Adams, E. M. (1997). Rationality in the academy: why responsibility center budgeting is a wrong step down the wrong road. Change, 29, 58-61.
The introduction of Responsibility Center Budgeting (RCB) in universities undermines educational policy and further weakens their ability to combat the dominance of materialistic values. According to Edward L. Whalen in Responsibility Center Budgeting: An Approach to Decentralized Management for Institutions of Higher Education, RCB divides a university into a number of units, each of which is responsible for generating its own income and managing its own budgets. Educational policy should be governed mainly by the requirements of human enterprise, not just economic enterprise. What is more, a university should focus on what are commonly called “the arts and the sciences.” RCB forces income-producing courses, projects, and research to be emphasized over ones that serve the educational needs of students.
Bepko, G. L. (1990). An experiment in decentralized management. AGB Reports, 32(6), 27-30.
Institutions are turning to responsibility-centered budgeting to instill campuswide fiscal responsibility. The approach places budget authority within individual academic units and allows decision makers to see their program's share of overhead expenses. The University of Indiana and Purdue University at Indianapolis have undertaken a joint venture using the system.
Carlson, S. (2015, February 13). Colleges 'unleash the deans' with decentralized budgets. Chronicle of Higher Education, 61(22), A4-A6.
The article discusses the use of the Responsibility Center Management (RCM) model for decentralized budgets by U.S. universities and colleges. Topics include the role of deans in an RCM budget process, the implementation of RCM as incentive-based budgeting at the University of Vermont (UVM), and a failed attempt to use RCM at Dominican University of California.
Curry, J. R., Laws, A. L., & Strauss, J. C. (2013). Responsibility center management: A guide to balancing academic entrepreneurship with fiscal responsibility (2nd ed). National Association of College and University Business Officers.
Multiple economic and political forces have driven universities to change how they fund and finance education and research during the last 50 to 60 years. The advent of Responsibility Center Management (RCM) in the late 1970s and early 1980s coincided with a poor economy that had adverse impacts on investments, employment, and state revenues. Similarly, the economic recession of 2008--and its lasting effects--prompted many universities to seek greater efficiencies and unleash their entrepreneurs by implementing an RCM system. Authors John R. Curry, Andrew L. Laws and Jon C. Strauss describe the many nuances and techniques institutions can use to implement RCM in this newly revised second edition.
Deering, D. & Sá, C. (2018). Do corporate management tools inevitably corrupt the soul of the university? Evidence from the implementation of responsibility center budgeting. Tertiary Education & Management, 24(2), 115-127.
The use of corporate management tools in universities has been widely critiqued in recent decades, as it is viewed as undermining academic goals and promoting marketization and corporatization. Responsibility center budgeting (RCB) is one popular management tool that has been decried as promoting market logics, internal competition and institutional fragmentation. This comparative case study investigated four North American universities that employed RCB for several years, to investigate the relationship between unit autonomy and coordination. Site visits and interviews with key informants were conducted at the four universities, supplemented by document analysis. The analysis identifies widely different experiences between two sets of universities. Findings show that the ability of the central administration to promote vertical coordination is critical to mitigating the adverse consequences of RCB.
Fethke, G. C. & Policano, A. J. (2019). Centralized (CAM) versus decentralized budgeting (RCM) approaches in implementing public university strategy. Journal of Education Finance, 45(2), 172-197.
This paper compares and critiques two budgeting models used at public universities: Central Administrative Management (CAM), and Resource Centered Management (RCM). These approaches represent alternative resource allocation methods: under CAM budgets are assigned centrally based primarily on allocation history, while RCM relies on decentralized rules and pricing mechanisms that react to current conditions. A primary question is: Do administrators possess the needed expertise and information to make informed budgetary decisions, or are decisions better executed in a decentralized manner, relying on "market-like" prices as guides? Effective budgetary frameworks display the following features: (1) transparency; (2) ease of implementation; (3) predictability; (4) responsiveness; (5) alignment of incentives; (6) minimal influence costs; (7) economic efficiency; (8) equity; (9) internalizing private benefits and costs; (10) internalizing public benefits and costs; and (11) increasing revenue/reducing costs. Our assessment is that CAM is preferred for its ease of implementation, predictability, perceived fairness, and conceptual if not actual ability to deal with public benefits and costs. RCM has the advantages of transparency, ability to respond to changes in the environment, incentive alignment, reduction of influence costs, economic efficiency, internalizing private benefits, increasing revenue, and reducing costs. Neither model performs effectively unless there is a carefully developed vision and mission that set priorities.
Hall, G., Metsinger, J., & McGinnis, P. (2003). Decentralized budgeting in education: Model variations and practitioner perspectives. (ED482686) ERIC.
In educational settings, decentralized budgeting refers to various fiscal practices that disperse budgeting responsibility away from central administration to the line education units. This distributed decision-making is common to several financial management models. Among the many financial management models that employ decentralized budgeting are site-based budgeting, contribution margin budgeting, and responsibility center management or responsibility center budgeting. While all of these models incorporate distributed decision making into their operation, the span of budgetary decision making responsibility appears to be related to the educational unit's influence over its revenue stream. All three models share characteristics common to both public school and postsecondary educational settings. From the perspectives of budgeting practitioners, the diversity of decentralized budgeting in educational settings is apparent. From public school settings, where administrators focus their budgeting energies on controlling costs, to universities, where administrators pursue alternative revenue sources, decentralized budgeting manifests the characteristics of different financial management models. Across the range of diverse manifestations, decentralized budgeting in education attempts to empower fundamental unit personnel with the ability to participate in, influence, and take ownership of expense and/or revenue decisions for which they are ultimately and uniquely responsible.
Harris, N. (2020). Academic deans reveal their leadership styles: Annual budgeting becomes an exercise in how authority is enacted. Planning for Higher Education, 48(4), 35-45.
The article offers information on academic deans that are shaping the future of institutions. Topics include examines that several colleges and universities have replaced centralized, incremental budget models with decentralized, revenue-centered models; and considered that Responsibility Center Budgeting (RCB) and Responsibility Center Management (RCM), transfer budgetary authority from central administrators to deans.
Heath, R. (1993). Responsibility center budgeting: A review and commentary on the concept and the process. Journal of the Association for Communication Administration, (1), 1-10.
This article focuses on the concept and the process of responsibility center budgeting. Academic publications, professional newsletters, convention conversations, E-mail, departmental bulletin boards, and hallway conversations at academic institutions are filled with voiced concerns about the future of higher education--specifically budgets related to academic and research program support. In tough times, innovation is essential. One innovation is responsibility center budgeting (RCB) which may empower faculty to feel confident that if they generate more income and lower costs for their colleges and universities they will be allowed to determine how those extra funds will be spent. Since faculty talent is the only service commodity that is for sale on campuses, RCB is a concept intended to encourage faculty members and academic officers to innovate to increase revenue and reduce costs. The motivation for this innovation is the opportunity to directly benefit from the rewards of their labor and thereby have more finances to strengthen their academic and research programs.
Honeyman, D. S., et al (Eds.). (1996). A struggle to survive: Funding higher education in the next century: Seventeenth annual yearbook of the American Education Finance Association, Corwin Press.
This book examines the issues surrounding the funding of higher education. The book is divided into 10 chapters: (1) "The Financing of Higher Education" (David S. Honeyman and Megan Bruhn); (2) "The Value of Investments in Higher Education: Capturing the Full Returns" (Terry S. Geske); (3) "State Funding Formulas: Promise Fulfilled?" (Mary P. McKeown); (4) "Accountability and Quality Evaluation in Higher Education" (John V. Lombardi and Elizabeth D. Capaldi); (5) "Benefit and Retirement Issues in Higher Education" (Jay L. Chronister); (6) "Responsibility-Centered Management: An Approach to Decentralized Financial Operations" (Edward L. Whalen); (7) "Funding Public Education With a State Lottery: Is Education the Winner?" (Susan Robinson Summers); (8) "Funding for Community Colleges: Changing Patterns of Support" (Dale F. Campbell et al.); (9) "Funding the Multipurpose Community College in an Era of Consolidation" (James C. Palmer); and (10) "Competition for Limited Resources: Realities, Prospects, and Strategies" (Richard L. Alfred). (Individual chapters contain references.) (MAH)
Jessup, L. & Kesner, I. (2015). Reaping rewards from RCM. BizEd, 14(1), 40-41.
The article discusses the views of Idalene Kesner, dean and Frank P. Popoff, Chair of Strategic Management at Indiana University's Kelley School of Business in Bloomington. Kesner and Popoff discuss financial model of the school. Topics discussed include responsibility-centered management financial model; how it gives the school more authority and responsibility to control its own finance; and it allows the school to accumulate resources, make investments, and plan for the school's future.
Kosten, L. A. & Lumina Foundation (2016). Outcomes-based funding and responsibility center management: Combining the best of state and institutional budget models to achieve shared goals. (ED587419). ERIC. Lumina Issue Papers, Lumina Foundation.
State governments serve as a key funding source for public higher education. An alternative to historically based state subsidies or enrollment-based formulas, outcomes-based funding allows states to convey goals for higher education by allocating state tax dollars based on measures of outcomes. Within higher education institutions, the Responsibility Center Management model engages deans and other mid-level managers in the responsibility and accountability for revenue generation as well as expense management. Policymakers will benefit from understanding this approach and how it could be used in concert with outcomes-based funding to support the development and delivery of new academic paradigms, expand access to underrepresented students, and, ultimately, increase educational attainment for a greater number of people. This article describes the potential alignment between incentives created by the Responsibility Center Management model and goals of outcomes-based funding. With an integration of the two models, there is a greater assurance of achieving the goals of both--fiscal sustainability and student success. By using Responsibility Center Management, college and university administrators are better able to marshal resources to help students complete their degrees and other credentials while also reaping the benefits of an outcomes-based funding system that directs public funding toward institutions that are doing just that.
Lovrinic, J. G., et al. (1993). "Developing an economic model: How one midwestern university is approaching cost control." Business Officer, 27, 34-38.
Indiana University-Purdue University Indianapolis developed an economic model for resource allocation in its dental school and undergraduate business administration program, using responsibility centered management and total quality management techniques. The evolution, design, results, and limitations of the model are discussed.
Maciariello, J. A. & Enteman, W. F. (1974). A system for management control in private colleges. Journal of Higher Education, 45(8), 594-606.
A systematic procedure is described whereby private colleges may establish long-range objectives and allocate their limited resources to programs that are most productive in .fulfilling these objectives. Dynamic relationships are identified among the economic variables that are responsible for the problems these colleges presently face, and an orderly procedure is offered for coping with these problems. The procedure provides for a long-range planning process, a responsibility-center organization structure, a program-budgeting process, and a technique for reconciling program budgets with the accounting system. Results of the actual application of this system to a private college are reported.
Massy, W. F. (1990). Budget decentralization at Stanford University. Planning for Higher Education, 18(2), 39-55.
Budget decisions in large institutions should be decentralized. Decentralization can be accomplished by responsibility center budgeting, block budgeting, or combinations thereof. The system should be designed so that organization unit heads have maximum incentive to be efficient and to optimize decisions on an institutionwide basis where applicable.
Mayer, L. J. (2011). Assessing the role of RCM in decision-making about discontinuing academic programs and restructuring academic units. [Doctoral dissertation, University of Pennsylvania]. ProQuest LLC.
The path of growth and development for many American colleges and universities is to add new programs, majors, minors, departments, institutes, and centers to their academic portfolios in order to meet new demands and pursue new knowledge. Their source of funding is primarily through raising tuition rates and increasing non-tuition financial resources, including fundraising campaigns, endowments, and auxiliary services. The option rarely taken is scaling back or even eliminating old academic programs to make room for new ones. Historically, there has been little incentive to reduce academic programs. Student demand for higher education has been virtually insatiable and institutional capacity for implementing high tuition rate increases has been virtually unlimited. However, as a result of increasing economic pressures in recent years, the American higher education business model has been severely challenged and will likely need to be modified to ensure the stabilization of its financial underpinnings going forward. The specific issue that is examined in this study is the decision-making process that colleges and universities use in determining which academic programs to eliminate, consolidate, or reorganize. A particular focus of the research is the role that Responsibility Center Management (RCM) plays in the program closure and reorganization decision-making process and how institutions that use RCM differ from those that do not. RCM is a financial management model which allocates all direct and indirect revenues as well as direct and indirect expenses to individual academic units. The model identifies which programs are generating surpluses, deficits, or break-even results, and how they all look in combination with one another in forming the overall cross-subsidy profile of the institution. The research for this study includes a qualitative comparison case study analysis using three cases, all of which are private universities that have decided to discontinue or reorganize academic programs--one that uses RCM, one that does not use RCM, and one that uses a hybrid combination of RCM and non-RCM. The study evaluates the advantages and disadvantages of each approach. Preview available.
McBride, A. B., Neiman, S., & Johnson, J. (2000). Responsibility-centered management: A 10-year nursing assessment. Journal of Professional Nursing, 16(4), 201-209.
Describes the implementation of responsibility-centered management, a decentralized model giving deans responsibility for expanding and using resources, at Indiana University's nursing school. Discusses how it led to creation of an information-rich environment, strategic decision making, and a performance-based reward structure.
Meisinger, R. J. (1994). College and university budgeting : an introduction for faculty and academic administrators. NACUBO.
Developed and edited by the National Association of College and University Business Officers' (NACUBO's) Accounting Principles Council, this guidebook, written by highly experienced, seasoned college and university leaders, is designed to help readers make sense of today's world and provide the right tools to make the right decisions.
Myers, G. M. (2019). Responsibility center budgeting as a mechanism to deal with academic moral hazard. Canadian Journal of Higher Education, 49(3), 13-23.
Universities face inherent informational asymmetries. These make university budgeting prone to various challenges including moral hazard. The last forty years has seen some large research- intensive universities move from centralized incremental budgeting to decentralized Responsibility Center Budgeting (RCB). It is assumed that a faculty chooses a level of costly effort in generating revenue for the university. The level of faculty effort is not observable by the central administration. When there is no revenue uncertainty or when the faculty is not risk averse, pure RCB is best from the perspective of the administration. The intuition is that pure RCB fully aligns financial responsibility with academic authority, that is, it makes the faculty the residual claimant. Once the faculty is risk averse, partial RCB is optimal. Partial RCB provides a balance between providing the right incentives to the faculty and the university reducing the revenue risk faced by the faculty.
Neal, J. G. & Smith, L. (1995). Responsibility center management and the university library. The Bottom Line, 8(4), 17-20.
Responsibility center management (RCM) is a new fiscal management system which has been introduced at several American universities. It seeks to link academic responsibility and budgetary authority and to promote innovation, entre-preneurship, and cost containment. Describes the implemen-tation of RCM at Indiana University with a focus on the impact on and role of academic support units such as the library.
Ozan, J., Kramer, D. A., & Curs, B. R. (2018). Growing the pie? The effect of responsibility center management on tuition revenue. Journal of Higher Education, 89(5), 637-676.
Responsibility center management (RCM) budgeting systems devolve budget responsibility while creating funding formulas that provide incentives for academic units to generate revenues and decrease costs. A growing number of public universities have adopted RCM. The desire to grow tuition revenue has often been cited as a rationale for adoption. Previous research has not assessed the effect of RCM on institution-level tuition revenue. Traditional regression methods that calculate “average treatment effects” are inappropriate because RCM policies differ across universities. This study employed a synthetic control method (SCM) approach. The SCM approximates the counterfactual for an RCM adopter by creating a synthetic control institution composed of a weighted average of nonadopters. The SCM estimates the effect of RCM separately for each adopter rather than estimating the average effect across multiple adopters. We used SCM to analyze the effect of RCM adoption on tuition revenue at 4 public research universities that adopted RCM during 2008 to 2010. We found a positive relationship between RCM and tuition revenue at Iowa State University, Kent State University, and the University of Cincinnati. The magnitude of this relationship was moderately large relative to placebo adopters. We found no relationship between RCM and tuition revenue at the University of Florida.
Priest, D. M., Becker, W. E., Hossler, D., & St. John, E. P. (Eds.). (2002). Incentive-based budgeting systems in public universities. E. Elgar.
Why incentive-based budgeting systems in the public sector and why now? / Douglas M. Priest ... [et al.] -- The case, if any, for responsibility center budgeting / Edward L. Whalen -- The efficiency of responsibility center management within state universities / John Douglas Wilson -- Revenue flux and university behavior / Larry L. Leslie, Ronald L. Oaxaca, and Gary Rhoades -- Responsibility center budgeting and management in Indiana University / Kenneth R.R. Gros Louis and Maynard Thompson -- Responsibility center budgeting at the University of Toronto / Daniel W. Lang -- Activity-based budgeting at the University of Michigan / Paul N. Courant and Marilyn Knepp -- Budget incentive structures and the improvement of college teaching / Michael B. Paulsen and Edward P. St. John -- Reward structures and faculty behavior under responsibility center management / William E. Becker and Neil D. Theobald -- Using performance indicators to evaluate decentralized budgeting systems and institutional performace / Robert K. Toutkoushian and Cherry Danielson -- Incentive-based budgeting : an evolving approach / Douglas M. Priest, Edward P. St. John, and William Tobin
Robbins, D. L. & Rooney, P. M. (1995). Responsibility center management: An assessment of RCM at IUPUI. Business Officer, 28, 44-48.
Indiana University-Purdue University at Indianapolis is the first public institution to implement Responsibility Center Management (RCM), a comprehensive decentralized, incentive-base financial management system. RCM has strengthened academic planning, budget management, general accountability, and multiyear fiscal planning. Organizational communication has also improved because of the information-rich system.
Rutherford, A. & Rabovsky, T. (2018). Does the motivation for market‐based reform matter? The case of responsibility‐centered management. Public Administration Review, 78(4), 626-639.
Abstract: Organizational theorists have long examined the implications of market‐oriented policies for public agencies. Current research often aims to understand the effects of policies imposed on organizations by external stakeholder groups, but few studies have attempted to gain a better understanding of what mechanisms cause agencies to select into these strategies. The purpose of this article is to understand, first, which factors make an organization more likely to adopt a decentralized, market‐based budgeting system—termed “responsibility‐centered management (RCM)—and, second, whether this type of system has implications for organizational performance. Using data on doctorate‐granting public and private nonprofit four‐year universities in the United States, the authors find that mission, resource dependence, and state party control influence the take‐up of RCM. In terms of effects, RCM creates winners for graduation rates (white students) and degree production (science, technology, engineering, and math departments), which raises questions of equity across groups.
Stocum, D. L. & Rooney, P. M. (1997). Responding to resource constraints A departmentally based system of responsibility center management. Change: The Magazine of Higher Learning, 29(5), 50-57.
A number of universities have implemented Responsibility Center Management (RCM), a financial management system that decentralizes fiscal authority and responsibility. RCM gives significant financial decision-making powers to individual academic units in a university, and the income, growth, and development of these units depends on their ability to regulate costs while providing high-quality, good-value academic programs. An important feature of RCM is the flexibility it affords deans in moving funds from one category to another, according to need. If RCM is left to operate without limits, however, academic programs can be driven purely by financial entrepreneurship. The history of a departmentally based system of RCM at Indiana University-Purdue University Indianapolis is discussed.
Strauss, J. C., et al. (2002). Responsibility center management: Lessons from 25 years of decentralized management. (ED469330). ERIC.
Decentralization of authority is a natural act in universities, but decentralization of responsibility is not. A problem faced by universities is the decoupling of academic authority from financial responsibility. The solution proposed in this book for the coupling is Responsibility Center Management (RCM), also called Revenue Responsibility Budgeting (RRB). RCM attempts to couple decisions with their consequences by making a fundamental trade: ownership of revenues for financial responsibility, including the indirect costs of programs. Since its evolution 25 years ago, RCM has met with mixed success. This book explores how well it is working, contrasting the promise of RCM with its performance. The history and current state of RCM confirm, in part, the early claims of efficiency and effectiveness, but the criticisms and lessons learned make very clear that formal decentralized management requires never-ending vigilance to assure that the fundamental incentives are not being subverted. The chapters are: (1) "Introduction"; (2) "Principles"; (3) "Budgeting and Planning"; (4) "Guidelines"; (5) "Details"; (6) "Answering the Critics"; (7) "Promise and Performance"; (8) "Lessons Learned"; and (9) "Conclusions." (Contains 14 references.)
Tambrino, P. A. (2001). Contribution margin budgeting. Community College Journal of Research and Practice, 25(1): 29-36.
Describes Iowa Valley Community College District's Contribution Margin Budgeting (CMB) program, successfully implemented to stave off bankruptcy. In this program, each responsibility center receives credit for all income generated and is charged for all expenditures, and each must build its own reserve against revenue shortfalls and unanticipated expenditures.
University of Alabama at Birmingham (n.d.). Responsibility center management. from Responsibility Center Management.
Answers to common questions about RCM and about UAB's new budget model specifically.
Volpatti, M. C. (2013). Privatization of public universities: How the budget system affects the decision-making strategy of deans. [Doctoral dissertation, Indiana University]. ProQuest LLC.
In response to lower funding commitments, many public colleges and universities have elected to incorporate decentralized budgeting systems, one of which is Responsibility Center Management (RCM). As public institutions are becoming more dependent on tuition dollars because state appropriations are declining, deans have an increased responsibility as financial managers. With RCM, the leaders of the academic units have the freedom to make decisions which affect the process of generating funds to increase the sustainability of the programs. The purpose of this qualitative case study was to better understand the management strategy of deans when making financial decisions and how the financial budgeting system, centralized or decentralized, of the institution influences the decision-making process for deans, the agents acting as the financial managers of the schools and colleges. Deans at two Midwestern universities, one using RCM and one using a centralized budgeting system, were interviewed asking each participant questions regarding demographics, prioritization of initiatives when seeking additional funding not associated with state appropriations, and linking the mission of her or his school or college to decision-making processes. Two major findings emerged. First, the financial decisions made by deans operating in both budget systems were strikingly similar. Second, deans in a centralized budget system identified that there were more complexity and less autonomy when working with central administration in executing financial decisions because the dean must align the school's mission with the mission of the university while deans operating under an RCM system did not feel the pressure to directly align the mission of the school and the university. In addition, the study discovered that deans used a constructive model as a management strategy as outlined by Chafee (1983). Preview available at https://www.proquest.com/docview/1450601743.
Whalen, E. L. (2004). Decentralizing the budget. BizEd, 3(4), 28-29.
Delves into the issue of decentralization in U.S. business schools. Comparison made between the centralized and decentralized budgeting systems; Discussion of responsibility center budgeting for schools;Questions that business school deans must consider regarding the matter of budgeting.
Whalen, E. L. (1991). Responsibility center budgeting: An approach to decentralized management for institutions of higher education. Indiana University Press.
This book offers a description of responsibility center budgeting, a management tool for fiscal and academic management at institutions of higher education, through a description of implementing this approach at Indiana University, a process that began in 1987. Responsibility center budgeting is based on three principles: (1) all costs and income attributable to each school and other academic unit should be assigned to that unit; (2) appropriate incentives should exist for each academic unit to increase income and reduce costs to further a clear set of academic priorities; and (3) all costs of other units, such as the library or student counseling, should be allocated to the academic units. The book's 11 chapters have the following titles: "When It All Started,""Principles of Responsibility Center Budgeting,""Defining Responsibility Centers,""Attribution of Income,""Allocation of Costs to Responsibility Centers,""Determining Total Costs,""Bringing Income and Expenditure Together,""Implementation,""Budget Construction Under Responsibility Center Budgeting,""Outcomes and Opportunities," and "Care and Feeding of the Monster." An appendix treats the determining of total costs. An afterword by John R. Curry describes the implementation of the same approach since 1982 at the University of Southern California. Included are an index, 56 tables and 16 references.
Wilms, W. W., Teruya, C., & Walpole, M. (1997). Fiscal reform at UCLA: The clash of accountability and academic freedom. Change: The Magazine of Higher Learning, 29(5), 40-49.
The attempt to fix the multimillion-dollar shortfalls of the 1990s in UCLA resulted in a clash between accountability and academic freedom. The shortfalls made it necessary to implement significant cuts in operating budgets, and the resulting conflict between the administration and the faculty revealed the framework of the powerful academic subculture usually submerged beneath the surface of everyday activities. A number of budget reductions between 1991 and 1993 proved to be insufficient, and Chancellor Charles E. Young and his staff introduced a program in 1994 to push decisions concerning revenues and costs down to individual academic and administrative units. This model, which was based heavily on the philosophy of Responsibility Center Management that was being enforced in a number of other universities, caused faculty members to worry that harsh business practices would irrevocably alter university life. The history of fiscal reform at UCLA is discussed in detail.