Frequently Asked Questions

Incremental Budget Model

How does the current budget model work?

The university has employed different budget models in the past. Prior to Budget Model 2.0, the university used an incremental budget model. In incremental budgeting, the budget for a specific period is derived from the previous period’s budget, with adjustments made for changes or new initiatives. The budget is incremented or adjusted based on the historical budgetary figures.

ModelLing Questions

Why was the activity-based budget model chosen as the best option? And are we assured that the parameters and variables are rightly chosen to fit the model?

The Budget Model 2.0 project commenced with extensive research into budget model options and sector best practice. A set of principles were developed and approved by the Board of Governors, which guided the decision to develop a simplified activity-based budget model to best the university’s operating model and strategy. Other budget models did not suit our context of strategic growth for the coming years. Activity-based budget models are used to:

1. Allow for changes in a university’s strategic ambition and specific goals.
2. Enhance transparency and simplicity of budget allocations.
3. Encourage greater investment in the university’s mission through growth in enrolment, teaching and research, while holding costs appropriately.
4. Better inform decision makers to respond to revenue and cost fluctuations.
5. Increase accountability for operational efficiency of university-wide services and of faculty operations.

Why do faculties need to share tuition revenue with university-wide services?

The new university operating model has shifted costs from faculties and units to University-Wide Services (UWS). Close to 45 percent of UWS costs are non-labour, including utilities, scholarships, IST, library and maintenance and repairs. Under Budget Model 2.0, the Operating and Program Support (OPS) grant is first used to meet UWS’s essential funding requirements for operations not covered by tuition revenue and investment income. Costs such as utilities are unavoidable in keeping the university operational.

In recognition of this, UWS units will each develop a Functional Plan that defines service delivery, priorities and future budgetary needs over the coming five years. These plans will be used to drive accountability for quality and cost-effective services delivery. Funding for faculties, units and UWS is not finalized until all units go through the planning process.

Budget Model Design

What modelling of the budget model occurred before the final model was approved?

The Provost and VP USF led the stand-up and engagement of 5 expert groups to provide recommendations across 5 topics. The expert groups were established to provide input to the development of the new model. Upon recommendation by APC, GFC, and BFPC, a set of principles to underpin the budget model was approved by the Board of Governors. The recommendations and principles provided the framework for the modelling.

The Resource Planning team used the expert group recommendations to develop modelling of a ‘baseline’ model scenario using FY 2024 data to provide a comparison between allocations in the previous incremental model and the activity-based Budget Model 2.0. Through iterative scenario modelling and in consultation with the Provost and VP USF, Resource Planning refined the model to remove minor adverse impacts created by the budget model recommendations in practice. The refined model was confirmed as the model for FY 2025 by the Provost and VP USF and presented to College and Faculty leadership in June 2023.

What will be excluded from the model design?

Budget Model 2.0 does not allocate budget to the department level. Faculty Deans will continue to receive allocated funding and will be responsible for allocating to the Department level (or equivalent programs) within each of the faculties.

Can you provide more detail on the transition plan to arrive at the final model?

Following extensive modelling of different transition approaches and timelines, Resource Planning recommended a 5-year, straight-line transition plan. The transition will allow faculties and units to adjust to their future budget allocation over a 5-year period wherein each year sees the allocation move 20 per cent toward the future state.

Budget Allocation

Where do we get our budget from? Will anything change?

The university has a variety of revenue streams including tuition fees, government grants, investment income, research grants, sales, donations and endowments. Not all of the money that we receive can be used freely. Some of our funding is restricted—that is, it’s set aside for a specific purpose (like research or capital projects). No sources of revenue have changed under Budget Model 2.0 and the primary sources of revenue for the operating budget remain tuition revenue and the Operating Support Grant (our provincial funding grant). Over time, the university would like to decrease its reliance on the Operating Support Grant and increase revenue through increased enrolment and other revenue streams.

In Budget 2.0 will units be paying overhead for all spaces?

The FY25 budget excludes a space charge. Future work surrounding optimizing the use of space will be undertaken by a Space Optimization Working Group, who will consider how to improve space usage and plan for significant growth in enrolments as set out in SHAPE.

Budget Model Drivers

How does the new budget model incentivize units and faculties to pursue our strategic goals?

Under Budget Model 2.0, budget allocations to faculties are tied to the level of activity (i.e., tuition and research) which encourages them to grow. The core levers that a faculty can exercise are enrolment, research activity and faculty efficiency and effectiveness (i.e., teaching load, class fill-rate). The model has also established a ‘university fund’ which faculties and units can access. This refers to one consolidated fund to support strategic initiatives, research growth initiatives, funding to reward performance, and supplementary funding for selected units.

What is the distribution for credit vs. non-credit tuition?

Allocation of tuition revenue will be allocated as such:

• Standard domestic for-credit tuition will be shared: 
  • 60% to the unit offering the course (the ‘teaching unit’)
    10% to the faculty that owns the program that the student is enrolled in (the ‘program faculty’)
  • 30% to cover university-wide services costs. 
• For domestic for-credit tuition, approximately 3% (2.76% in 2022-23) of tuition is dedicated to student scholarships. The remaining domestic for-credit tuition will be allocated in the same manner as standard domestic for-credit tuition. 
• For international for-credit tuition, 7.55% of tuition is dedicated to student scholarships. The remaining international for-credit tuition will be allocated in the same manner as standard domestic for-credit tuition. 
• Tuition for non-credit courses and programs (whether paid by a domestic or international student) will be shared: 
  • 85% to the unit offering the course (the ‘teaching unit’)
  • 15% to cover university-wide services costs.

How is headcount calculated?

*Headcount refers to fall data (December 1) for domestic undergraduate and course-based graduate students (1.0 for full-time and 0.5 for part-time). International student headcounts are not taken into consideration for allocations under the Operating Support Grant (our provincial funding grant).

Budget Model Mechanisms

The report speaks of transparency. What will be the mechanisms for that transparency? What stakeholder groups will have access to the information?

Transparency is a key principle which has guided the design of Budget Model 2.0. This refers to being transparent about the rationale, process, and outcomes of resource allocations. A wide variety of stakeholders have been engaged with and provided input on the design and implementation since November 2022. This has included the standing up of five expert working groups to help design the model, a series of townhall engagements to the broader U of A community and ongoing working groups to continue to refine and iterate the model. In addition, the budget model scenarios and allocations have been shared with Faculty Deans, Chairs Council and General Faculties Council.

Budget Process

What will faculties and units need to prepare before the budget process commends?

Faculties and units will undertake the ‘Tour of Deans’ each year, which refers to the academy-focused side of the budget process. This involves each faculty presenting to senior leaders their strategic objectives, priorities and budget for the subsequent years. The faculty will also need to articulate how they plan to take advantage of the levers built into the new budget model (enrolment, research growth, faculty efficiency and effectiveness) in the coming years. Each faculty will also need to articulate how University-Wide Services (UWS) and Colleges can support their operations. Materials will be provided in advance for faculties to complete. Funding for both UWS and faculties is not finalized until all units go through this planning process.

Colleges

Where do Colleges fit in the new model? And will standalone faculties receive the same services from the colleges as other faculties?

Colleges will be treated as a university services unit, funded out of the Provost’s budget. Colleges now provide services that have been agreed upon. These services were previously provided by the Provost Office or were previously done by the faculties or units. Standalone faculties will continue to receive the same services from the Provost Office.

University-Wide Services

What is a central unit and the central portfolios? What is the cost of their operation?

A central unit (known as university-wide services at the university) is a non-teaching unit that delivers services to students and staff from within the university to support the delivery of the university’s core mission of teaching, research and community engagement. This includes finance, human resources, IST, facilities and operations, research and innovation, student services, external relations and others. 

The most recent budget for all university-wide services was approximately $400 million. This is out of an operating budget of $900 million and a consolidated budget of $1.9 billion. When we look at university-wide services costs, the most significant are space and utilities ($132 million), IST ($45 million), Libraries ($42.4 million), and scholarships and bursaries ($35.5 million).

An almost 50:50 split of operating budget for academic and university-wide services in operating budget is common across universities and the university is closer to 40:60 university-wide service:academy. When all consolidated revenues are considered, the split is closer to 20:80 university-wide service:academy.

General

What impact will the budget model have on my department?

Budget Model 2.0 does not allocate budgets to the department level. Faculty Deans will receive allocated funding and will be responsible for allocating to the Department level (or equivalent programs) within each of the faculties.

What are the risks of implementing a new budget model?

No one Budget Model is perfect, nor can they be designed with perfect information. The Budget Model 2.0 will employ a 5-year straight-line transition, allocating one-fifth of the budget change annually. This approach smooths out the effect of implementing the budget model and allows each unit time to adjust.

In this transition period, the new university fund will begin to support faculties and units.There may also be additional transition funding to invest back into faculties and units, on the approval by the Provost and VP USF. Iterations will be made before a full budget model review, scheduled 3 years from the model’s launch in FY25.