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Responsibility Center Management (RCM), commonly known as incentive-based budgeting, is a management philosophy designed to align budget allocations with university goals and objectives by decentralizing several components of the University’s budget authority. The goal is to delegate aspects of the University’s operational authority to colleges, centers, and other units, allowing them to align their goals with the University’s central mission: Teaching, Research and Scholarship, and Service. These decentralized models result in increased transparency and empower local leadership to make data-driven decisions.

In an incentive-based budget model a framework is created to direct funding to the units generating the revenue, then charges are assessed to cover the unit’s share of central support expenditures like shared administrative services, facilities & maintenance, and information technology.

The structure of the model also creates a strategic investment fund for executive leadership to leverage to push forward institutional priorities. This discretionary “steering” power also enables cross-functional investment and startup funding for innovative, mission-critical initiatives.

This new approach allows schools and colleges that outperform their budget to retain those additional funds –which can become a virtuous cycle of increased one-time funds and ongoing funds.  It also ties the university together by linking the success of all campuses, colleges, and central support units. Having coordinated goals and actions across campuses will empower the entire USF community as the institution continues to grow into the OneUSF vision.

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USF has long used an incremental approach to resource allocation. This is a traditional, commonly used budget model in which budget proposals and allocations are based on the funding levels of the previous year. Under this model, new revenue results in equal percentage increases for all units; in hard times, budget cuts are typically across-the-board in reach. Incremental budgeting typically does not encourage the type of action needed to create growth, properly reallocate financial resources, or contain costs.

While USF is in a relatively strong financial position, the university is not immune to fiscal pressures facing higher education today. Modifications to the University’s budgeting approach establish a stable, healthy foundation and reduce the risk of more drastic funding adjustments in the future. Furthermore, the new budgeting approach supports a more nimble and financially sustainable model as the university navigates external pressures and pursues internal strategic initiatives.

USF’s new budgeting approach will help the University effectively manage and successfully leverage its resources in the years ahead.

The RCM model distributes resources to the units responsible for generating them. Revenue-generating units will also be responsible for proportionally supporting central services. This decentralization allows departments and units to function in an entrepreneurial manner, leverage resources how each unit sees best fit, and pursue growth opportunities in areas where demand exists.

Since centrally received revenues (tuition and state appropriations) are distributed to colleges, the costs of support services must also be distributed to colleges. Support Units will still set their budgets through a standardized annual process making any incremental requests and explaining spending plan in support of university priorities and any appropriate benchmarks.

Once Support Unit budgets are set, their costs are then distributed across the colleges. Since these are indirect costs, the model uses an activity metric (e.g., employee headcount, student credit hours) to approximate a college’s utilization of the support service relative to the other colleges. This allocation process is independent of the Support Unit budget development process. The activity driver representing a Support Unit is solely used to distribute costs among colleges and does not affect the size of a Support Unit’s budget.

As part of the budget model redesign, the annual budget development timeline will be updated to reflect the needs of a data-driven, incentive-based model. Responsibility centers will see their budget targets guided by model results, while support units will follow a similar process for requesting budget authority. It is important to recognize that moving to an incentive-based approach does not create or destroy wealth across the institution. The model provides a more transparent and dynamic method for allocating funds, but it is not responsible for generating more funds for the university.

Student Success at USF and beyond
The RCM model incentivizes units to pursue initiatives and expand activities that improve student success metrics. Additionally, the increased transparency created by the RCM model and corresponding budget processes enable the University to effectively measure and evaluate targeted investments into students’ success at USF.
 
Faculty excellence in research and innovation
The RCM model distributes indirect cost recovery revenues (F&A funding) to colleges and principal investigators (PIs) who are responsible for conducting the research. Additionally, a portion of state appropriations will be distributed to colleges based on their research activity. These incentives encourage PIs to continue growing their research portfolios and provide a recruitment and retention benefit for USF.
 
Partnerships and engagement with local, national, and global impact
The RCM model establishes a strategic investment fund for the President and Executive Leadership to make strategic investments into community partnerships. Furthermore, the RCM model increases transparency around these investments, providing all units the opportunity to understand these partnerships and coalesce around the OneUSF vision.
 
A diverse and inclusive community for learning and discovery
Decentralizing revenues allows unit leaders, who are closer to the unique needs of their communities, to invest in programs, initiatives, and activities that advance diversity efforts in a targeted manner.
 
A strong, sustainable, and adaptable financial base
The RCM model provides a more transparent and flexible funding model for the university while also providing incentives to pursue entrepreneurial activities aligned with the strategic priorities of USF. This sophistication enables the university to align funding more effectively with the mission of USF while promoting long term fiscal sustainability.

Over the course of FY24, the USF will continue to operate in the historic, incremental budget model. Simultaneously, the Budget and Financial Analysis Office and various budget subcommittees will run the RCM model in the background (or in parallel) during FY24 to identify unanticipated risks, develop mitigation strategies, and continue to socialize the new model prior to go-live in FY25. 

The RCM budget model will be implemented (“go-live”) on July 1, 2024 (FY25). This will be followed by a hold harmless period which will end on July 1, 2026 (FY27).

The hold harmless period begins in FY25 and signifies USF is operating in the new RCM model. However, to allow units ample time to transition into the RCM model, a hold harmless period is established. During the hold harmless period, individual units will understand financial changes related to the RCM model’s parameters without experiencing changes in funding levels because of the RCM model’s parameters. Hold harmless is a recognition that units may not be able to strategically adapt operations to new model parameters within a single year.

Yes. Units will be provided with a data packet encompassing all activity driver data used in the budget model. Among other data items, this includes student, faculty, staff headcount, credit hour data, space, research, and financial data.

If you have additional questions or your campus group would like to be further engaged, please email RCM@usf.edu.