Budget Model FAQs

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General FAQs

What is a typical timeframe for an institution to shift from an incremental model to a new budget model framework?

Organizational complexity and change management capacity vary across institutions, so implementation timeframes vary. Some institutions adopt new models in as little as six months, while others continue their implementation efforts for several years. Regardless of exact timing, implementation should include close coordination between academic and administrative leadership, effective communication of the changes, and a focus on milestones and timelines.

Research by the Huron Consulting Group, which URI has hired to consult on its transition to a new budget model, of institutions who have made similar budget model transitions shows that the average timeline for implementation is 18 to 30 months. The difference in this range is the amount of time dedicated for infrastructure (e.g., new budget system development) and the ramp up period selected prior to go-live. 

Will the new model lead to budget cuts? 

The new URI budget model does not create or eliminate resources but instead provides transparency into how those resources are generated and used. This transparency better enables the University and its colleges to better manage resources, identify opportunities for generating additional resources, and more effectively plan. 

What is “subvention”? 

Subvention is the term used for funding that is administered by the University’s central administration to academic units in need of additional funding. 

Does subvention reflect poor management? Is subvention expected to be eliminated through revenue growth or cost reductions? 

Subvention is allocated for a myriad of reasons across higher education. The goal is to make the use and allocation of subvention explicit in university decision-making and ensure that subvention leads to the best institutional and student outcomes. It is important to note some academic units may always need subvention, which is not always indicative of poor management. It is most commonly a reflection of the inherent pedagogical nature of a unit (e.g., accreditation requirements for select faculty-to-student ratios). The goal is to have transparent conversations about the budget setting process, which enables adequate support of units while working to lessen the reliance on subvention over time. More information will be shared as the subvention allocation process becomes further developed. 

Will this budget model allow colleges and units the ability to retain any unspent budget in a given fiscal year? 

URI’s new budget model will incorporate a carry forward mechanism to allow both academic and support units to partially retain remaining resources at the end of the fiscal year. Excess resources could be created through revenue generation or cost containment. An institutional fund balance policy will be developed to inform the recommended level of accrued balances that should be maintained at various levels of the organization. 

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Budget Model Methodology and Philosophy

What is URI’s new budget model?

URI’s new budget model aligns resource generation and use at the unit level by using allocation metrics. Allocation metrics utilize activity-level variables that best represent the function. For example, tuition may be allocated to units based on their credit hour generation. If we were to label the current URI model design being developed, the best descriptor is a hybrid model reflective of characteristics from decentralized, performance-based, and incentive-based budget models. The goal of the URI budget model is to incentivize select behaviors in alignment with the University’s overarching strategic plan, such as growing research and supporting student retention and progression, while also recognizing the unique missions of the university’s academic units. 

How is URI’s new proposed budget model different from URI’s current model? 

The current URI budget model provides annual budgets reflective of historical decision-making. In that way, the current budget model lacks activity-based components, meaning resources are not allocated in a way that explicitly considers program growth, enrollments, faculty size, etc. The current model has no mechanisms in place to incentivize units to perform in alignment with the University’s mission or strategic plan. The new model aims to allow units who are more productive in the identified incentive areas to receive more funding. 

Which funding sources are included in the new model’s allocations/distributions? 

To demonstrate all available resources, all funding sources are included in the new URI budget model, except for agency pass-through and capital funds. Only select unrestricted funding sources (generally tuition, fees, and state appropriations) will be included in the new model’s allocation formulas. Restricted and designated dollars (e.g., gift funding, research funding, auxiliary funding) are excluded from the formulas but are reflected in the model as available resources for units to spend. 

How does a new budget model help URI achieve its goals in the strategic plan, FOCUS URI? 

The new URI budget model will support the University’s strategic plan by leveraging industry leading practices to promote transparency and accountability as the University seeks to be more fiscally sound and agile. The model also encourages student success and research activities through financial incentives for high-performing units. Finally, this model will reward academic units that demonstrate progress in support of institutional key performance indicators (KPIs) that are outlined in the FOCUS URI Strategic Plan. 

How does the new budget model support and incentivize research? 

The new URI budget model incentivizes research by allocating specific revenue sources to those units conducting research activities: 

• For all funded grants, contracts and cooperative agreements bearing an indirect cost rate, one hundred percent of Indirect Cost Recovery (IDC) revenues be allocated to the unit(s) responsible for generating the activity. 
• A portion of state appropriation funds will be allocated based on a respective unit’s annual research activity. 
• Research spaces (i.e. wet labs) will not be assessed a higher price per square foot than other types of spaces even though they are more expensive to operate and maintain. This decision was made intentionally so as not to disincentivize ownership of research-related spaces. 

How does the new model encourage interdisciplinary activity? 

The new model will encourage interdisciplinary activities by allocating tuition revenues to academic units based on two different, but related, credit hour production variables; credit hours based on the college of instruction (teaching) and credit hours based on the college of record (student advising). With the new budget model, units are encouraged to collaborate in developing innovative programs and courses that generate student interest and enrollment, which may increase the total tuition pool for allocation and each participating unit’s subsequent tuition allocation. 

The new budget model will also include a performance funding component to encourage cross-college collaboration.

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Revenues Treatment

How will tuition and aid be allocated in the new model? 

The new budget model will allocate tuition revenue and aid costs based on student credit hours. For undergraduate students, 75% of net tuition (i.e., gross tuition less aid) will go to the instructor’s college of record, and 25% will go to the student’s college of record. For graduate students, two-thirds of gross tuition will go to the instructor’s college of record, and one-third will go to the student’s college of record. Graduate aid will be aligned 100% to the awarding college. 

How will non-traditional tuition revenues such as online and summer/winter sessions be managed? 

Under the new budget model, online revenues and graduate summer/winter tuition revenues are formulaically allocated to colleges based on student credit hours, consistent with the treatment of traditional tuition revenue allocations. Undergraduate summer/winter tuition and instructional expenses will be distributed directly to the college conducting the course. 

How is indirect cost recovery (IDC) managed? 

Facilities and administrative (F&A) costs (sometimes referred to as Indirect costs or IDC) are the real costs of university operations that are not readily assignable to a particular project. The University’s F&A rates are determined by an agreement with the federal government in accordance with the federal Uniform Guidance. 

Under the new budget model, 100% of indirect cost recovery revenues will be allocated to the college conducting the research or split appropriately when multiple colleges are involved. IDC revenues generated by awards established within departments will be subject to IDC distribution methodologies as determined by each dean or unit leader. An intended outcome is to incentivize the generation of additional IDC revenue, by securing the full, sponsor-allowed rate whenever possible. As revenue is allocated directly to units conducting research, central research administration will no longer receive a portion of IDC revenues “off the top”. Instead, central research administration costs will be assessed to academic units using two equally weighted variables: the proportion of a unit’s total sponsored expenditures and the proportion of a unit’s total contract and grant proposals. 

The treatment of IDC revenues generated by awards established within centers and institutes is still under consideration. 

How will URI allocate state appropriations? 

The allocation of state appropriations is still being modeled and finalized. State appropriations are likely to be divided into four buckets of funding: 

• Operating revenue: A portion of unrestricted state appropriations would be formulaically allocated to units equally weighted based on sponsored (Fund 500) research expenditures and total undergraduate and graduate degrees awarded. These funds are unrestricted and can be deployed at the discretion of the unit. 
• Performance funding: A portion of unrestricted state appropriations would be reserved to incentivize select areas of activity. An academic unit’s performance would be evaluated based on a set of predetermined budget performance benchmarks for that unit. The specific metrics to be utilized for performance funding calculations are still under development. 
• Subvention support: Subvention is the term used for funding that is administered by the University’s central administration to academic units in need of additional funding (see questions 3 & 4 for additional clarity). 
• Strategic Funding: Limited funds would be held centrally to be deployed by the president and provost for strategic initiatives or contingency funding in the case of unforeseen circumstances. 

What happens if the state reduces its annual appropriations? 

The level of support from the state has varied widely over the years. One of the goals of the new budget model is to identify additional resource opportunities to ensure the University’s long-term financial health. 

If the state reduces URI’s annual state appropriations, the new budget model will be nimble enough to enable University leadership to adjust their financial plans and determine the best path forward.

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Support Unit Costs Treatment 

How will administrative unit costs be allocated? 

Administrative unit costs, also known as support unit costs, will be pooled together based on similar functions (i.e., Academic Support, General and Administrative, Facilities and Public Safety, IT, Research Administration) and then assessed to academic units based on metrics reflective of their use (e.g., headcount, square footage). Any revenues generated by the support units will be used to offset their direct expenses prior to assessment. 

Why is this a better model for paying for administrative costs than the current budget model? 

The new budget model brings transparency to support unit expenditures and enables a better understanding of the actual costs associated with running the general operations of the University. URI’s current incremental model funds support units by taking funding “off-the-top” before funds are allocated to academic units, which generally provides less transparency on the investments made in these areas. With the new budget model, we aim to enhance our transparency and focus on efficiency and effectiveness of operations. 

How are service expectations defined between support units and the academic units? 

Support unit service expectations will be defined through the development of service level agreements (SLAs). These SLAs will serve as an agreement between the service provider (support unit) and customers (academic units). SLAs will outline basic service expectations, roles and responsibilities, feedback and escalation procedures, and associated service metrics. 

How does the new budget model incentivize support unit efficiencies to ensure that central cost growth does not unfairly consume resources from academic units? 

The new budget model brings transparency to what central services actually cost. This transparency also enables conversations between academic and support units. Support units will have budget hearings each fiscal year where they will justify any budget increases being requested and how they relate to institutional priorities or the support unit’s ability to deliver on service metrics as outlined in SLAs. Model management structures are currently being developed to 

ensure investments are being optimized to meet the institution’s core mission while striving to maintain an appropriate balance between the academic, research, and administrative enterprises.

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Implementation Efforts and Next Steps

How will the new model be implemented? 

Work began in March 2023 to develop a new budget model for URI. Budget model redesign efforts have included several phases, including design, financial modeling, stakeholder engagement, and data validation. The process has invited community participation town halls, Faculty Senate meetings, smaller group meetings, and website forms and updates. 

The University will continue to communicate the new budget model to the URI community during an FY25 transition year. During the transition period, the new model will operate in parallel with the existing budget model, meaning that while budgets will be allocated based on the current budget process/model, the results of the new draft model will be discussed with academic unit leadership as the University prepares for its go-live in FY26. This transition period will allow URI leadership, including deans, to identify any modifications they would like to see modeled for consideration and determine whether the budget model should be adjusted accordingly in advance of FY26. 

How will the University ensure community engagement throughout this process? 

oUniversity leadership is committed to engaging with the URI community throughout this process, including after the new budget model goes live in FY26. URI administration has and will continue to share information via town halls, website communications, and individual meetings. Feedback will continue to be collected and used to refine the model in anticipation of the model going live in FY26. 

What constitutes a successful implementation? 

The success of the new budget model will be reflected in the University’s progress on its strategic plan and key performance indicators (KPIs), (e.g., increased graduate student enrollments, greater research activity, student persistence rates). The ability to bring greater transparency to the budget process and accountability to both academic and support units will also be measures of success. 

How often should the model be re-evaluated?

One of the lessons learned from institutions that have undertaken a budget model redesign is the importance of re-evaluating the model regularly. Industry leading practice is to evaluate the budget model’s key attributes, processes, and resulting outcomes every three to five years.