What is incremental budgeting?
Incremental budgets are based on history, rather than current academic activities and priorities. They involve looking to the prior year’s budget and adding or subtracting a percentage based upon changes in revenues.
What is activities-based budgeting?
In activity-based budgeting, faculty revenues depend on teaching and research activities rather than on the historical allocation of resources.
How does the new model differ from the current model?
The new activities-based model differs from the current incremental model in several ways:
- The budget allocation provided to faculties is based on teaching and research metrics—these metrics relate to the teaching and research activities conducted by the faculties
- The allocation of revenues is more transparent
- Tuition follows students (no base tuition follows students at present)
- Almost all International Differential Fees go to faculties (rather than only 50%)
- A portion of the base provincial grant is allocated to the faculties based on program enrolments and research-based metrics
- 15% of non-credit tuition goes to central administration (none goes to center at present)
- 100% of market modifier and program differential fees go to faculties (only 60-80% of market modifier funds go to faculties at present)
- 50% of the Federal Research Support Fund goes to faculties (rather than approximately 25% at present)
- 100% of other indirect costs of research funds go to the faculty or unit generating the funds (rather than 85% under the current model)
- A portion of space costs (about 1/3 of Facilities & Operations' costs) is paid by faculties on the basis of their space usage—none of these costs are implicitly covered by faculties at present
- A process is established for the systematic evaluation of central administrative costs and budgets
- Transparent Strategic Initiatives Fund and Subvention Fund are established
How does the model support and enable the academic priorities of the university?
The U of A fulfills its core academic mission through teaching and research. The new model allocates funding to the faculties using data and formulas which capture the costs of there two central activities. In addition, the model creates transparent processes for supporting strategic academic priorities through the establishment of both a Subvention Fund and Strategic Initiatives Fund. Finally, with the creation of an Administrative Portfolio Committee and review process, the deans will have the opportunity to provide input and feedback on administrative services and activities on an annual basis to ensure that resources allocation to the administrative portfolios is directed to services and activities that support the academic mission of the university.
How does the model reflect the values of the U of A?
The new budget model aligns with Objective 22 in For the Public Good, in which we commit to developing a sustainable budget model to preserve and enhance our core mission. The initial step in the model’s development was consultation on and approval of a set of principles to guide the Budget Model Working Group’s creation of the model. Those principles are:
- Supremacy of academic priorities
As implied by the wording, the most important guiding principle is that the model should support and enable the academic priorities of the university.
Who will benefit the most from the model?
The university as a whole will benefit from the model but so will individual faculties and administrative units. It will help all of us see and understand where resources come from and what they are used for. Everyone will have a clearer understanding of the formulas and principles that underlie budget allocations and will have the information they need to make beneficial changes at the faculty or unit level. The new model will also promote greater accountability of and responsibility for how resources are allocated and used, which, in turn, will help us to be more strategic in the allocation of resources and ensure the financial sustainability of the university.
How will the budget model help us to contain costs and reduce expenditures?
The budget model is a mechanism that determines how we will allocate the resources we have available. It cannot, in itself, reduce expenditures. It will, however, provide us with the transparency and data we need to make better decisions in order to address cost containment.
How will a budget model help us to contain salaries, benefits, and pension—by far our largest costs?
The budget model will have no direct impact on salaries, benefits, and pension expenses. These are decided by negotiated agreement, on the one hand, and through strategic hiring decisions, on the other. The model can help faculties understand more clearly where the greatest programming demands are, and in that way, can aid in faculties making more strategic hiring decisions over time.