumed.

2.7 Entrepreneurship

a. Most schools, colleges and departments should be funded from a central source rather than held responsible for generating their own revenue. All Schools/Colleges should be encouraged to become entrepreneurial within their mission.

b. Entrepreneurship should be encouraged but this will require new policies with respect to the sharing of gains and losses and covering of overhead expenses.

2.8 Information

a. Information systems must be continually refined to support the administration of the model and minimize the cost of transactions.

b. Information systems for decision making should be well maintained and accurate and subject to availability as needed (e.g., electronic access).

c. Central Administration shall support decision making at the departmental level (e.g., technical support) as opposed to controlling and monitoring functions.

2.9 Research Budgeting a. Research is a top priority of the University

b. Research must be encouraged by investment and leveraging of resources.c. Not all research is self-supporting. There should be multiple funding sources available including the operating fund, recovered indirect costs, entrepreneurial and endowment funds, and extramural grants.

3. ENTREPRENEURSHIP

3.1 Definition

The process of identifying and fulfilling external market opportunities that are consistent with and reinforce the University's/sponsoring unit's strategic plan and represent a value-added, positive profit (revenues greater than costs) potential.

3.2 Description

1. Entrepreneurial ventures are externally focused and intended to not only fully recover their delivery costs, but also generate discretionary revenues for other uses.

2. Entrepreneurial ventures flow from a positive, synergistic fit between a unit's mission/expertise/strategic competencies (e.g., research, teaching, outreach) and a market opportunity.

3. Entrepreneurial ventures must be market/customer driven.

4. Entrepreneurship is inherently risky. Most new ventures fail, but the willingness to risk is an inherent requirement of entrepreneurship.

5. Entrepreneurship becomes successful when sound ideas are transformed into profitable products and services.

6. Some examples of entrepreneurship are:

a. Externally-funded research;

b. Self-supporting educational programs, including non-credit programming;

c. Industry-, organizational-sponsored service programs.

3.3 Guiding Principles

1. Academic and service units should be encouraged to be entrepreneurial, facilitated in operating such ventures and rewarded for being successful by being able to retain a significant portion of the net revenues (profits). Successful entrepreneurship should not be punished via a funds substitution effort.

2. As a top priority, any entrepreneurial effort should reinforce rather than compete with UConn's research, teaching and service/outreach mission.

3. Ideally, entrepreneurship ventures should, at a minimum, be self-supporting and, hopefully, generate revenues greater than associated costs.

4. Faculty should be encouraged to behave in an entrepreneurial manner by tying their accomplishments in this area to the UConn rewards process, e.g., PTR process, merit review. However, it must be emphasized that faculty entrepreneurship is a component of the existing evaluative criteria (research, teaching, service) not a fourth dimension. Nevertheless, the entrepreneurial activities of the faculty should be recognized as being as valuable as similar traditional activities.

5. UConn should establish appropriate support mechanisms for entrepreneurial ventures and seek to minimize bureaucratic controls.

6. One of the costs of doing business for successful UConn entrepreneurial ventures must be the return of a tax on income to the University. Some of this overhead should be set aside for start-up funding for new entrepreneurial ventures. The University needs to establish some operating guidelines for assessing this tax, and, insofar as possible, units should know the applicable tax rate before commencing the venture. A portion of these tax revenues should be distributed in a manner that promotes further entrepreneurial initiatives at the departmental level.

7. Interdisciplinary entrepreneurial ventures among UConn's academic units should be encouraged and dysfunctional competition should be discouraged.

8. The Chancellor's Office should establish a system to facilitate, coordinate, review and, as needed, eliminate entrepreneurial ventures, i.e., coordinating/facilitating committee. Simply letting the market mechanism weed out "unsuccessful" ventures may be insufficient. The required level of approval and review may vary depending upon whose money (e.g., UConn or academic unit) is at risk.

3.4 Next Steps

1. UConn should review financial, legal, governmental practices, regulations, policies, processes, etc. to determine how entrepreneurial ventures can be facilitated, while maintaining the necessary checks and balances.

2. UConn should inventory its existing entrepreneurial ventures and publish factors contributing to success and failure.

3. UConn should benchmark entrepreneurial experiences at other relevant universities as part of the transition to a more entrepreneurial environment. Budding entrepreneurs should do likewise as part of their market analysis.

4 RESEARCH

4.1 General Principles of Resource Allocation Model with Respect to Research Mission

1. Since the University of Connecticut is a Research I Institution and should be maintained as one, the resource allocation model should factor in research as a top priority of the University and should build into the model support for research and recognize the investment and leverage aspects of research.

2. Priorities for supporting research should be consistent with the goals of the Strategic Plan and established University and college/school priorities. These priorities should be clearly expressed. Units should report annually on their expenditures in support of research.

3. The model should ensure that the allocation of all resources (dollars, space, renovations, positions) associated with research be synchronized and aligned with overall priorities.

4. The model should provide for local flexibility in the use of University allocated funds to encourage and sustain research.

5. The model should ensure that the primary purpose of indirect funds is to support the cost of performing research and the development of research.

6. The model should promote the allocation of resources (internal and external) to provide the infrastructure for high quality research, that is, to fund technicians, workshop staff, computing support (software, hardware, networks), etc., who support both the teaching and research missions.

7. The resource allocation model should reduce administrative costs for research with those saved dollars directed toward the activities that foster and leverage research, including equipment purchases and maintenance, travel, and graduate student support. An example of potential cost savings would be through streamlining accounting procedures.

8. Administrative functions must be made as efficient as possible to optimize Purchasing Department regulations and to avoid a large percentage of indirects going to management, double bookkeeping systems in Grants and Contracts and in departments, etc.

4.2. Teaching Mission

A. Undergraduate Students

The benefits of undergraduate participation in scholarly activities are well recognized. However, in order to achieve the objectives spelled out in the Strategic Plan proposing that all undergraduates have the opportunity for a research experience, it must be recognized that resources will have to be found to underwrite the cost of undergraduates' research for items such as supplies. The University must consider the impact of this initiative very carefully. If it remains an objective of the University, development and external funds should not be the only sources of dollars for these efforts. The effect of such an initiative on teaching loads, especially in view of a shrinking faculty base, must be considered

B. Graduate Students

Resources should be found for professional meeting attendance, doctoral dissertation fellowships, illustrations/graphics for publications, etc. Discretionary funds, including development dollars, should be sought to guarantee long-term support commitments to graduate students. Decisions regarding allocations of resources for student research should be made at the departmental level.

4.3. Scholarly Mission

a. Research should be factored into the model as a top priority of the University. The model should facilitate faculty and student research and should provide the appropriate infrastructure to foster excellence in research.b. Funds to support research currently come from multiple sources: direct and indirect costs from extramurally funded scholarly activities, the operating budget, capital equipment funds, endowments and entrepreneurial activities.1. Indirects:

i. The model should leverage indirect funds by returning a scheduled percentage of recovered indirect costs to the Principal Investigators and/or research centers that generate the funding.

ii. A portion of the indirects should provide local support for research via a peer-review mechanism in a process established by the Chancellor's Office.

iii. A portion of indirects should be used to support research administration.

2. Capital Equipment

i. Faculty start-up needs should be met from capital equipment funds.

ii. A percentage of capital equipment funds should be set aside to meet new and replacement departmental equipment needs.

iii. A percentage of capital equipment funds should be set aside to be used as matching funds for proposals.

3. Operating Budget

The operating budget for research should be enhanced by setting aside an allocation for research that is equivalent to a proportion of the total direct research funds brought into the University. This fund would be managed by department heads consistent with priorities of the University.

5. SERVICE CENTERS

This section presents a first pass categorization of central services into those essential to the institution and those which might be considered optional; each service could be additionally categorized as to whether it were best provided by multiple departments, or through a central facility.

Taking as the defining quality of "essential" that it includes only those services without which the institution - in this case, a public research university - cannot fulfill its mission, our initial list contains remarkably few "optional" services.

Conference Services

Publications Design

Printing Services

Tech Services

Transportation and Fleet Operations

The remaining, essential services are listed below. Those for which there is a substantial institutional interest in standardization, uniform quality and lack of duplication, are candidates to be performed by a central facility. Where duplication is not a material concern and local control of a process may best serve its "clients," decentralization is suggested. A few services might be bifurcated between those aspects to be rendered at the departmental level and those which benefit from the concentration of expertise or capital possible in a central facility. The resource allocation process for each central service must undergo detailed analysis in the implementation of the new resource allocation model.

Respectfully Submitted: