University Budgeting: Academic Information Technology Department

Topics: College, Bachelor's degree, Graduate school Pages: 19 (2849 words) Published: April 19, 2014
Case study: Budgeting in an Academic Information Technology Department of a University
(Source: This case has been adapted from - Vollmers, G. & Coons, W. (2012). IMA Educational Case Journal, 5(1), Art. 2).

You are a senior accounting faculty member in the business school and your dean, Rose Garrett, is asking for help. She is very discouraged after a midyear budget meeting with the Vice President of Finance (VPoF). The college’s Department of Information Technology has a large budget deficit, and because of this the VPoF is inclined towards closing the department entirely or closing its bachelor’s program. The department’s deficit is the worst in the university and has been so for several years. Garrett met with James Dawson, Director of the Department of Information Technology, nine months ago, asking him to do his best to reduce expenditures, but Dawson said then that it wasn’t possible – they were down to the bone. Dean Garrett has already had to transfer funds from another department to cover the non-base-budgeted salary of a faculty member. The college will also have to cover the final deficit, which means that the other three departments of the college, operating within their budgets, will find any surplus proportionately depleted. Dean Garrett tells you that, from a budgetary viewpoint, the college would be better off without Information Technology, but that she does not understand what is really going on. The deficit is obvious, but Dawson says the department is booming – there are plenty of students. She asks you to analyse this situation. Visit the department and talk to Director Dawson. Find out what you can, collect data, and report back as soon as possible. You have access to the budgetary information she has and all other possibly relevant information, including student credit hours and price of tuition. Make the case for or against the Vice-President of Finance’s recommendation to close the Department of Information Technology.

The university is facing declining enrolments because of a change in demographics. The number of students graduating from the state’s high schools is declining. Efforts to recruit and retain are underway, but between the enrolments decline and rising costs, there are tremendous incentives to find places to cut.

Tuition and fees (see Table 1) and other student charges contribute about 30% to the revenue side of the university, but they do not appear on any college or departmental budget. Only revenues clearly generated by a particular department (e.g. lab fees) are included in that unit’s budget. State appropriations, grant funding, endowment earnings, and other revenues make up the remainder of the revenue side of the university budget,


but they also are not distributed among the budgets of the colleges or other units. By the same token, no overhead charges appear in college budgets either. Well before the beginning of the fiscal year, the VPoF sends each dean the college’s base budget: the total amount available for salaries and other costs. Typically it equals last year’s budget (with minor modifications). The deans send the department heads their budgets and then meet with them to discuss their concerns. Finally, the deans meet with the VPoF to answer standard questions, such as whether departments and the college can come in on budget; whether revenue opportunities exists; where cuts will be taken. Neither the deans nor the department heads have an opportunity to challenge the budget as a whole. Budget changes are usually incremental and often temporary. That is, a dean may secure a onetime transfer of funds for some special purpose, but a permanent increase to the base budget is rare. One exception to this occurs when a new faculty member, not a replacement, is hired1. Another occurs in the opposite direction: when there are cuts to the entire university’s budget. When or how budget...
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