The premise of the budget model assures financial responsibility, accountability and fairness. It is based on the concept of an activity-based model but is a hybrid of that.

Framework Revenues are allocated to Faculties based on activity called “Revenue Drivers” (enrolment, teaching, research, other). The Support unit (e.g. Library, SGS, HR, etc.) fixed budgets are deducted from the Faculty revenues based on activity, called “Cost Drivers”. Support Unit Budgets are Fixed Budgets and Faculty Budgets are Activity-Based – hence Hybrid! Resulting amount comprises each of the Faculty.

The percentage charged to various Faculties is reviewed annually based on cost drivers and Faculties may contribute more or less towards a particular support.

Many other universities have adopted a hybrid of activity based budgeting. These include the University of Toronto, Queens University, York University, the University of Saskatchewan and many other universities in the United States and Australia.

BMTF I had established a set of principles that would serve as the framework for the examination of any new budget model. These principles state that a budget must:

• Promote transparency, trust and engagement
• Assure financial responsibility, accountability and fairness
• Advance the efficient use of physical and human resources
• Have predictability and stability
• Enable innovation, creativity and change
• Assign fiscal and academic responsibility to the appropriate levels
• Build the student learning experience both inside and outside the classroom
• Enable rapid response to opportunities
• Ensure the sustainability of areas of existing and emerging excellence in keeping with academic priorities

Additional guidelines adopted by BMTF II and based upon additional feedback are:

• Support and enhance the academic mission (research and teaching)
• Avoid the creation of “silos” and promote interFaculty / departmental cooperation
• Keep things simple, not too many variables
• Utilize the concept of “materiality” – spend time on large items, set a limit under which the item will not form part of the components of a budget model
• Be simple to administer
• A research infrastructure fund (RIF) will be established to promote the support of research at McMaster University

In 2013-14 was the final year under the previous budget system. The model has been continuously reviewed and updated since its implementation in 2014.

The new budget model is an important tool in planning for resource allocation. Having said that, the heightened focus on revenues and costs demands that university leaders remain vigilant in ensuring that academic planning remains the primary factor driving decisions. Accurate and timely information, transparency and stakeholder engagement all play a role in ensuring sound academic planning. The new budget model provides decision makers with clear budget information from which effective decisions can be made.

The inherent decentralization of the budget model does make interfaculty cooperation complicated. It must be noted that the current budget methodology does not make it any less complicated in fact it currently provides no incentive for interfaculty cooperation. There is currently no provision for teaching students in other Faculties and there is no acknowledgement of space that is used in a Faculty to house interdisciplinary programs. The previous budget model had led to Faculties refusing the supply courses to other Faculties’ students and it is the students who have suffered as a result. The new budget model provides compensation that resolves some of these issues. The new budget model provides predictable income for teaching students in other Faculties through tuition sharing, rather than unreliable one-time allocations. The new budget model will also provide transparent information for Faculties to use to determine other revenues and expenses for interdisciplinary programs.

There was a lack of trust in the previous budget model as there was no explanation possible for the existing budget allocations. This has led to mistrust between Faculties and departments which has supported the establishment of silos rather than decreased them.

Each Interdisciplinary program is assigned a home faculty referred to as the “Coordinating Faculty”. The Net Revenue, which is defined as the BIU and Tuition funding (based on program FTEs, rates and weights) less central support unit costs (based on program cost drivers), will be allocated to the Coordinating faculty through the McMaster Budget Model. The Net Revenue allocations are released at a Faculty level; however the Coordinating faculty will request the breakdown by program/department (including space, student and employee FTEs, etc) in order to correctly attribute the Net Revenue to the program. The miscellaneous and other fees will be received directly into the Program account.

Combined or double honours programs between Faculties have been coded in Mosaic to attribute revenue to the Faculty in which the student was enrolled in Year one.

Under the current funding models for research, research does depend on other operating funds for support. The new budget model makes this transparent so that the University can make informed decisions in regard to the support of research.

The creation of the Research Infrastructure fund reallocation some revenue in the model from less research intensive faculties to the highly research intense areas.

Facilities operations and maintenance expenses will be distributed and paid by all units that have assigned space, using a university wide, per-NASM charge. This charge will reflect averaged maintenance costs for the entire campus, not actual costs for individual buildings and does not distinguish between the uses of space. This is an advantage to research because wet and dry lab spaces are both significantly more expensive to run than office space.

Ancillary units are not included in the model as they work on a cost recovery basis and have been paying occupancy costs for several years.

Revenue sharing agreements of multi-institution collaborative programs will continue to be handled outside of the framework.

Support units are critical enablers who provide the resources, tools and support to foster strong academic programs for the activity units. These include (but not limited to) academic administration, student services, administration as well as scholarships. Activity units are charged for these services based on cost drivers.

There is no change planned to the current process of meeting with the Budget Committee. Requests for changes would go to that committee through the envelope manager.

It should be noted that McMaster’s new budget model is not a true activity based budget where support units are concerned. In such a model each net new employee, for example, would result in an increase of $X to HR.

The new budget model will hold support units at their current Year 0 budget allocation levels unless an increase (or decrease) is granted following an application through the governance mechanism. Envelope managers will submit their budgets to the Budget Committee who will recommend to PVPD any changes to budgets. Within the approved budgets, the drivers being developed for the support units will be used solely to allocate costs to activity units and not in aggregate to set the budgets. Activity units’ budgets will be assessed a charge based on the percentage of their use of a support unit.

Facilities operations and maintenance expenses will be distributed and paid by all units that have assigned space, using a university wide, per-NASM charge. This charge will reflect averaged maintenance costs for the entire campus, not actual costs for individual buildings and does not distinguish between the uses of space. This is an advantage to research because wet and dry lab spaces are both significantly more expensive to run than office space.

Space is expensive. Not only are the costs of our current space (operating and deferred maintenance) a large area of fixed costs, with deferred maintenance being significantly under-funded, the costs associated with expanding our facilities are expensive. If we can make better use of existing space, we can save substantial funds that would otherwise need to be devoted to new buildings. Charging for space is an incentive to economize our space and to make efficient use of this constrained resource, rather than trying to hold on to space that may not be required.

Off campus space, with some exceptions such as the Downtown Centre areas used by McMaster administrative staff, are excluded where they have their own arrangements to pay for facilities and utilities. Faculties will be responsible for making these payments directly to the facility such as the RJC and satellite campuses.

The costs of space will be assigned based on prior-year actuals. Changes in assigned space will be reflected in the following year’s projections and there will be a one time adjustment to true up prior year actuals.

All space is assigned either to an activity unit or a support unit. Research space would be typically assigned to the Faculty where the PI is located and the Faculty would be responsible for occupancy costs.