Editor’s note: The University will implement value-centered management (VCM) in July. Rick Kelly, vice president and chief financial officer, recently talked with TIMES to define the budgetary process, explain how it will affect academic and nonacademic units, and describe its benefits to USC.
Q. Can you start by defining value-centered management (VCM)?
A. VCM is a budgetary process that allocates both revenues and expenditures to the department that incurs those expenses or revenues. For example, when a college teaches a student, it would get the revenue generated by the tuition that the student pays. If the student was taking a lab in a chemistry course, the course might have a lab fee that would go to chemistry department. We also might have a student fee for the Strom Thurmond Wellness and Fitness Center, and that money will come to the general fund for the retirement of the debt on the center. In general, tuition and college-specific fees go to the college in which the course is taught.
So do the expenditures. An example: in the past, beyond salaries, there are fringe benefits—annual leave and sick leave and health insurance premiums that are due by the employer, the University. Someone has had to pay those, and it’s 27 percent of an employee’s salary. In the past, we have retained that money inside the general fund and paid those things from the general fund. In the future, we’ll give that money to the departments associated with the employee or the position, and they will pay it.
VCM is a budgetary process that distributes both the revenue and expenses to the department in which they occur. It’s allocating the money according to the source from which it was generated. It’s a logical business linkage process.
Q. You’ve said before that VCM does not create new money.
A. No, VCM does not create new money. It shows you where money is being spent and where money is being collected.
Q. Can you explain how VCM will work for an academic unit and a nonacademic unit?
A. All academic units will be responsible for all of their expenditures, but they also will be responsible for all of their income and will receive all of their income.
We know those two won’t match. There’s not a situation on campus—a couple are close—but there’s not any department or college that will collect enough tuition and fees to pay its own way. Tuition and fees will be supplemented by state appropriations. In reality, that’s basically what we do now.
VCM will be a little different. Academic units will get their revenues, and we’ll supplement their revenues with state appropriations. But they then will be responsible for all the expenses they incur such as fringe benefits.
There currently are services the academic units pay for; some services they get for free. Services they pay for include telecommunications and computer services. Services they get free include payroll, legal services, human resources, and the [services of the] provost’s office.
In the new academic situation, units will receive their tuition and fees and a state supplement to cover the difference between the tuition and fees and what it actually costs them to teach. They also will get funds that will be taken back from them as a tax to pay for services [such as payroll and legal services]. So, in reality, they are made whole.
Q. What about the nonacademic or service units?
A. On the nonacademic or service unit side of the house, the way it will work is this: if you are a unit that produces a service that is chargeable—printing, facilities, telephones, for example—you will now bill the customer, which can be an academic or other nonacademic unit. Nonacademic units that do not have a service to sell will be paid for by the tax.
Q. What are some of the benefits of VCM?
A. VCM is an accountability process. VCM lets the service units as well as the academic units identify exactly what it costs to operate. Then they can use that information against benchmarks.
If we’re providing facilities services for painting a room and it costs $1,000 for us to do it, we’ll be able to benchmark that against what the private sector would charge. So, we can tell whether we’re efficient or not. We can be accountable.
It’s a system that encourages better customer service. We’re trying to treat the people we’re servicing with a degree of respect, much as you would if you went to a private business. If you get bad service at a place, you don’t go back. We want that motivation to be instilled inside our service units.
Q. Other benefits?
A. We’re going to be able to determine exactly what it costs to provide a service, whether academic or nonacademic, and decide if that is efficient. We’ve got benchmarks for, again, painting rooms, providing automobiles, and computer services; so, we have some accountability processes built in. This budgetary process will encourage departments to be more entrepreneurial in identifying revenue sources and improving the quality of their offerings for the students or their customer base.
A bigger benefit is that it will help the University set priorities. In these times of dwindling resources, the ability to be all the things we’ve always been is not possible, and we’re going to have to do things differently. Whether that’s on the academic side of the house or the nonacademic side of the house is something the president and the Board of Trustees will have to determine.
This process will allow the departments, the units, the colleges, the provost, and the president to see how each independent group is functioning.
05/03
|
