Taskforce One

Executive Summary

President Peter George announced the formation of a Task Force to review and recommend changes to the McMaster operating budget model in June 2007. The mandate was to review the current McMaster budget model relative to the objectives, examine alternatives and, after consultation with the Budget Committee and the University Planning Committee, make recommendations to the President that will enhance the effectiveness and efficiency of the budget model and budget process. This report is submitted to the President as the Task Force’s progress report as of June 2009

The Budget Model Task Force met monthly from December 2007 to May 2009. Its first item of business was to establish a set of governance-related principles that would serve as the framework for the examination of any new budget model. These principles state that a budget must:

  • 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

Adopting a new budget model does not increase the revenue coming to the University. It changes the method used to allocate existing resources.

The Task Force examined a budget model called Activity-Based Budgeting (ABB) where all operating revenue is attributed to the activity units, who by their ‘activity’, such as enrolling and teaching students and carrying out our research, carry out the core mission of the University – typically but not exclusively the Faculties. The Faculties use a portion of this revenue to pay for the budgets of the service units (defined as all budget units at the University other than the activity units), using specific “cost drivers”. It is a highly decentralized budget system with considerable responsibility and accountability for financial outcomes devolved from the central administration to Faculty Deans/Directors. All evidence reviewed suggests that this system leads to more transparency, greater awareness of the budget and trust between the senior administration and the budget units. It makes innovation easier, and it allows deans to do long-range planning more proactively.

Task Force on Alternative Budget Models Report 3 August 2009 Revised October 6 2009

In an activity-based budget system at McMaster University the revenue streams that would be attributed to the activity units have been identified as:

  • Tuition income, both undergraduate and graduate
  • Government operating grants (accessibility, BIU-based and others)
  • Overhead on research grants
  • Proportional interest on the unrestricted endowment
  • Proportional interest on the working capital
  • Other income generated internally by the Faculty
  • The recommended cost drivers for attribution of the service units are:
  • Total revenue
  • Total Expenditures (which includes operating, research, trusts and others)
  • Total tuition income
  • Undergraduate student counts (FTE + headcounts)
  • Graduate student counts (FTE + headcounts)
  • Total student counts (FTE + headcounts)
  • Faculty counts (FTE + headcounts)
  • Employee counts (FTE + headcounts)
  • Research funds
  • Net Assignable square meters (NASM)
  • Metered utilities costs

A University Fund would be established and held centrally to support high priority initiatives of the University. This Fund would be used to ensure a smooth transition to the new system is achieved in the transition years of the budget model. The Fund would be used to hold units harmless, to the greatest extent possible, during the transition period. The Fund would be established by using a percentage taken off the top of the tuition and Provincial government grant revenue streams available to the operating budget. A recommendation about the amount of that percentage is yet to be determined.

Funding for undergraduate teaching would be supported by a 50:50 split of tuition revenue with half to the Faculty home of the student (to support advising and other student services) and half to the Faculty teaching the courses. This assumes an “average” tuition rather than a calculation for each student. BIU funding would be attributed to the Faculty that houses the program. This recognizes that roughly half the BIU revenue supports scholarly/creative activity and half teaching. The BIUs support scholarly/creative activity but also recognize the needs above the average in teaching certain types of programs.

Space costs would be attributed to the activity units to cover the utility charges, custodial services, security, and routine building and grounds maintenance. Deferred maintenance is not included. The costs of new capital construction would be borne by the Faculty.

Task Force on Alternative Budget Models Report 4 August 2009 Revised October 6 2009

Recommendation

The Task Force on Alternative Budget Models has now agreed to a set of principles guiding any budget system for McMaster University, and has conducted detailed studies, received input from the University community and held discussions on many aspects of budgeting. The Task Force makes the following recommendation:

McMaster University investigate the development of a version of an activity-based budget system that fully supports and enhances its academic mission. This investigation shall have established consultation points and decision points. Any proposed new budget system should be phased in to ensure a smooth transition from the existing budget system and with provision to hold units harmless, to the extent possible, during the transition period.

Next phase

Over summer 2009, we will proceed with numerical modeling. The Task Force can proceed no further in its analysis of the ABB model without a numerical simulation of an ABB budget system. We propose to use the 2008/09 and 2007/08 fiscal budgets for modeling purposes. This analysis is no small task as the working group must look at numerous scenarios of the model assigning differing values to the defined metrics.

As the Task Force continues its work, it will continue to consult with various constituencies of the University and will keep the campus community informed of its progress.

Membership

Task Force Membership

ROLE NAME AREA
Member Kathy Bennett Faculty of Health Sciences
Member Ilene Busch-Vishniac Provost and VP Academic
Member Karen Belaire VP Administration
Member Suzanne Crosta Dean, Faculty of Humanities
Member Mo Elbestawi VP Research and International Affairs
Member Khaled Hassanein Faculty of Business
Member John Kelton VP and Dean, Faculty of Health Science
Member Brian McCarry Chair, Budget Committee
Member Bob McNutt Chair of Task Force
Member Karen Menard AVP, Institutional Research and Analysis Office, Co-Chair (TEAM)
Member Lilian Scime AVP Administration
Member Michael Veall Chair, Task Force on Evaluation, Assessment and Management (TEAM)
Member Cindy Ward Director of Administration, Faculty of Science
Member John Weaver Faculty of Humanities
Member David Wilkinson Dean, Faculty of Engineering
Member Phil Wood AVP and Dean, Student Affairs
Resource Staff Barb Campbell Office of the Provost
Resource Staff Fred Cram Budgeting Services (later replaced by Lou Mitton)
Resource Staff Barb McKenna Research Services
Resource Staff Gina Robinson Student Services
Administrative Support Tracy Stojanovic Office of the AVP Academic

Sub-Committee Membership

ROLE NAME AREA
FHS/Administrative Group Barb Campbell Executive Director, Office of the Provost and Vice-President (Academic)
FHS/Administrative Group Ross Gardner Director of Finance, Faculty of Health Sciences
FHS/Administrative Group Debbie Martin Administrator, Corporate Services, FHS
FHS/Administrative Group Barb McKenna Director, Administration and Finance for University Research Envelope (Vice-President Research and International Affairs)
FHS/Administrative Group Karen Menard Associate Vice-President, Institutional Research and Analysis
FHS/Administrative Group Lilian Scime Assistant Vice-President, Administration
FHS/Administrative Group Kevin Sulewski Administrator, Clinical Services, FHS
Metric Sub-Committee Group Karen Menard Associate Vice-President, Institutional Research and Analysis
Metric Sub-Committee Group Ross Gardner Director of Finance, Faculty of Health Sciences
Metric Sub-Committee Group Lilian Scime Assistant Vice-President, Administration
Metric Sub-Committee Group Roman Viveros-Aguilera Professor (Mathematics and Statistics)