III. Resource allocation
  1. This section considers the resource allocation processes within PolyU covering issues such as the level of transparency in the distribution of funds and the extent to which the resource allocation mechanisms provide incentives to achieve increased value for money. The discussion is structured under the following headings:

    2. Overview of resource allocation processes

  2. The resource allocation process follows the UGC triennial process. It is based on the principles of one-line budgeting and devolution of budget authority. The one-line budget system was introduced for the first time in 1997-98, with Vice-Presidents and Deans as block budget holders. The resource allocation process of recurrent grant commences with a review of the Costed Estimates and the production of a draft triennial budget after taking into consideration the resource requirement to support UGC approved activities and the University's strategic initiatives. Decisions on the initial allocation to the various major resource areas are taken after reviewing historical expenditure patterns. A "one-line budget" and/or earmarked allocation for specific purposes is allocated to departments with reference to departmental budget submissions and respective resource models for academic staffing, non-academic staffing, supplies and "other items". Research allocations to departments are mainly based on a range of performance indicators and the number of Areas of Strategic Development. After initial allocation, Heads of Departments have the opportunity to appeal to the Budget & Resources Committee with the support of their Dean/VP. Subsequent to the appeals, the allocations are finalised. The Panel was pleased to find that staff consider the allocation processes to be fair and transparent. It encourages the University to continue in its efforts to increase the performance-based components within the current model, particularly with respect to teaching.

  3. The Deans, as block budget holders, can top slice a fixed 3% of their overall budget . The Panel considers this level of top-slicing to be appropriate, given the present state of development of the university, and was pleased to observe that these funds are being used to encourage fulfilment of strategic objectives. For example, Deans cited examples of using top-slicing to encourage collaborative projects across departments. In addition, there are other special reserves, including the President's reserve (1.5%) and research funding (e.g. Areas of Strategic Development). In general, staff appeared to be clear about the potential uses of these funds as well as the application processes. However, the Panel detected a certain lack of clarity regarding the future levels of top slicing, particularly at the Faculty level, and encourages the SMC to provide further information on this as soon as possible.

  4. Both Deans and Heads of departments seem to be comfortable with their responsibilities with respect to resource allocation. Heads of both academic and non-academic departments welcomed the flexibility of the one-line budgets, and indicated that they were aware of the recently-introduced opportunities for carrying over savings each year. Deans also demonstrated a clear understanding of their role, with respect to overseeing the one-line budgets and administering top-sliced funds. The Panel was pleased to learn that all Deans and Heads had received training prior to the implementation of the new one-line model. However, the Panel perceived some uncertainty as to the likely future developments in resource allocation, such as the responsibility for allocating student numbers. The Panel strongly recommends that the SMC completes its thinking on these issues as soon as possible, and communicates its plans to all budget holders.

    5. Tracking the use of funds

  5. Departments are required to set out their estimated resource requirements in their three-year business plans, making adjustments on an annual basis as necessary. To assist them in this process, the Budget & Resources Committee has begun to provide departments with information on their budgets for the previous year, as well as the estimated allocations for the coming three years. All Heads and Deans have to provide six-monthly reports to the President, as well as an annual report at the end of each year.

  6. The Panel was pleased to learn that PolyU has a well-established internal audit function (the Internal Audit Unit, or IAU). The IAU reports direct to the President, and provides quarterly reports to the Executive Committee of Council. However, the Panel noted that there is currently no executive meeting between the IAU and the Council, and suggests that PolyU gives this matter further consideration. It also understands that in future PolyU plans to introduce some individual performance measures for Heads and Deans, in order to reflect their capabilities as budget holders in their appraisals. The Panel supports this development.

    7. Incentives for value for money

  7. The Panel found evidence to suggest that both academic and non-academic departments appreciate the importance of achieving value for money. Awareness of opportunities to reduce spending has been raised through a Business Process Re-engineering (BPR) exercise. For example, as a result of this, the Personnel Department has been exploring several "crisis scenario plans" in which it has identified opportunities for coping with significant cuts to its staffing budget. The Panel hopes that as the resource allocation processes become more established, budget holders will develop increased impetus in seeking to achieve value for money.

    Conclusions

  8. The allocation of block budgets and one-line budgets to faculties and departments appears to be working well. The Panel found that budget holders are clear and confident about their responsibilities. However, some uncertainties remain about the final arrangements for devolution of budgetary authority and the Panel encourages senior management to clarify and communicate its proposals on this as soon as possible.

  9. Procedures have been put in place to track the use of funds and to assess performance. The IAU plays a critical role, which could be even further strengthened through the establishment of an executive meeting between the IAU and Council.