RCM At Rutgers, The State University Of New Jersey

Rutgers Investor Update 12-18-13 2.ppt\16 DEC 2013\7:05 PM\1RCM at Rutgers, The StateUniversity of New JerseyAPLU CIMA – Summer MeetingJuly 13, 2015J. Michael GowerSenior Vice President for Finance & TreasurerRutgers, The State University of New Jersey

BACKGROUND AND RECENT HIGHLIGHTSHistory of Rutgers Rutgers is the only university inthe nation that is a colonialcollege, a land-grant institution,and a leading public researchuniversity Rutgers is the nation’s eightholdest institution of higherlearning– One of only nine colonialcolleges established beforethe American Revolution, andhas a centuries-old traditionof rising to the challenges ofeach new generation Rutgers was chartered in 1766 as Queen’s College, and renamed Rutgers College in 1825 In 1864 Rutgers became New Jersey’s land grant university, as Congress established thenation’s land-grant colleges in response to the Industrial Revolution In 1924, Rutgers College officially became Rutgers University In 1945 and 1956, state legislative acts formally designated Rutgers as The StateUniversity of New Jersey In 1989, Rutgers was invited to join the Association of American Universities, anorganization comprising the top 62 research universities in North America Today, Rutgers has 31 schools and colleges, offering 100 undergraduate majors and morethan 100 graduate and professional degree programs across four major operating units Rutgers has nearly 67.000 students and approximately 23,000 faculty and staff acrossthree campuses in New Brunswick, Newark, and Camden and health sciences campuses inNew Brunswick and Newark In 2012, the New Jersey Medical and Health Sciences Education Restructuring Act waspassed by the New Jersey Senate and Assembly, and signed by the Governor The lawintegrated all units of UMDNJ, except University Hospital in Newark and the School ofOsteopathic Medicine in Stratford, into Rutgers on July 1, 2013

Rutgers Today4

STRATEGIC PLANStrategic FrameworkTo be broadly recognizedas among the best public universities: preeminentin research, excellent in teaching, and committed to communityThemes foracademic distinctionBuilding onFaculty ExcellenceTransforming thestudent experience Ethnicity, diversity andmigration Creating a sustainableworld. Health and wellnessin individuals andpopulations Educating citizensfor a dynamic world Creative expressionand the humanexperience Recruiting andretaining the strongestfaculty Research facilities andinfrastructure Breadth and depth ofgraduate education Professional educationas acore strength Endowment supportfor academic effort Honors Colleges Learning environment Culture/socialenvironment Student supportservices Faculty interactions Physicalenvironment Transportationand accessCollaborationsand partnerships State (NJ)BusinessAlumniUniversityTech transferPrivate-publicEnhancingour visibility Regional and nationalbrand Public spaces Public image Prospective studentsand facultyRobust core of sciences and humanitiesCohesive, vibrant, diverse, and inclusive cultureEfficient and responsive processes, infrastructure, supporting staff, and leadershipFinancial resources sufficient to fund the aspiration

Similar Budget Issues At Other UniversitiesSource: University of Virginia – University Financial Model Presentation (6/24/2014)5

Responsibility Center Management A budget model promoting financial responsibility at aunit level Works most effectively in an environment oftransparency and accountability RCM is a tool – academic leaders have responsibilityfor using the system to advance the missions of theUniversity6

How Does RCM Work?REVENUERevenues are credited tothe Responsibility Centerthat generates them Tuition and Fees F&A Return Other IncomeRESPONSIBILITY CENTERS Schools Research Centers AuxiliariesSchools must then pay fortheir direct expenses aswell as a share of theexpenses to fund theSupport UnitsDIRECT & INDIRECT COSTS Direct Expenses System-wide Support Units Local/ Regional Support Units7

Current Budget Model All Funds Budgeting (AFB) was amodified version of RCM where a flatoverhead on tuition and F&A wasused to fund the costs of supportservices not directly budgeted to theschools Legacy UMD units were on an RCMtype model, different from AFB butlacking in transparency for allocatedcosts8

Why Switch to RCM?Academically Centered “Academics over Economics”Provides schools with betterdata, more control, andgreater flexibility over resourcedecisionsIncreasedaccountabilityand transparencyGreater focus on long-rangestrategic planningRCM enables understandingof “ROI” and priority decisionsgiven limited resources9

Allocation of CostsSystem-wideLocal/ RegionalCosts that areincurred bysystem-widesupport unitsprovidingservices to allCosts that areincurred bysupport unitsprovidingservices at thelocal/ regional orchancellor level10

Allocation of CostsSystem-wide Cost PoolsGeneralAdministrationAcademic andStudent SupportDebt ServiceUtilitiesOperations ch Support11

Metrics for Allocation of Costs Cost pools allocated to the schools and other RCs using ametric that is a reasonable measure of their use of thoseservices The metrics based on “best practices,” verifiable, easy tounderstand, and uniform Our model includes the following metrics: unit expenditures,net assignable square footage, F&A return data, studentheadcounts and faculty & staff FTE12

Who Decided on the RCM Model? RCM Steering Committee (Chancellors, CFOs, SVPFinance, SVP Administration, VP Budget) provided policydirection and came to consensus on the current model.This Committee will continue in FY16, adding the SVPAcademic Affairs. RCM Advisory Committee (representative of deans,support unit heads, and faculty representatives from theSenate budget committee) provided ongoing advice,questions, etc. RCM Technical Committee (business managers frommajor units) reviewed metrics, data sources, andcalculations13

Time FrameDESIGN (FY13)-Read available RCMliterature and researchedRCM models at otheruniversities-Determined indirect costpools and developedmethodologies to allocatethese costs to the revenuegenerating responsibilitycentersPREPARATION (FY14)-Advisory committeesformed to discusspreliminary RCM budgetmodel-Develop preliminarybudget model-RCM budget model iscontinually refined and finetuned based on committeefeedbackTRAINING & TRIAL RUN (FY15)FULL IMPLEMENTATION(FY16)-Training will be providedthrough informationsessions, small focus-RCM will be fullygroups, hands onintegrated into the generalcomputer labs, andledgerdocumentation-A trial run of RCM will beimplemented on paper andrun parallel to AFB-Assumptions will betested and “tweaks” made14

Is the Model Done? No budget model is perfect or “done” Collecting “parking lot” issues for further discussion Current model is a significant step forward in increasing theunderstanding of the true financial position of RCs under acommon set of assumptions Begun project to automate cost allocations for budget andaccounting needs15

Systems Work to Support RCM in Progress Hyperion Financial Management Consolidated chart of accounts for both Oracle and Banner Align monthly closing procedures Hyperion Planning/Budget and Strategic Finance Align current budget planning tool with RCM Provide tools for “what-if” analysis Overall economic model Hyperion Profitability and Cost Management Automate RCM cost allocations (statistics, bases, multiple versions) Foundation for mission-based costing information Oracle Fusion “Cloud-Based” Financial System Consolidating from two legacy general ledgers Reporting Strategy for Financial Data Relating to other data from new and legacy systems Multiple tools for analytics16

Questions?

Hyperion Planning/Budget and Strategic Finance Align current budget planning tool with RCM Provide tools for “what-if” analysis Overall economic model Hyperion Profitability and Cost Management Automate RCM cost allocations (statistics, bases, multiple v