The Cost Allocation work group consists of 24 members representing offices from all over WMU. Their charge is to determine allocation of direct and indirect expenses to responsibility units. Direct expenses are costs that can be specifically identified with a responsibility unit. Indirect expenses are costs incurred for the general university community and not specifically identified with a responsibility unit. The work group collaborates closely with the Strategic Resource Management Core Team, which provides data and answers questions for the work group.
The Cost Allocation work group was charged with making recommendations for allocating direct and indirect expenses to the responsibility units using the guiding principles of the Strategic Resource Management initiative. These guiding principals are found on WMU's Strategic Resource Management website.
The group consisted of 24 members from colleges, auxiliary and support services units across campus. The members can be found on the committee page of the SRM website. The group was committed and engaged; everyone had a voice and a vote. Initially the group met every other week during the fall semester, then increased their meetings to weekly during the spring semester in order to complete their task in a timely manner.
The first step was to gather information from various sources, including the text "Responsibility Center Management," by Curry, Laws, and Strauss; articles on the subject; and information from other universities and institutions that have undertaken similar projects. From there, each support unit was considered. To better understand each support unit, the group was given an overview of the unit’s purpose, including the functions and the people and other units served by the support unit. With these important groups of people in mind, the group brainstormed possible options for the rule by which costs of the support unit would be allocated to the responsibility units.
The Cost Allocation work group defined consensus as 67 percent of the votes. In the voting process, the group used straw polls early to determine if more discussion was needed to better understand the impact on units and the people they serve. Votes took place at the next meeting after a rule was proposed to allow time for reflection and consultation with constituents. Absentee votes were accepted to ensure inclusion of all group members. Additionally dissenting opinions were given a chance to voice their disagreements and make the case for why their disagreement would merit reconsideration of the vote.
At the completion of the task assigned, the Cost Allocation work group was able to define rules for direct and indirect expenses charged to responsibility units. The rule for direct expenses was established as the direct operating costs of a responsibility unit being charged directly to the unit incurring the expenses. Rules for indirect expenses were also defined for each area of academic indirect expenses, general fund central administration, and general fund facilities expenses.
December 2018 | January 2019
The group was given detailed information on the current budget process and heard a report by an auxiliary unit that already uses a Responsibility Center Management, or RCM-based budget model. The Core Team provided examples of cost allocation rules from other universities, and group members have been doing their own research and sharing relevant documents with the group in Microsoft Teams.
The group has defined consensus as 67 percent of members, for the purpose of future votes on allocation rules.
The group has developed and passed a rule for allocating direct costs to the responsibility centers that incur the costs.
The group has almost completed the more complicated task of allocating indirect academic and general fund central administrative expenses.
Following indirect expense allocations, the work group will develop rules for facilities expenses.
There has been much discussion about the level of detail needed for expense allocation. For example, whether usage should be a factor, as opposed to access was considered. Keeping in mind the guiding principle of simplicity, the group has been concentrating on a broader view.
Given the size of the task, the group has lengthened the meeting times to two hours every other week for the fall semester and two hours every week for the spring semester.