Declining enrollments, severe reductions in state funding, rapidly increasing student tuition and fees, and a call for greater accountability by the public – institutions of higher education face catastrophic consequences without a budgeting solution that maximizes resource allocation while addressing equity and transparency.
Struggling to find a way to make financing your strategic plan work? Tyin resources to initiatives and plans can make your plan a quantifiable and achievable reality. As the only solution with native support of Integrated Strategic Planning, SPOL and the Society for College and University Planners (“SCUP”) formed a strategic alliance combining SCUP’s programs and expertise in integrated planning with SPOL’s technological resources.
Institutions of Higher Education normally combine Budget Models to allocate resources with differing degrees of success and SPOL Diamond supports them all. The following list is ranked according to each model’s ability to transform institutional vision into concrete goals and outcomes that directly connect to financial decision making:
- Zero-Based Budgeting (ZBB),
- Performance-Based Budgeting
- Centralized Budgeting,
- Incremental Budgeting.
Some institutions report that 80% of their budgeting is zero-based. Each unit starts annual budget planning with a clean slate. Every unit must re-request funding levels, and all requests must be justified and tied to the institutional strategic plan.
Zero-based budgeting effectively controls costs. Since units must justify line-item budget requests, all money allocated has a purpose, keeping waste and discretionary spending to a minimum. This approach reduces the “entitlement mentality” with respect to cost increases and can make budget discussions more meaningful. SPOL Diamond connects planning with budgeting to strengthen the institution’s zero-based budgeting process for decision-makers.
Performance-based budgeting awards funds based on performance determined by several defined outcomes standards. The most effective performance budgets show how dollars fund day-to-day tasks and activities, how these activities are expected to generate certain outputs, and what outcomes should then be the result.
A performance-based budget gives a good idea of how money is expected to translate into results relative to greater accountability demands. Performance-based funding is not new to higher education, but according to a report released by Virginia Tech researchers, it is “now more likely to be legislatively mandated than at any other time in history.” SPOL Diamond allows institutions to demand justification of budget requests and regular reporting of unit results and action plans for improvement with ties to budget requests.
Centralized budgeting puts all decision-making powers in the hands of upper-level administration. Typically, colleges and universities combine aspects of centralized budgeting with decentralized budgeting.
Professor William Lasher of the University of Texas at Austin sees a more centralized budgeting system as a prudent way to navigate difficult financial circumstances, due to the powers invested in top administrators to make tough decisions for the university as a whole. When combined with zero-based or performance-based approaches, centralized budgeting can review new budget requests in conjunction with expenses necessary to non-optional basic functioning of divisions such as salaries. A common example of centralized budgeting under this rationale is IT equipment—e.g., computers, printers, and software. If faculty require a computer to perform their duties, this cost cannot be compromised and can be centrally budgeted to ensure that the college keeps the cost under control. However, when budgeting is centralized, units may be less motivated to thoughtfully develop requests aligned with institutional strategic planning. SPOL Diamond facilitates upper-level managers’ needs to easily view all requests with justifications for making final decisions on funding allocations.
This is a traditional budget model in which budget proposals and allocations are based upon the funding levels of the previous year. Only new revenue is allocated. Budget cuts are made as a percentage of the institution’s historical budget and are typically across-the-board. Incremental budgeting has historically been attractive to institutions of higher education because it is easy to implement, provides budgetary stability, and allows units and institutions to plan multiple years into the future, due to the predictability of the model.
However, this model is limited in its vision, as it is difficult to determine where costs have been incurred and how these costs contribute to the achievement of the institutional strategic plan. Justifications are also lost as budget decisions are based on broad principles. Institutions are accountable for what they spend in the most basic sense. SPOL Diamond plots three-year expense cycles for each unit’s budget accounts for easy comparison by managers at all levels.
The Diamond Difference
At many institutions, planning and budgeting are large, separate, manual cumbersome processes with different key stakeholders, often supported by different administrative offices and not necessarily with the same cycles and timelines. In every case, successfully implementing Integrated Strategic Planning depends upon critical leadership guidance, discipline, and facilitation. The primary outcome is to transform institutional vision into concrete goals and outcomes that directly connect to financial decision making. Listen to a short clip of Nicholas Santilli, Senior Director for Learning Strategy at the Society for College and University Planning (SCUP) discussing this topic during a recent webinar on the Future of IE: Software to Inform your Integrated Strategic Planning Process.
We welcome the opportunity to discuss how SPOL’s Diamond software can assist your institution in achieving true Integrated Strategic Planning as well as providing solutions to your institutional challenges with Planning, Assessment, Budgeting, Faculty, and Accreditation practices.
Written by: Tony Adam and David Mosley
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