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Budget alignment and transparency in higher ed

July 29, 2022

Russ Hannah, Ed.D., CPA, CGMA, CGFM

Chief Financial Officer, Arkansas State University

The views and opinions expressed are those of the author and do not necessarily represent the views or opinions of EAB.

Topic and problem:

Arkansas State University recently adopted a new strategic plan.  A key aspect of strategic planning is effective implementation; a critical element of implementation is aligning the institution’s budget with the strategy.

“The strategic plan defines the primary objectives the organization will undertake to achieve its mission, the implementation plan adds details to these objectives, and the budget allocates money to accomplish these objectives. The strategic and financial plans come together in a process called alignment. Alignment is fundamental to good management.”

Dean O. Smith How university budgets work

“When constituents have access to factual information they become much less likely to fill the information void with rumors and misinformation that chip away at the institution’s stability. Transparency builds trust among all level of participants in the resource allocation process.”

Larry Goldstein College and university budgeting

The problem to be addressed is how does Arkansas State University (A-State) or any higher education institution align its budget with its strategic plan and how is transparency achieved in the process? The challenges we face at A-State are a long history of incremental budgeting which makes significant resource reallocation difficult; a shifting enrollment mix that complicates financial forecasting and threatens traditional revenue streams; a structural deficit resulting from past overly-optimistic revenue assumptions and difficulties exacerbated by the pandemic; and a recent change in executive leadership that potentially challenges consensus and slows momentum.

Solution:

The solution we are pursuing has two elements.  First, with respect to alignment, we consulted with EAB about budget models in terms of alternatives to incremental budgeting, what current best practices are in higher education, and what factors should be considered in potentially changing our budget model.

Based on these consultations, our research, and EAB-facilitated discussions with campus leadership, A-State decided to retain an incremental budgeting model, but seek targeted changes to assist in a resource allocation process in support of our strategic plan.

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Second, with respect to transparency, the finance office, with the support our chancellor and our chief operating officer, began a campus conversation to engage our constituents in understanding our current budget situation, the challenges that confront us, and the opportunities to reallocate our resources to support our shared strategic vision. Our efforts and achievements in fiscal year 2022 include:

  • Campus discussions with chancellor’s cabinet, the university planning council, the dean’s council, the chair’s council, the faculty senate, the staff senate, and the system office and trustees.
  • Consultations with EAB (participated in the Financial Sustainability Collaborative and the Rising Higher Education Leaders Fellowship)
  • Academic program viability study
  • Structural deficit reduced by 29%

Our plans for fiscal year 2023 and beyond include:

  • Initiate the budget planning process much earlier in the fiscal year
  • Actively engage the university planning council
  • Continue and intensify discussions with constituent groups
  • Continue consultations with EAB by participating in the inaugural Financial Sustainability Collaborative for Administrative and Organizational Effectiveness
  • Conduct campus town halls
  • Establish multi-year targets for phased reductions in structural deficit
  • Prepare for ten-year accreditation visit by HLC in April 2024

I am grateful for the opportunity to have participated in the Rising Higher Education Leaders Fellowship. To interact with subject matter experts at EAB, to learn the latest research findings and best practices, and to share and compare experiences with colleagues from across the country is invaluable and an incredible force-multiplier. I especially enjoyed meeting and working with my capstone partner, Sandra Cavi of Illinois State University and am thankful to her for sharing her professional experience and contributing her expertise and counsel to my project.

Resources

EAB contacts:

  • David Attis
  • Jason Scott
  • Joseph Timanovsky

EAB research reports:

Capstone partner:

  • Sandra Cavi-Associate Vice President for Budgeting and Planning, Illinois State University

A-State Colleagues:

  • Len Frey, Ph.D.-Executive Vice Chancellor Finance and Administration & Chief Operating Officer
  • Donna McMillin-Assistant Vice Chancellor for Budget Planning and Development

See the fellows’ blogs from the capstone projects

Russ Hannah and others participated in EAB’s Rising Higher Education Leaders Fellowship in spring 2022

Read more

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