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The University of Waterloo is committed to the implementation of a budget model that will better inform strategic decisions across all levels of the institution. The model will assist with (a) the understanding of the effect of increased, decreased or diversified revenues and (b) promoting increasing efficiency and controlling costs across the institution.
1. What was the previous University of Waterloo budget model?
The previous budget model provided historically-based budgets that did not directly connect with academic enrolment, non-academic support efforts nor strategic planning on campus. There was a lack of understanding and transparency surrounding a large portion of the base operating budgets, and a lack of tools other than across the board cuts to control costs or to be more efficient in spending. The lack of clarity in the budget did not promote effective planning across the institution.
Essentially, all organizational units received their budget from the previous year, with incremental adjustments as required (such as income funds, salary increases, change in complement positions).
2. What is the Waterloo Budget Model? What is it based on?
The Waterloo Budget Model is based on a hybrid of activity based budgeting systems – known as responsibility center management (RCM). In RCM, the institution identifies units that generate revenue (in this case primarily Faculties) and then allocates all costs – both direct and indirect – to the unit generating that revenue, while reserving a portion at the center for strategic initiatives.
3. Why are we doing this now?
Like our peers, our institution is operating in an environment where government funding and domestic student enrolments are not expected to increase in the next few years, and competition between universities and colleges for students and research funding is increasing. University of Waterloo needs to use its resources efficiently and recognizes that new initiatives may need to come from the reallocation of existing resources. Additionally, the inability to link growth of enrolment directly to budgets makes it difficult for Faculties and Academic Support Units to plan.
This initiative to change the current budget model has been suggested at the University of Waterloo on several occasions. Many of our U.S.A. peers began changing their historical models as far back as the 1970s for reasons such as: an incentive for revenue growth, to improve transparency, to control costs and to increase strategic funds.
University of Waterloo has been working towards a longer-range multi-year budgeting and planning platform that would allow alignment to our institutional strategic plan, or strategic enrolment management process and the strategic mandate agreement.
4. Who is making the decisions on this model?
The Provost is chairing a steering committee whose members are the Deans from all six Faculties, the Vice President, Administration and Finance, the Vice President of University Research, and the Director of Institutional Analysis and Planning (IAP).
The steering committee is supported by members from the Provost’s Office and members from IAP. Additionally, from time to time, a working group has been utilized to provide additional information to the steering committee.
5. How long has the committee been meeting?
The steering committee was formed on March 15, 2013 by the Provost and has been meeting regularly since then, mostly bi-weekly, with the exception of summer months. Moving into 2016-17 the committee has been meeting on a monthly basis.
6. Why have I not heard about this? Are the details secret?
The President has been talking about his three priorities for the University of Waterloo for some time: developing and implementing the strategic plan, developing the strategic enrolment management process and the developing and implementing a new budget model.
The Provost has been informing the various committees (such as Board of Governors and Senate Finance) since 2013, the year in which the steering committee was struck and the exploration began. The steering committee has been using the established principles to developing the prototype (characteristics) of a new budget model. The model development phase is coming to a close and the implementation phase began in summer 2016.
This communication will assist with informing the community about the model.
7. What phase is the model in?
The steering committee has been very carefully weighing the available research and data and is nearing completion of the model development phase. The specific calculations are still being refined.
The impact of shifting to this budget model will be communicated once the conceptual phase is completed and during the implementation phase.
8. Do other institutions use this type of budgeting model?
Yes, many of our peers have adopted, or are in the process of adopting, a similar model within their institutions. University of Toronto adopted their model around 2007 after almost five years of investigation and implementation. Other universities such as McMaster, Windsor, Queen’s, and Saskatchewan are in various stages of research and implementation.
9. What impact will the budget model have on my department?
Academic Support Units will continue to receive ongoing budgets. Any additional budget transfers will be proposed to the Strategic Budget Advisory Committee prior to the start of the fiscal year.
Academic Departments and Schools may or may not be directly impacted by the model. The intent of the model is to allocate revenues and costs at the Faculty-level. It is up to each Faculty to decide how to allocate resources internally according to their own strategic priorities. Some Faculties may decide to recursively apply the budget model to the department/school level, while other Faculties may choose a different strategy that better matches their needs and priorities.
10. Do I need to obtain/secure the Provost’s approval to hire a new or replacement position?
The current hiring and approval process will not change under the new budget model.
11. What is a cost driver?
A cost driver is a measure applied to each academic support unit to allocate its costs across the Faculties. Each Faculty is allocated the measure to proportionally share the academic support unit costs.
12. What does ”transition support” mean?
With the application of the new budget model, some Faculties would not receive as much funding as they would have under the old continuity-based budget model. Transition support has been added to the model, so that no Faculty’s allocation will be less than their 2016/17 base (continuity) budget. This will allow those Faculties more time to adjust their activities and spending to correspond to the new budget model. Funding for transition support is provided through the University Fund.
13. How will research space be paid for?
Space occupied by the Faculties is paid for by the Faculties. Academic Support Unit Space is charged to the Faculties based on the same cost drivers as the rest of their expenses.
14. What is an Academic Support Unit?
Academic Support Units are critical departments that provide the resources, tools and support to foster strong academic programs for the Faculties. These include, but are not limited to, Human Resources, Registrar’s Office, Graduate Studies (including bursaries and scholarships), IST, and Senior Administration. Faculties are charged for these services based on cost drivers.
15. Can I opt out of a support unit if I don’t use it?
There is no option to resign from the services provided by the support units.
16. Will slip-year allocations continue?
The model is based on slip-year allocations to the Faculties. Any revenue received beyond the slip-year will be reviewed by the Strategic Budget Advisory Committee and allocated at the Provost’s discretion.
17. What tools are available to support planning under the new model?
A number of planning tools are currently under development. Information and training will be provided as they become available.
18. How are ancillary units dealt with in the new model?
Ancillary units are not included as they work on a cost recovery basis and have been paying occupancy costs for several years.