Higher education institutions rely on a wide variety of approaches to manage their budgets, from a centralized system of incremental budgeting to a decentralized Responsibility Center Management (RCM) budget model, with many other options and hybrid approaches in between. You may be one of the many universities still using more traditional incremental budgeting approaches because of its simplicity and ease of use. If so, then you likely run into issues with financial transparency and being able to fully support and validate strategic decisions with accurate financial data. To overcome this, some large universities have moved to RCM budget models, which provide individual units with more autonomy and increased transparency. Although this approach is complicated and not right for everyone, the principles used in RCM budgeting can be applied in more traditional budget model environments to increase transparency without adding complexity.
In this article, we will provide an overview of the different budget model options and how you can take the best of both approaches to improve your operations and strategic decision making.