What is Responsibility Center Management (RCM)?
RCM is a decentralized, incentive-based budget model. It gives account directors or center managers greater flexibility in and responsibility for generating income and managing expenses. It provides greater budget authority at lower levels of the university administration and decentralizes key aspects of the university’s budget process.
Why did we change to the RCM Budget Model?
The initial impetus for looking at Budget Restructuring came about in the summer of 1996 as a result of learning about the Value Centered Management efforts at other universities. As the executive leadership of the university learned more about these efforts there was an increasing conviction that CMU would be well served to pursue some of these same issues. CMU moved to RCM to accomplish eight primary goals, consistent with our core mission and values:
1. Having better-informed managers
2. Increasing decentralization of authority and accountability
3. Moving to a total cost approach in looking at programs and services
4. Encouraging deans to have more market-focused program offerings.
5. Encouraging greater entrepreneurial behavior by center managers.
6. Requiring center managers to be accountable for total compensation including annual increases
7. Maintaining some strong points from the current system.
8. Keeping the new model as simple as possible.
How does RCM Work at CMU?
All tuition flows directly to the department/college that offers each course. State appropriations are allocated to each department/college based on a simple three-year rolling average of semester credit hours generated in the previous three closed academic years (CMU's fiscal year closes June 30th). Other revenue earned by the department/college for course fees remain in the college to pay for the related expenses. The college is responsible for paying all direct expenses related to the delivery of courses (e.g. faculty salaries, benefits, travel, etc.) and the indirect expenses of the college (e.g. dean's office, support staff, supplies and equipment, etc.). The college is also responsible to pay for a portion of the centralized costs of the institution via an operating assessment. This is visually represented here.
How are assessment rates determined?
All academic and quasi/academic departments are assessed an operating assessment. The assessment percent is based on the academic centers fiscal year gross margin percent. The assessment percent is applied on actual on-campus and off-campus tuition and state appropriations revenue for the fiscal year. The assessment percent is applied on actual tuition, state appropriations and other revenue. The assessment is processed monthly and posted in general ledger account number 959973, operating assessment expense. At year-end, the assessed amount may be adjusted if required based on the final actual revenues received in the fiscal year.
Where can I get training on RCM?
The Office of Financial Planning and Budgets is committed to providing training and support to the University community in the financial planning and budgeting of university resources related to RCM.
- Training opportunities are available for the seasoned finance and budget professional as well as employees who are new to the CMU RCM finance and budget model.
- Training is available for groups seeking additional knowledge about a common set of information or for individuals pursuing training or guidance on finance and budget matters specific to their units.
- Training sessions can be scheduled by sending an e-mail request to the Office of Financial Planning and Budgets at firstname.lastname@example.org.
Do other higher education institutions use RCM?
Many universities, both private (e.g., Harvard, Duke, Johns Hopkins, Syracuse) and public (e.g., the University of Michigan, University of Delaware, Wayne State University) use some form of RCM. CMU adapted RCM to fit our distinctive qualities, culture, organizational elements and mix of mission-related goals.
RCM was developed and has evolved over some 35 years with the University of Pennsylvania being the first higher education institution to implement RCM in 1974.