Iowa State University's central budgeting model emphasizes people and process rather than place.
By Larry Goldstein and Johnny Pickett
While the university's virtual budget office—or “VBO” in ISU parlance—relies heavily on e-mail, electronic document transfer, and other modes of technology to facilitate budgeting processes and resource allocations, the actual technologies have little to do with the success of the VBO. The bigger boost to ISU's virtual office effectiveness is the organizational structure of the university that facilitates this minimalist approach to institutional budgeting.
ISU's virtual budget office is composed of only eight university staff members, each devoting between one-quarter and three-quarters time to central budget and related matters. That's in sharp contrast to the central budget office structure of many large research universities that may employ as many as 15 or more individuals full time.
Not only does ISU manage to meet all state board of regents requirements for the submission of budget information under its virtual structure, it also recently addressed appropriation reductions totaling $63.5 million over the most recent four-year period. This occurred at the same time that the university dealt with a $23.6 million shortfall in state funding for compensation increases.
Addressing resource reductions averaging $22 million annually would tax the most well-staffed central budget department. The fact that eight "part-time" individuals did so suggests a budgeting approach worthy of further inspection. A deeper look at ISU's VBO explores when and how such a model might work for other institutions.
Who: Staffing a Virtual Office
Although ISU is a land-grant institution and a major research university, it represents a very lean operation overall with only four senior university executives: the president, vice president for academic affairs and provost, vice president for business and finance, and vice president for student affairs. These four individuals sit on the president's budget cabinet and, coupled with the eight VBO staff members, make up the 12 university positions that represent the central budgeting process for the institution.
In a nutshell, ISU's eight-member virtual budget office functions as an implementation body rather than a decision-making body. While the president's budget cabinet makes the critical resource allocation decisions at ISU, it does so using information supplied by the VBO, which in turn implements the decisions of the president's cabinet. Additionally, the VBO prepares the annual budget submission; processes reallocation transactions; maintains the budget database reflecting past resource allocation decisions and commitments for the future; and conducts whatever financial analysis is required to support planning and budgeting within the university.
Who are these virtual staff? Four of the eight members are senior assistants or associates handling major areas of responsibility directly supporting ISU's president and vice presidents. The other half of the team includes individuals providing budget analysis and support for the process (see sidebar, “Iowa's Virtual Staffing Model”). While these four spend varying amounts of time focused on central budget issues, each functions as a budget analyst for his or her unit while sharing responsibility for aspects of the university's overall budget process. Along with their four counterparts at the assistant or associate level, these individuals collectively handle all centralized budgeting responsibility for the university.
Until about five years ago, ISU's virtual budget office didn't have a formal name for the entity. Because of some confusion by newer members of the VBO staff, the team decided on the "VBO" initialism as a way to improve the group's cohesiveness and to provide clarity about who is involved.
What: Allocating Workload
Despite its lack of a traditional office structure, the VBO still must complete the myriad tasks required to develop and implement an operating budget. Clear division of labor is therefore as important if not more so within a virtual structure. Although the eight VBO staff describe themselves as equals, some individuals do carry greater responsibility than others. For instance, in addition to serving as the nominal head of the VBO and the interface between that group and the president's budget cabinet, the assistant to the president for budget planning and analysis is ultimately responsible for ensuring that the budget is completed and submitted through appropriate channels. He also serves as the main contact with the state board of regents; oversees internal audit; and coordinates university committees responsible for capital projects, maintenance and improvement, and so forth.
Similarly, one of the four budget analysts—the business and finance budget officer—has significant additional responsibilities when it comes to the operating budget and consequently is the only VBO staff member devoting as much as three-quarters of her time to central budget activities. Although each analyst contributes to budget development, only the business and finance budget officer can make the necessary entries and adjustments to produce the finished product. Because of these extra duties, she is chief among the VBO budget analysts. As the overseer of the automated budget system, she also is the person who works closest with the programmers and analysts responsible for maintaining and modifying the system. She is charged with running the revenue and compensation projections for the various “what if” scenarios throughout the budget process. And, the president's assistant for budget planning and analysis relies heavily on her to review his work and to ensure that everything balances.
The close working relationship between these two positions in particular is indicative of another important element of ISU's virtual business office: It relies on a “matrix” management approach. With this approach, the various individuals focus less on the organizational hierarchy or departmental boundaries than on carrying out their functional responsibilities.
“I have great interaction with all four budget analysts and am comfortable working directly with any of them when senior VBO staff members are unavailable,” says Todd Holcomb, associate vice president for student affairs. Likewise, Assistant Provost Ellen Rasmussen acknowledges that her budget analyst takes the lead role in communicating budget information to the academic units. “She's also the first person that the academic units contact when they need information,” says Rasmussen. "She understands policies and issues because she works with them on a daily basis."
Further demonstrating this cross-divisional, collaborative virtual office is the approach taken to train Holcomb's budget and human resource manager when she recently joined the student affairs division. Although she works closely with Holcomb on division budget matters, the other budget analysts helped her get up to speed. Such an approach ensures that all university divisions are employing the same budgeting practices and taking advantage of the same tools and techniques.
Where, When, and How: Conducting Budget Business
|Iowa's Virtual Staffing Model|
|Eight Iowa State University staff members comprise the university's virtual business office. None devotes full-time focus to central budget issues. Virtual staff include two from each key executive area of the university.|
From the office of the president:
From the office of the vice president for academic affairs and provost:
From the office of the vice president for business and finance:
From the office of the vice president for student affairs:
Although they do not share common office space, ISU's VBO staff all work in the university's main administration building—a major plus to their effectiveness, since this makes it relatively easy for them to have regular informal contact. While formal face-to-face meetings are scheduled on a biweekly basis, if no need to meet exists, staff are more than willing to cancel meetings and devote the time to other productive activities. On the other hand, when things heat up—as they did earlier this year when the state's board of regents directed a major shift in approach late in the budget submission process—VBO members will meet more frequently and put in the long hours to prepare needed materials.
Not surprisingly, the VBO concept is not always well understood by the broader university community. Clearly there is recognition that a central budget office does not exist at ISU. However, because of the matrix management approach employed for budget processing and communication, the inner workings of the VBO are not always apparent to the various decentralized campus units. That puts the onus on VBO staff to communicate budget information in ways that reach the full university community.
To do so, VBO staff use a variety of communication methods to address budget issues across the many units of the institution. The assistant provost and the provost's budget analyst conduct regularly scheduled meetings with academic fiscal officers to brief them on budget matters. The student affairs budget and human resource manager conducts comparable meetings with representatives from her division.
|Accounting Aplenty at March Forum|
David M. Walker, comptroller general of the United States, will be the featured speaker at NACUBO's Higher Education Accounting Forum in San Francisco, March 26–28. Representatives from the Governmental Accounting Standards Board and the Financial Accounting Standards Board will provide updates on board activities.
The forum, aimed at advanced-level accounting and finance professionals, offers the latest information on trends, issues, and best practices in both financial and managerial accounting and analysis for all types of institutions. Topical areas at this year’s event include executive compensation, debt evaluation, AICPA interpretations, disaster recovery, accounting professional competencies, derivative financial instruments, trustee communication, and post employment benefits. Presentations and roundtable exchanges provide opportunities for networking and discussion with peers.
For more details, visit www.nacubo.org or call 800.462.4916.
The business and finance division approaches the issue of communication somewhat differently. The vice president routinely includes budget topics on the agenda of the division's monthly staff meetings. During these meetings, the associate vice president or the budget officer will brief unit directors on important budget matters. Such meetings are not necessary for the president's units because the president's administrative specialist serves as the budget officer for the entire unit. However, in other regularly scheduled meetings, information is shared about decisions coming out of the president's budget cabinet or process changes being implemented by the VBO.
According to Warren Madden, ISU's vice president for business and finance, much of what the VBO does is largely invisible to the operating units until the final stages of budget development. But while communication may pose a special challenge within a virtual structure, Madden also believes that fiscal administrators in the operating units are likely more comfortable calling up someone within their own division and asking questions or raising budget issues than they would be with a central budget office. “We have pretty open and frank discussions throughout the budget process, and the communication goes both ways,” says Madden.
Ben Allen likewise believes the VBO serves the needs of the operating units. “The individuals involved in the VBO are deeply engaged in their home units. Each is part of the leadership teams of the various units. These individuals fully understand the programmatic and strategic needs of their units, not only the budgets and numbers,” says Allen, vice president for academic affairs and provost. As a result, “The VBO process helps ensure that the budget follows the strategic initiatives—not the other way around.”
In all instances, VBO staff use these various meetings to provide early notice of issues under consideration and to gather feedback about possible ramifications. In this way, they are able to share information among VBO staff and, when appropriate, pass it on to the president's budget cabinet. This information-gathering role is one of the many positive outgrowths of the VBO model.
Virtual Office Benefits
Apart from significant cost savings that the university realizes from not having a full-time dedicated budget operation, other significant benefits result from ISU's virtual structure. First, because staff members have other operational responsibilities, they have a deep understanding of the impact of the various decisions made with respect to resource allocation. More importantly, they understand the implications of the requests for information that they impose on the rest of the university and are careful to ask for only the information that is essential for decision-making purposes.
|Transplanting the Concept|
Iowa State University staff believe that their virtual budget office (VBO) model can be applied effectively at other institutions—if the proper environment exists.
While many factors are important to virtual office success, two are perhaps critical. The first is leadership and organizational structure. According to Warren Madden, vice president for business and finance, “ISU's virtual budget office allows centralized direction from the president's office while maintaining direct lines of communication with the operating units.” The university's eight-member VBO includes four senior administrators and four budget analysts who work in support of the president's four-member budget cabinet. Having only four senior university leaders to involve allows the institutional budgeting process to operate efficiently and effectively. While the ideal number for an institution is functionally driven, because many research universities have seven or eight vice presidents, the structure of a virtual budget office probably would not work as effectively if expanded to allow every division to have direct representation.
A second critical factor is the chemistry and talent of the individuals involved. Having the right people involved—people who are knowledgeable and have built trust with the other members of the VBO and the decentralized units—is key to ISU's success, says Ben Allen, vice president for academic affairs and provost. Because VBO staff are held in high regard within the university and are recognized for being successful within their respective operational areas, this gives individual members credibility when dealing with central budget matters.
Why it works. While virtual, ISU's VBO is still a high-priority, high-visibility entity. This is evidenced in several ways: the creation of the position of the assistant to the president for budget planning, central involvement of the provost, shared responsibility among the vice presidents, and the critical role of the analysts who have other core operational duties. Regarding this last point, there is another implication for institutions that may want to replicate ISU's model. From a human resources standpoint, because those with budget and planning responsibilities must also be skilled in other operational areas, these positions require a more well-rounded skill set.
Also worth noting is that, while people are key, the model itself must be able to stand the test of time. ISU's VBO has remained successful throughout staff changes, including three transitions within the assistant to the president position. For institutions interested in the VBO concept, bear in mind that a gradual phase-in may be necessary. Transitioning from having a full-fledged central budget office one year to not having one the next year is more than ambitious. A good first step may be to develop and nurture the budget analyst positions and transition them to their respective areas within the institution.
Consider all factors. Among other key points to consider: ISU's VBO operates within a relatively top-down budget approach employed in Iowa. The state board of regents establishes the budget policies and the process to be followed for budget submission. Institutions have some flexibility with respect to how the budget is implemented, but they operate within a structure imposed by the regents. Additionally, ISU employs block budgeting, which requires significantly less effort than line-item budgeting. For institutions and systems that follow other budgeting approaches and where selling the budget to legislatures takes on a primary role, a central budget office structure may ultimately make more sense.
Because the president's budget cabinet relies extensively on the VBO to examine issues before they are addressed by the cabinet, VBO staff perform a valuable role as staff consultants and serve as a sounding board for the cabinet, thereby helping the president's cabinet be more effective with its time and decision making. According to Allen, "By the time the budget development issues come to the president's budget cabinet, the non-starter ideas have been eliminated."
Madden sees another positive aspect of the VBO. Because the senior administrators have specific operational responsibility in addition to their roles with the central budget, they tend to take a more practical approach with respect to resource allocation and related processes. In addition, says Madden, they are able to identify implementation issues much faster than would a traditional staff office. “I've been at ISU for more than 30 years, but I've participated in accrediting reviews at institutions with central budget offices. In general, large centralized staffs are not necessarily viewed by the campus community as positive,” he says. “Our process seems to be less complicated and more supportive of getting operational concerns communicated early enough to influence the budget decision-making process.”
Questions of Focus, Format, and Composition
|Iowa State University Profile|
|Institution type: Land-grant institution; Carnegie Doctoral/Research-Extensive university. Eight colleges offer more than 100 undergraduate degrees and nearly 200 fields of study; recent research and technology transfer initiatives include agricultural biotechnology, plant and animal genomics, bioinformatics, “smart” materials, agricultural product and market development, human nutrition, human computer performance, biorenewables, and food safety and security.
Student population: 26,380 including 21,354 undergraduates from throughout the United States and more than 100 countries
Faculty and staff: 6,075
Tuition (undergraduate): resident, $4,702; nonresident, $14,404
Operating revenues: $820 million
Endowment: $456 million
Sponsored program awards: $287 million
Licensing income: $4.9 million
Note: Data are from FY04-05.
Although ISU's VBO provides major benefits, it presents some challenges as well. For instance, Madden suggests it would be beneficial to have additional staff support for budget modeling, record-keeping, and tracking of budget decisions. He also is somewhat concerned that no individual at ISU focuses solely on budget issues on a full-time basis. Mark Chidister shares Madden's concern. As assistant to the president for budget planning and analysis, Chidister participates in both the VBO and the president's budget cabinet. Despite his significant focus on budget matters, with his many other responsibilities, he knows there are times when the budget doesn't receive as much of his attention as it should.
Echoing the concern of others, Allen suggests it would be beneficial for the two groups to meet collectively once each semester—preferably at the beginning of the budget cycle. Similarly, some see value in having the budget analysts routinely meet separately from the full VBO staff. (Currently the analysts meet only informally when one of them has an issue.) From a technical standpoint, all four budget analysts suggest that an electronic folder would further enhance their efficiency. While documents are shared electronically among the VBO staff, there isn't a dedicated space on a server for VBO documents.
Yet another consideration is the composition of the VBO itself. The current makeup is beneficial because each major division is represented. The importance of this was reinforced when the student affairs representatives recently were added to the VBO. Many of their units are unique in that they do not rely on appropriated funding for their support. Because student affairs was not represented directly on the VBO, too little attention was being paid to the uniqueness of the student affairs units. There now is a better balance between focus on units funded by appropriations and self-supporting units.
In the same manner, some now also question having human resources represented within the VBO on a permanent basis. Human resources is invited to participate when warranted by specific issues but does not have an ongoing role within the VBO. Because so much of a research university's budget is devoted to compensation, some feel that the VBO would benefit from having ongoing participation by the chief human resources officer. However, because the current model—with one representative per major division—has worked so effectively, there is reluctance to change the current composition.
A Workable Model
Despite the challenges and questions about structural changes, ISU's VBO has no doubt been an effective model for the university—especially during the recent period when such large budget cuts had to be made. Given the right balance of trust, knowledge, and good working relationships, this same or a similar model may work well at other institutions (see sidebar, “Transplanting the Concept”).
"In the Iowa environment, our process works well,” says Madden. “Feedback from our board of regents, legislature, governor, and others give us high marks. Because we have fewer layers, there is less filtering and translation of information, and that enables us to be more responsive."
|Could Virtual Budgeting Work for You?|
|What's the most effective approach to budgeting taken by your institution? Send an e-mail to firstname.lastname@example.org to share your experiences.|
For institutions where such a model is feasible, another less tangible benefit may be realized. At a time when so much concern is expressed about the size of university administration, ISU's virtual budget office is proof that it's possible to handle significant administrative responsibilities with fewer staff.
- NACUBO Responds to FASB's NFP Proposal
- Results Are In: The 2014 NACUBO Tuition Discounting Study
- NLRB Dismisses Union Bid from Northwestern Football Players
- WEBCAST: Legislative Lunchcast: A 30-Minute Washington Update from NACUBO
Wednesday, September 9, 2015 12:00PM ET
- WEBCAST: A Financially Sustainable Approach to Innovate Academic Programs
Wednesday, October 21, 2015 1:00PM ET
- ON-DEMAND: Developing Your Campus Distance Learning Strategy
- ON-DEMAND: VIRTUAL: 2015 Annual Meeting
- ON-DEMAND: NACUBO Live!: CBO Speaks
- ON-DEMAND: A Just-in-Time Webcast to Explain FASB’s NFP Reporting Proposal
- ON-DEMAND: Decoding ED's Cash Management Proposal
- A Guide to College and University Budgeting: Foundations for Institutional Effectiveness, 4th ed. - by Larry Goldstein
- NACUBO's Guide to Unitizing Investment Pools - by Mary S. Wheeler
- Managing and Collecting Student Accounts and Loans - by David R. Glezerman and Dennis DeSantis