Until last year Birmingham operated an ICAM (Indirect Cost Allocation
Model). This was actually a misnomer as it distributed direct costs such as
premises charges (we operate building meters so can charge for building
services) as well as the indirect costs of the central services. The actual
indirect model made use of many drivers that acted as proxies of size and
activity for the attribution. So Finance Office costs were allocated via
expenditure figures, Academic Office costs were allocated via student
numbers etc.

This made for a very complex model (30+ units had there costs allocated by
this method, and the underlying data covered staff, student no.s,
expenditure and space, all averaged over 3 years). At some point in the past
it was decided that rolling averages would smooth the year on year
allocations. But the model was almost entirely relative and distributive, so
changes in the costs to be allocated produced variances, while changes in
individual budget centres produced variances across the whole body.

This all changed this year.
We now explicitly refer to the direct charges, and have a one size fits all
"tax rate" for the indirect costs that form the "Corporate Services
Contribution". This is a tax applied against all staff related expenditure.
Ie we have moved to a single driver.
The advantages of this is that the method is highly transparent. It allows
financial planning to take place, an impossibility under the old methodology
given variances occured because of changes elsewhere.
There are still problems with it though. There are areas that carry out CPD
work that involves buying in teaching/consultants on behalf of clients.
Effectively the unit is acting as an agent and passing charges straight back
to the clients, but being charged for the activity that gets labeled as
expenditure on staff. (But it could be worse in that the tax isn't against
all expenditure!) This problem is exacerbated because under the previous
model "traditional" student numbers were the heaviest driver, and the unit
in question was light on these students.

Over the last ten years the resource for the centre has not increased at the
same rate as academic expenditure (and by analogy student number growth,
increases in space occupied etc). From the centre's perspective the new
model allows it to grow as the academic units grow (ie  by fixing the tax
rate from year to year).

I remember Mike's promise of the AUA session. Surely now is the time to be
developing and submitting a title? Maybe there could be a practical element
based on role play/game theory (a Monopoly board with Uni's as streets,
although we'd probably spend 3hrs trying to decide on which institution went
where...)

Dave

--
Dr Dave Radcliffe
Senior Planning Officer
Planning & Policy Development, Academic Office
University of Birmingham


-----Original Message-----
From: Michael Milne-picken [mailto:[log in to unmask]]
Sent: 28 June 2002 13:38
To: [log in to unmask]
Subject: Re: Resource Allocation Models


There may be a semantic debate here.  If central costs are fixed and have to
be 'bought into', then there is no practical difference between a top-slice
and a charge-back system, other than the psychology of how it is presented!

We use a slightly different language:

The University of Central Lancashire resource allocation model is
income-led.  Income is attributed to cost centres earning it (ie academic
departments and faculties), so they know how much they bring in from HEFCE
grant, fees, other grants etc.  They then make a percentage contribution to
indirect costs (these are not necessarily all 'central', for instance the
contribution pays for telephones, IT workstations, buildings etc used by the
cost centres but not currently charged to them).  The information about
income attributed by faculties/departments and calculations/assumptions
about costs in faculties/services is totally open and transparent - and
available to anyone who wants/needs  it.  It is mostly based on the HEFCE
model, as applied through the University's modular scheme.

The key management decision is about what the contribution rate is - at the
moment it varies between faculties and activities, but there is a plan for
convergence being developed.  The decision is taken in effect by the Vice
Chancellor, advised by his senior management.  The principal budget holders
(Deans) are consulted about the issues and take part in the discussions.
The strategy aims over time to increase the proportion of University income
allocated to Faculties, enabling them to retain a greater proportion of
income earned.  Service budgets are also increasingly becoming income led,
eg the library learning materials fund is now directly linked to gross
teaching income.

I promised to do a session on it for an AUA conference - hopefully we will
get one together for Derby in 2003!

Mike Milne-Picken
Head of Planning & Performance Review
University of Central Lancashire
PRESTON
PR1 2HE
Tel: +44 (0)1772 892391
Fax: +44 (0)1722 892943
[log in to unmask]
www.uclan.ac.uk/planning

>>> [log in to unmask] 28 June 2002 12:34:17 >>>
Dear Colleagues

I wonder if some of you could give me some background on your resource
allocation models.  I have recently moved University and have been asked
to work towards devolving budgets to Schools (this is currently
controlled centrally).  I am familiar with the model from my last
University but I am not sure how typical it was.

Essentially what I would like to know is how you treat central costs.
Do you top-slice for central costs (Registry, Library etc) and then use
an income model to distribute the remainder,  or do you charge central
costs back to Schools/Faculties?  If you charge central costs, on what
basis is this done?

I would be grateful for any general information on your resource
allocation model.

Thanks

Martin Smith
Director of Planning and Development
University of Paisley
0141 848 3970
[log in to unmask]


Legal disclaimer
--------------------------

The information transmitted is the property of the University of Paisley and
is intended only for the person or entity
to which it is addressed and may contain confidential and/or privileged
material.  Statements and opinions expressed in this
e-mail may not represent those of the company.  Any review, retransmission,
dissemination and other use of, or taking
of any action in reliance upon, this information by persons or entities
other than the intended recipient is prohibited.
If you received this in error, please contact the sender immediately and
delete the material from any computer.

--------------------------