Skip to Content Find it Fast

This browser does not support Cascading Style Sheets.

NEW PROGRAMS

The question has come up in various forums: what is the procedure for funding new programs under RCM? This question comes up because direct expenditures are incurred at the RC unit level prior to revenue allocations being received due to the allocation methodologies employed in RCM. In addition to direct expenditures, the timing of overhead allocations must be considered when analyzing the financial viability of a new program.

This document outlines the major financial considerations and provider a template when planning for a financial analysis of a new program.

Academic Programs:

Graduate and Summer Session
If the program is a graduate program or occurs during the summer, net tuition revenues are allocated directly to the unit based on current year activity. Therefore, a unit that begins a graduate program in the fall semester will receive net tuition revenues from that program during that fiscal year. It is probable that new graduate startups will not be able to generate revenues sufficient to cover costs in the first year or two of the program. These startup costs can be covered by use of unit reserves, internal reallocation of resources within the unit or via request to the Central Budget Committee for an allocation from the University Fund.

Undergraduate Programs
Net tuition revenues associated with the program are allocated to all academic units based on the proportion of average credit hours over the prior two calendar years. The credit hours generated from the new program will not be included in the distribution equation until the following fiscal year. For example, a new program starts in the Fall of 2000 (Fiscal Year 2001) - the credit hours generated by the new program will be counted in the distribution formula in Fiscal Year 2002. In FY2002, only the Fall of 2000 credit hours will be counted in the formula. It is not until FY2004, will credit hours from that program be fully recognized in the net tuition distribution formula. Two calendar year credit hour averaging was done to provide units sufficient time to adjust resources in the event of enrollment fluctuations and to simplify the tuition model. Tools/incentives exist for the academic community to temporarily fund new programs. See Appendix A for a look at how a new program affects tuition allocated to a unit in the first year of a program. Because units cannot fund new programs from tuition revenues generated by the program in the first year, units will require other types of resources. There are a few options available:

  1. Utilize unit reserves in compliance with the UNH Policy on Reserves Management.

  2. Reallocate existing resources within the college to fund the program.

  3. Apply for an allocation from the University Fund - this is subject to approval from Central Budget Committee.


See Appendix B for a graphical depiction of this process.

There is another option that can be implemented in future years, if needed:
A revolving loan fund managed by the Dean's Council/Provost's office designated for academic priorities. It would serve as a loan fund that would be repaid by units once net tuition is recognized at the unit level. This would be one-time money and not an ongoing commitment. The resources for this fund could be generated by:

Research Initiatives/Centers:
Establishment of research initiatives must be coordinated with the responsible Dean and responsible Vice President as well as the Vice President for Research and Public Service. 66.5% of indirect cost recovery revenue (ICR) generated by a grant/contract is returned to the RC unit where the activity occurs based on the prior completed calendar year. Thus, a new program will not result in an ICR revenue allocation to the RC unit at least until the following fiscal year (real time distribution is being considered for FY02 to eliminate these timing differences). For example, if a unit generated ICR during the Fall of FY03, the indirect cost revenue for that activity will not be allocated to the RC unit until FY05. If generated in the Spring of FY03, the ICR will not be allocated to the RC unit until FY06.

Since salaries and support expenditures will be incurred during the current year and ICR will not be allocated to the RC unit until future years, funding must be identified to cover current year expenditures. This can be achieved through a variety of means:


Overhead Considerations:
The prior sections have discussed the implications of the timing of revenue allocations and direct expenditures. Overhead must also be considered. Facilities Services overhead is allocated to units on a net square footage basis. If a unit acquires new space for a new program, the incremental facilities costs will be allocated in the following fiscal year. Overhead (general admin and academic affairs) expenses will be allocated to units based on the prior completed fiscal year's actual results. This means that for a new program, overhead expenses will not be allocated until year 3 of the program (year 1 is the base).

Financial Analysis of a New Program:
Units must prepare two financial schedules for at least a 5-year period that shows major revenue sources and expenditures resulting in a net revenue/expense figure for each year. One schedule would show the actual new cash flows for the University generated by the new program and the other would show the direct/allocated revenues and expenditures to the RC Unit. This will allow for analysis of the impact to the university as well as on the RC unit. Assumptions must be listed and alternate scenarios can be presented. An example format for these financial schedules is presented in Appendix C.


Appendix A


Appendix B

Appendix C
Example Budget Forecast for New Program