Rethinking our budgeting process
One of the most enjoyable parts of my job as principal is the opportunity that it gives me to meet fellow alumni from across Canada and around the world.
Those I meet often ask me whether Queen’s is still as they remember. I’m always happy to report that the essence of the Queen’s experience – the closely-knit community, the transformative learning environment, and a drive for innovative research – has endured over the decades, despite our greater size.
Having said that, the university faces a number of financial challenges in the years ahead and we cannot simply take the Queen’s experience for granted. The University is subject to constraints on tuition, static or declining government grants, and significant cost pressures such as a growing list of deferred maintenance and a deficit in our pension plan. These challenges are likely to compound over the coming decade if we don’t do everything we can now to ensure we operate efficiently and to find ways of generating new revenue.
Queen’s is working to address these challenges on a number of fronts, and I want to tell you specifically about a key piece of the puzzle: how we’ve turned the budgeting process on its head in order to make Queen’s more resilient for these challenging financial times while protecting the academic mission.
In the past, operating revenues – principally fees and government grants – flowed to the University centrally and then the administration set annual budgets for academic faculties and shared services (such as the libraries or physical plant). This was done largely based on the budgets from prior years. While this historically-based budget system provided a level of predictability, it created little incentive for individual units to exercise creativity and engage in local planning.
The new budget model replaces that system with one that’s activity-based. This means that operating revenues are attributed directly to the faculties that generate them rather than to the University centrally. In turn, each faculty is responsible for paying its own operating costs, including a charge for its use of the central shared services. The result is that each faculty has far greater responsibility for, and control over, its own revenues and costs.
(In case you’re wondering, none of this affects your philanthropic gifts, which are always credited to the area you’ve specified.)
This new budget model is important for two major reasons: First, it creates transparency in the budget process. It is absolutely clear where money goes, how it accrues, and what one has to do to generate – or save – more of it. This doesn’t mean that every program in a faculty has to be financially self-sustaining, but the model’s transparency does allow the faculty to make informed decisions on whether and where cross-subsidization should occur.
Second, it provides the faculties with an incentive to cut costs where possible and to develop new revenue-generating programs and activities that will allow us to “grow the pie.” Faculties directly reap the benefits of such initiatives under the new budget model.
The exercise of turning the budget process on its head isn’t just an administrative or fiscal transformation; it’s a cultural one as well. It goes hand in hand with a number of other initiatives, including the strategic framework (which I wrote about in a recent issue of the Review), the development of a long term strategic enrolment plan, a push to raise our game internationally, an energy audit to reduce the university’s energy costs and greenhouse gas emissions, and the Initiative Campaign.
There’s nervousness and uncertainty in some quarters as there always is with any change of this magnitude. However, less than a year in, I’m already encouraged by the ideas and plans that the new budget model has unleashed.
These initiatives should result in greater degrees of freedom for our academic units, as well as much-needed financial flexibility for Queen’s as a whole. They are some of the steps that we must take to ensure our financial sustainability over the coming years, while preserving the exceptional Queen’s experience that we value so highly.