Budgets and Financial Management in Higher Education

Margaret J. Barr, George S. McClellan

• Publisher: Jossey-Bass
• Year: 2017
• Print ISBN: 9781119287735
• eBook ISBN: 9781119287766
• Edition: 3
• Topic: Education
• Subtopic: Education Administration

This book will help new administrators (department chairs, directors, deans) understand and become more proficient in their financial managementrole within the institution.Highly accessible, practitioners will be able toput the book's guidance to immediate use in their work. It is also grounded in the latest knowledge base and filled with examples from across all types of institutions, so that it makes an ideal text for a courses in graduate programs in higher education leadership and administration. Specifically, thebook:

• provides an understanding of the basics of budgeting and fiscal management in higher education

• defines the elements of a budget, the budget cycle, and the steps for creating a budget

• suggests ways of avoiding common pitfalls and problems of managing budgets

• contains effective strategies for dealing with loss of resources

• includes end-of-chapter reflection questions and an expanded glossary of terms Written in plain language this volume provides practical approaches to many complex problems in fiscal management.

This new edition of the book contains new information in every chapter reflecting both the most recent developments in higher education and feedback from readers of the earlier edition. The information on the current higher education financial environment has been updated, and the case studies have been revised. Readers will be introduced to Bowen's theory of resources and expenses as an important way to understand budgetary decision making in colleges and universities. Special attention ispaidtothe use of restricted funds, thebudget implications of faculty appointments and the challengescaused by personnel policies for staff. In addition, greater attention is given to development and implementation of repair and replacement programs in auxiliary enterprises. The challenges that arise when budget problems are postponed are also discussed.The volume contains a number of suggestions for practitioners with new budgeting and fiscal responsibilities.

1
The Fiscal Context and the Roleof the Budget Manager

Understanding how to forecast, build, and manage a budget is an essential skill for all administrators in higher education. Almost every administrative position in higher education carries some responsibility for budget management. From the new professional managing a small program budget to a program director, dean, or vice president, understanding the budget and skill in managing budget issues and problems are critical competencies for administrative success.

This chapter focuses on increasing the reader's understanding of the process of obtaining financial support for institutions of higher education. Attention is first paid to the complex fiscal context for American higher education. Second, the chapter focuses on the differences in fiscal issues among public, private, and for‐profit institutions of higher education. Next, the responsibilities of the person who manages the budget for an individual program, a department, a division, or a school or college within an institution are discussed. The narrative closes with a discussion of the importance of this information for any administrator in higher education. At the end of the chapter the practical implications of all of this information are illustrated in a case study of Alpha University followed by reflective questions.

The Fiscal Context of American Higher Education

Higher education institutions, regardless of the type of institution, are experiencing great changes related to identifying and capturing fiscal resources to support educational endeavors. These include increased competition for funds within both the public and private economic sectors; increased regulations, including a rise in unfunded mandates at the state and federal level; the cost of technology; competition for faculty and staff; increased competition for students; concerns about the rising cost of higher education to students and their families; increasing dependence on students to finance their education; and rising costs for the purchase of goods and services.

Not‐for‐profit higher education institutions are also facing competition from for‐profit institutions, which have proliferated across the country and grown from a focus on specialized certificate programs to include four‐year undergraduate and graduate degree granting institutions. While this sector has faced challenges of its own, including increased scrutiny from governmental agencies and difficulties with enrollment (Associated Press, 2016), it is likely to continue to be an important part of the higher education landscape moving forward.

Increased Competition for Funds

Competition for funds has increased in both the public and private sector over the last decade and is likely to continue into the future. K–12 education is one of the largest areas of expenditures for state governments. Many state health care programs have expanded to meet the needs of an aging population. Other programs, such as prisons and public safety, have grown because of the increase in criminal behavior and public demand for stricter law enforcement and harsher criminal penalties. While state spending on education (K–16) has remained relatively constant as a proportion of their budgets in recent years, spending on health care and corrections has increased (Center on Budget and Policy Priorities, 2017). In addition, the infrastructure of most states, including street and highways, bridges, tunnels, flood control, and public transportation, are aging and need massive renovation and repair. Recreational use of public lands has grown, and with that growth has come the need to assure the safety and health of members of the public using the lands and additional construction to provide safe access and egress. The list of state needs seems to be never‐ending. Suffice it to say that higher education is but one of many programs seeking support for a very limited amount of money at the state level (Schuh, 2000). The result has been less and less direct fiscal support for public higher education on a per student basis and increased expectations that such institutions develop new ways to obtain the resources necessary to operate the enterprise. In fact, some public institutions have changed their public rhetoric and describe their institutions as state “related” rather than state “supported” because the contribution of the state to the institutional budget has been reduced so much over the last decade of the 20th century and the first decade of the 21st century. The University of Virginia and the University of Vermont are both examples of such institutions.

The reduction in available state funding also influences private higher education in both direct and indirect ways. Directly, the institution may not receive funding for a special project that meets the needs of the state (See Chapter Two). Indirectly, state financial aid grants to individual needy students usually can be used by the student at public, private, and for‐profit institutions. If funding for such aid programs is reduced or remains static, more of the cost for individual student aid is shifted to the student or the institution.

During the last decades, many public institutions have also joined their private colleagues in seeking financial support from alumni, foundations, parents, business, and industry. Billion‐dollar campaigns, in either the public or private sector of higher education, are no longer unusual and consume a great deal of the time and energy of institutional leaders. Concurrently, other charitable institutions such as museums, youth service organizations, and organizations focusing on diseases and social welfare issues have also increased their quest for financial support. Competition for private funds is fierce and likely to remain so. Consequently, fundraising has become a major function in many institutions.

Increased Regulations and Unfunded Mandates

Within the last fifty years American higher education has experienced unprecedented growth in regulations from both the state and federal governments (American Council on Education, 2015). Many of these statutory regulations support important opportunities for students, faculty, and staff, but they also require additional institutional investment in order to achieve compliance. However, funding for compliance at either the state or federal level has not been forthcoming. The following are examples of these unfunded mandates.

Security and Safety

The security and safety of students, faculty, and staff has been the subject of a number of federal regulations. For faculty and staff the Occupational Health and Safety Act of 1990 (OSHA) and the Employee Retirement Security Act of 1974 (ERISA) both influence the day‐by‐day working conditions of most faculty and staff members at institutions of higher education. These regulations focus on everything from the disposal of contaminated materials to the configuration of workstations. The Student Right‐to‐Know and Campus Security Act and accompanying Department of Education regulations (1999) require notification of all members of the campus community of crime statistics and other crime data on an annual basis. Depending on how that notification is conducted, the costs for printing, mailing, and other means of communication can be quite large.

Student and Employee Privacy

The Family Educational Rights and Privacy Act (FERPA) regulates access to student records and requires institutions to inform students of their rights under the act on an annual basis. Faculty and staff have privacy protections under the National Labor Relations Act of 1935.

Research Regulations

Regulations governing research are many, but two stand out with regard to costs to institutions. First is The Animal Welfare Act (70 U.S.C. sec. 21.31. et seq.) regulating the care of animals used in research on campus. Compliance with the standards required by the federal government under the act has been an expensive investment for most institutions of higher education. Second, research involving human beings is regulated under the Human Subjects Research Act (45 CFR 46) and requires disclosure of risks and monitoring of participation of humans involved in research studies. Compliance with research regulations has direct and indirect costs to the institution that are not funded by the granting federal or state agencies, including hiring staff to monitor compliance across the institution.

Discrimination

A plethora of laws are in place at the federal level prohibiting discrimination in admission and employment. All have direct influence on the conduct of daily life in colleges and universities. While they are essential to assuring equal treatment and inclusion in higher education, all of these statutes have monetary costs associated with compliance with them.

The various discrimination statutes include prohibiting discrimination on the basis of: age (Employment Act of 1967) and race, creed, sex, or national origin (Title VII of the Civil Rights Act of 1964, amended by the Equal Employment Opportunity Act of 1972). These laws impact the complexity of conducting searches for positions, recordkeeping in human resource offices, admissions practices, intercollegiate athletics, and more.

Title IX prohibits discrimination in educational programs, facilities, policies, and employment practices. Intercollegiate athletics is the most striking example of rising costs associated with compliance with Title IX. Providing opportunities for young women to receive athletic opportunities in proportion to their enrollment in the institution has been a very positive change, but the change has great costs associated with it, particularly in Division I schools that provide scholarships for both men and women athletes. In addition, Title IX requirements also influence costs associated with team travel and facilities to support athletic endeavors.

The Rehabilitation Act of 1972 prohibits discrimination in access to educational programs for persons with disabilities if they are oth...

Table of contents

• Cover
• Title Page
• Table of Contents
• Figures, Tables, and Exhibits
• Preface
• About the Authors
• 1 The Fiscal Context and the Roleof the Budget Manager
• 2 Primary Elements of the Budget: Revenue and Expenses
• 3 Understanding Budgets
• 4 Management of the Budget Cycle
• 5 Understanding Auxiliary and Capital Budgets
• 6 Problems and Pitfalls in Budget Management
• 7 Managing Budget Fluctuations
• Glossary of Terms
• Index
• End User License Agreement