Thoughts on UWO’s New Budget Model

I always tell by budgeting students that the first steps they should take when beginning a public sector job is reading the budget, and learning all they can about the budget model being used. Why? Knowing where your organization’s revenues come from, knowing where those revenues go, and knowing how the decisions to allocate funds are made puts you in position to understand the bureaucracy of which you are a part of, enables you to answer questions regarding your organization, and generally sets you up to understand your organization’s priorities and direction. Simply, knowing the budget and budget processes will make you the smartest person in many rooms.

But what happens when a budget model becomes so indecipherable that it is impossible to understand? What happens when nobody can determine where the money is coming from and going, and much less why? Well, that means it is time to start over. A budget model that is indecipherable makes accountability, transparency, and outcomes-based resource allocation and decision making impossible. Unfortunately that is the situation my university found itself in.

If you work at UW-Oshkosh, or just care about budgeting, I recommend you read this recommendation report from the University Budget Development Committee (On a personal note, this is one point where being a lowly unwashed and untenured assistant professor is devastating to me, this committee would have been so much fun). The committee’s review of the university’s current budgeting model is justly harsh. The model lacks transparency, and nobody seems to understand how or why it looks the way it does. Another thing I frequently tell my students is that ambiguity creates opportunity. Though this can be good in a leadership context, in a budgeting context such ambiguity enables mayhem and corruption. After reading this report it is easy to see the link between some of the recent issues at UW-Oshkosh and the presence of a broken budgeting model.

To be fair, the sorry state of the budgeting model is itself not evidence of anything nefarious. Inertia, muddling through, and objective-drift are all pathologies of large bureaucratic organizations, like universities. The specifics of the current budget model all were likely created to serve some logical function at some point, but spiraled into obsolescence. It would be very easy to simply throw up our collective arms and say the budget model is too complex, but it is reality so we must accept it. So kudos to those who identified the existing model for what it is.

The new model (you can read the draft operating manual here) holds a lot of promise and it premised on the following six goals (quoted from page 3 of the report):

  • Establish incentives for innovative activity leading to revenue generation
  • Establish incentives to manage scarce resources
  • Include mechanisms to encourage inter-unit collaborations
  • Improve the operating budget allocation process by presenting financial data in clear, consistent, and transparent formats so the campus community can understand the financial condition of the university
  • Improve budgetary understanding to improve budget forecasting and financial planning
  • Ensure that colleges/units and central administration each maintain savings and strategic funds to support the college/unit and university mission.

All of these goals are important, but I am drawn to a few themes I see throughout the report. First, is equity. Resource allocation procedures are closely tied to enrollments. Finally normal people (I include myself in that category) should be able to understand why each college and unit gets the resources it does. Second is objectivity. Under the old model decision-making appeared to be mostly relationship- or deal-driven. The transparent allocation of resources should prevent this. Third is transparency and accountability. It will be easy to see where the money is coming from, where it is going, and why. Fourth is incentive alignment. When allocation decisions are arbitrary or indecipherable, it is impossible to ensure incentives at the college and unit level align with the organization’s goals. In fact they often run counter, which helps exactly nobody.

So I am excited to see how this new budget model in action. I am excited for the transparency that will allow my little department to make data-driven decisions. And I am excited to teach my students how the whole thing works. I’ll end by saying that no budget model alone will make an organization successful, create a culture that improves outcomes, or address very real financial challenges. It does however create the conditions that allow for improved fiscal management, a healthier culture, and ultimately improved outcomes. This new model is a necessary and appreciate step.

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