Responsibility Based Budgeting and Responsibility Center Management – A Primer on Decentralized University Budgeting

A trend in higher education is the move towards decentralized budgeting.   Terms like ‘Responsbility Based Budgeting’, ‘Activity Based Budgeting’, ‘Responsibility Centered Budgeting’ and ‘Value Centered Budgeting’ are used to describe this concept.   Support for responsbility based budgeting at universities has been mixed.  Organizations like the NEA have expressed their concerns with it (Beware Higher Ed’s Newest Budget Twist by Leroy W. Dubeck) and organizations like the National Association of College and University Business Officer’s have generally been supportive of it (The Case for Decentralized Financial Management, by Scott Scarborough).

If your university is engaged in discussions about responsbility based budgeting, it is important to understand how it works.  I have found the following document to be the absolute best source of information:   Responsibility Center Management: Lessons from 25 Years of Decentralized Management by Jon C. Strauss and John R. Curry.   This is a relatively old document (2002), yet it is the most comprehensive and readable report on the principles, guidelines and details on how to make decentralized budgeting work.

Please consider the following quote from the preface of the report”

Decentralization is a natural act in universities. Decentralization of authority, that is.  Decentralization of responsibility is not a natural act.That requires intention and design.  Many academic leaders will say that most authority lies with the faculty in departments and schools, and most responsibility lies with central administrators. In many universities today, this state still obtains yet is more often lamented than addressed and managed.  Increasing numbers of institutions,however, are making explicit efforts to address such imbalances, to design organizational structures and incentives to make responsibility commensurate with authority, wherever that authority lies. The problem we address is the decoupling of academic authority from financial responsibility.

I highly recommend that you read this document as you consider new budeting models at your university.

– from the pen of Dr. Percy Trappe