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This section considers the resource allocation processes within CityU covering issues such as the level of transparency in the distribution of funds and the extent to which the resource allocation mechanisms provide incentives for increased value for money. The discussion is structured under the following headings:
The allocation of resources within CityU has, to date, been largely formula driven based on perceived UGC guidelines. Due to the diversity of institutional roles and missions, the UGC does not publish any such funding formulae guidelines. The Panel is concerned that the formula does not allow sufficient flexibility to take account of the institution's specific mission and strategy and the particular needs of different departments. This concern appears to be shared by a number of academic staff who expressed a desire for greater selectivity and use of judgement in the distribution of resources.
The Panel understands that the University holds annual "Budget Hearings" which are intended to address these concerns by providing the opportunity to shift resources between different areas before the budget is approved by the Management Board. The Panel commends CityU for introducing the "Budget Hearings" and urges the senior management to ensure that they provide a genuine opportunity to steer resources in line with strategic intent (rather than to take account of "one-off" developments) and to recognise the particular needs of different departments. To this end, it suggests that it might be necessary to earmark a proportion of the formula funding for distribution at the hearings.
More generally, the Panel recommends that CityU consider whether it may benefit from adjusting the balance between the use of formulae and the making of judgmental decisions to allow for a closer link between strategic planning and resource allocation. It may also wish to consider whether the components of the existing formula could be adjusted to reflect more closely CityU's mission and unique characteristics.
As noted above, the allocation of the resources to academic departments is largely formula driven based on perceived UGC allocation guidelines in relation to teaching commitments and research performance. The Panel was pleased to find that this formula mechanism is relatively transparent and generally understood across the University. CityU will need to ensure that the process for adjusting formula allocations via the "Budget Hearings" is also clearly understood. To this end, it may be helpful to identify criteria and guidelines to assist Deans in making justifications for additional funds.
In addition to the above formula element, the University top-slices the total block grant (approximately 20-25% excluding institutional expenses) to resource non academic departments and uses top-slicing to fund a number of institution-wide initiatives as follows:
Funds for specific initiatives.
From the next triennium, the Panel understands that each Vice President will also receive a reserve fund which will be top-sliced from the block grant.
The Panel recognises the critical role of top-slicing in allowing for the steering of resources outside the formula allocations. However, the Panel would wish to advise the University to ensure that priorities for non-formula funding are clearly articulated so that the allocation of top-sliced funds is also transparent and understood across the institution.
The resource allocation formula used by the University is considered to have in-built incentives for increased value for money within academic units. In terms of research, base funds are allocated on the basis of the results of the UGC Research Assessment Exercise. In addition, CityU is in the process of introducing a three tier system of research centres at the University, Faculty and Departmental levels with differential levels of funding in each case. The University anticipates that this system will provide incentives for performance improvement by encouraging competition for the higher levels of funding associated with the higher tiers. The intention is that under-performing centres will also be "demoted" to a lower tier.
The Panel sees this initiative as a potentially effective mechanism for encouraging performance improvement in research and allowing for the steering of resources towards priority areas. However it urges CityU to ensure that the system is used to promote research in areas consistent with the institution's mission and strategic priorities, even though this may not be in accordance with the results of the Research Assessment Exercise. The UGC has repeatedly stressed that the RAE results may not fully reflect the institutional priorities of institutions with different roles and missions and they should therefore not be used as a substitute for institutional strategic decision-making.
In terms of teaching, it was reported that the allocation of resources, based on departmental student load, provides some incentive for cost effectiveness in teaching. However, a number of academic staff expressed concern that the system does not adequately recognise excellence in teaching and non-traditional areas of scholarly activity (e.g. development of interactive learning modes). The Panel recognises this issue may be addressed outside the funding formula allocation and that CityU has already begun to do so with the introduction of the Teaching Excellence Awards and the consideration of other schemes (e.g. improved terms and conditions and central floating posts for high performers). The Panel urges the University to continue to seek to find new ways of identifying and rewarding different types of excellence in scholarship in the future as a means of realising its AURORA strategy ¨C particularly the "Ambience" and "Reward" elements.
Regarding non-academic departments, CityU is seeking progressively to reduce their total share of expenditure with reductions of 5% per year over the last 3 years and further reductions of 3% per annum planned for the next triennium. The Panel was interested to note that CityU has introduced a series of re-engineering and benchmarking initiatives to improve efficiency and productivity in support of this and recognises CityU's significant success in instilling a strong awareness of value for money issues in a number of departments. This is likely to be re-enforced by the recent appointment of an internal auditor to undertake value for money studies. However, the Panel shares the President's concern that performance improvement has been constrained in some areas by an over-emphasis on systems of control which has resulted, in some cases, in the development of a"gate-keeping" mentality and culture. It urges CityU to address this by continuing to work towards a more "output" orientated approach to service delivery across the administration.
CityU has introduced a relatively high level of devolved responsibility for budgeting. Following the distribution of resources between faculties, Deans have the authority to assign budgets to their constituent departments according to their own criteria. It was reported that some Deans have introduced their own formulae for resource allocation while others have mimicked the University-wide formula. Deans also have the option of top-slicing the block grants to create reserve or contingency funds to support faculty initiatives, to provide contingency funds to deal with unexpected/ad hoc demands for resource and to provide the matching resources for University "special" funds. Budget units have flexibility in viring between the staffing and non-staffing budget and may carry forward unspent balances, up to a specified level, for specific purposes.
The Panel supports the principle of devolved budgeting and recognises its benefits within CityU. However, it is concerned that the current system allows the Deans too much freedom in strategic matters resulting in the development of different approaches across the institution which are not all consistent with the overall strategy. It is at this level where obstacles to the implementation of the strategy may occur. The Panel therefore recommends closer oversight of Faculty activities (possibly via the planning process) to ensure that the AURORA strategy is consistently followed and implemented. However, it emphasises the importance of ensuring that the reporting system is focused on outputs and does not place heavy and overly bureaucratic demands on the Faculty management.
The Panel found that CityU's resource allocation system generally works well and is well understood across the University. However, it is concerned that the current formula-driven system does not allow sufficient scope for steering resources in line with strategic priorities nor for recognising the different needs of different departments. This concern is shared by a number of senior staff within CityU who have articulated a desire for further refinement and sophistication in the resource allocation mechanism.
In addressing this concern, the Panel recommends that CityU review the balance between the use of formulae and the making of judgmental decisions as well as the component parts of the existing formulae with a view to allowing for greater leverage and selectivity in funding. It recognises that the new "Budget Hearings" may play an important role in the process and urges the University to ensure that they are used to steer resources in line with strategic intent.
In terms of incentives for value for money, the Panel was pleased to note that CityU has introduced a number of new initiatives to promote performance improvement such as the tiered research centre structure and the appointment of an internal auditor to undertake value for money studies. However, it found that the mechanisms for promoting excellence in teaching and non-traditional areas of scholarship are under-developed and urges the University to address this as a matter of priority as a means of realising its AURORA strategy ¨C particularly the "Ambience" and "Reward" elements.
Lastly, the Panel has some concerns about the level of devolved autonomy to Deans in strategic matters; and recommends that CityU review whether there is sufficient oversight of Faculty activities to ensure consistency with the overall strategy.