Budget Model Review - Spring 2017

During the 2007/08 academic year, the President announced the formation of a Budget Model Task Force to review and recommend changes to McMaster’s approach to revenue attribution and the underlying operating budget model.  The intention was to develop an approach that would enhance the effectiveness and efficiency of the budget model and related processes.  Budget Model Taskforce I agreed on the following principles of a new Budget Model:

  • Promote transparency, trust and engagement
  • Assure financial responsibility, accountability and fairness
  • Advance the efficient use of physical and human resources
  • Have predictability and stability
  • Enable innovation, creativity and change
  • Assign fiscal and academic responsibility to the appropriate levels
  • Build the student learning experience both inside and outside the classroom
  • Enable rapid response to opportunities
  • Ensure the sustainability of areas of existing and emerging excellence in keeping with academic priorities

The primary recommendation of this report was that the university should move to adopt some form of Activity Based Budget model, often referred as Resource Centred Management (RCM).  Following acceptance of this recommendation, Budget Model Taskforce II was tasked to develop an activity-based budget model that would fully support and enhance McMaster’s academic mission.  Additional guidelines adopted by BMTF II for the new budget model were:

  • Support and enhance the academic mission (research and teaching)
  • Avoid the creation of “silos” and promote interfaculty / departmental cooperation
  • Keep things simple, not too many variables
  • Utilize the concept of “materiality” –spend time on large items, set a limit under which the item will not form part of the components of a budget model
  • Simple to administer

This taskforce developed a framework which was then further refined by the Budget Model Implementation Team, a group assembled under the direction of the Provost and the VP Administration, to ensure the successful implementation of the model.  McMaster launched its current Budget Model in time for the 2014-15 budget cycle, with 2013-14 serving as the shadow year.   

Post Implementation, the Budget Model Implementation Team has continued to monitor the effects of the Budget Model with a view to understanding what was working well, what was problematic and what behaviours (both intended and not) the model was incenting.   As a result of this work, several adjustments have been modeled and implemented over the past two years.  A full description of the taskforce mandates and reports, the final model and subsequent updates can be found at: https://budgetmodel.mcmaster.ca

Now that the University is completing its third year with the new McMaster Budget Model (MBM), it is prudent to initiate a more fulsome review.  To that end, the following committee has been struck for the purpose of conducting the review.

Committee Membership

Chair- Alan Harrison, former Provost and VP, Academic, Queen's University
Scott Mabury, Vice-President, University Operations, University of Toronto
Alison Sills, Professor, Faculty of Science
Khaled Hassanein– Professor, DeGroote School of Business
Steven Hanna- Professor, Faculty of Health Sciences

Budget Model Review Committee – Terms of Reference

The committee is asked to review McMaster’s budget model to critically assess the strengths and weakness of both the model itself and its associated processes, paying particular attention to the degree to which the model and its processes are in appropriate alignment with each other and with the originally agreed set of principles.

As preparation for this task the committee will:

  • review any background documentation received in advance of its McMaster meetings including the Budget Model survey responses;
  • engage key stakeholders: Budget Envelope holders, MSU/GSA executive, and MUFA Budget Advisory group to determine their experience with the model.
  • gather input on the strengths and challenges of the budget model as perceived by the McMaster community.

The committee’s report will address the following questions:

  • Are the principles underpinning the model still appropriate?
  • Are the MBM and its associated processes upholding these principles?
  • Does it enhance the academic mission of the University?
  • From a strategic and technical perspective:
  1. What are the strengths of the model and its processes?
  2. What are the challenges of the model and its processes?
  3. How might any challenges be best addressed?
  • Are the bins and drivers still appropriate for the attribution of revenues and expenses?
  • Has there been a notable impact on the research mission of the university?
  • Is the cross teaching formula appropriate and creating the correct incentives?
  • Is the model incenting innovation and optimal use of resources?
  • Are there any unintended consequences or perverse incentives and, if so, how should these be addressed?
  • Are the information and the tools needed to effectively function within the model readily available?
  • Is the University Fund right-sized?

It expected that a report will be available by the end of this academic year.

David S. Wilkinson, Distinguished University Professor
Provost and Vice President (Academic)