Finances and budgeting: Or; putting your money where your heart is
There has been an explosion in the last few decades in university expenditures on non-core functions. Expenditures for managers and support personnel have far outpaced expenditures on instruction and research. The Center for College Affordability and Productivity at Ohio University has recently released a report documenting the growth in expenditures for this sector of the university. According to Richard K. Vedder, the center's director and an economics professor at Ohio University, this shift means that the core academic operations, teaching and research, are now a smaller piece of the pie.
Managerial and staff hires for student services figured prominently in this explosive growth of expenditures outside the core areas of teaching and research. Barrett Seaman, a close observer of the campus scene, has stated in his book Binge: What Your College Student Won't Tell You that the immense growth in student affairs and the advent of coeducation have been the most important developments in the college scene since he was a student in the 1960s. This phenomenal growth in the student affairs divisions has also contributed mightily to what author P. G. Kluge has called the “Kamp Kenyonization” of American higher education, which has turned American colleges and universities into “therapeutic kibbutzes.”
When I read The Guardian and Times Online pieces and learned that the Cambridge dons had retained control of the governing body of the university, I wondered if there was any evidence that Oxbridge’s virtually unique governance structure had made any difference in how those universities had spent their revenues. One of the important questions was whether Oxbridge had devoted a greater share of revenues to the core functions of teaching and research than institutions with other governance structures.
It turned out, happily, that data was available to answer this question. For U.S. universities, the data came from the Integrated Postsecondary Education Data System (IPEDS), a division of the National Center for Education Statistics, part of the U.S. Department of Education. The data for Cambridge, Oxford, and other UK universities came from the UK counterpart of IPEDS, called the Higher Education Statistics Agency (HESA). Using these data sources I was able to compare Oxford and Cambridge with universities in the UK and the US.
The method I used to arrive at the results is a bit complicated, so many of the details have been put into the Appendix at the end of this article. Suffice it to say here the information I wanted was given in the HESA database in two categories: “Academic departments” and “Administration & central services.” In the IPEDS database, the data I wanted was broken down into four categories rather than two: “Instruction,” “Research,” “Institutional support,” and “Student services.” I combined the figures for the first two and the last two in order to get the close equivalent of the two HESA categories of “Academic departments” and “Administration & central services.” (The definitions of these categories in HESA and IPEDS that justified this procedure are given in the Appendix below.) I was then able to find the ratio of the two. Since the expenditures for “Academic departments” (i.e., Instruction + Research) was, with only one exception, greater than expenditures for “Administration & central services” (i.e., Institutional support + Student services), I expressed the ratio as a fraction, with the percentage of expenditures spent on “Administration & central services” (or its US equivalent) as the numerator, and “Academic departments” (or its US equivalent) as the denominator.
My own intuitions are that a high ratio of administration and student services expenditures to expenditures on the core functions is a strong indication that a university is losing its focus on its core functions, and that this is a bad thing. I also had the hunch that Oxbridge’s very unusual—indeed virtually unique—governance structure had enabled those universities to maintain a uniquely low ratio of administrative and student services expenditures to expenditures on core functions. As it turned out, I was mostly right about this. The ratios (expressed as percentages) were much lower for Oxford and Cambridge than for other universities in the U.K. taken as a group. Significantly, the same was true for the University of Sussex, which is the only other institution of higher education in the UK that has a council controlled by the university’s faculty. The ratios were also much lower for Oxford, Cambridge, and Sussex than 4-year colleges in the U.S. The ratio was also much lower for Oxbridge than for Harvard, the principal competitor of Oxford and Cambridge in international rankings of universities. However, unexpectedly low ratios were also found in the IPEDS data for the category of “4-year doctoral extensive universities” and for a comparison group of U.S. peer universities that included Princeton, Stanford, Yale, and the University of California. (For the decision to use this comparison group, see the Appendix below.) My hypothesis that Oxbridge would outperform other universities was not confirmed in the case of these universities. However, the results were largely confirmatory, because Oxbridge was comparable with these universities on this measure, and fell into a very small set of universities in the US and the UK with low ratios of administration and student services expenditures to expenditures on the core functions. It is particularly striking that the only universities in the UK that have faculty majorities at the council level also have very low ratios of administrative to academic expenditures. I have no explanation for the equally low ratios for US “4-year doctoral extensive universities” (including Princeton, Stanford, Yale, and UC Berkeley.)
Looking to the future
The Guardian and Times Online articles raised important questions for the academy that deserved more than a Quick Take in Inside Higher Ed. Oxbridge’s long history presents a colorful picture of scholars fighting pitched battles throughout the centuries against the powers of King and Church and the town rabble. But the tale is still a timely and important one. Throughout all the vicissitudes of English history, Oxbridge maintained a governance structure that is still relevant to universities today.
The analysis provided here calls for further work and refinement. It would be desirable to have Geertzian thick description of governance at Oxbridge as compared with other universities. But any further analysis would, I think, likely confirm my hunch that the dons at Oxbridge are in fact energetically promoting the interests of the university, academic standards, and scholarly pursuits. Certainly, the centuries-old reputation of Oxford and Cambridge as outstanding centers of teaching and research speaks well for their efforts, and for the governance structure they have zealously preserved.
There is no reason why today’s universities and governing boards cannot adopt the Oxbridge governance model, or why future universities shouldn’t begin by adopting it. The virtual universities of the future, about which I have written before, in my “Extracurricular Sector of the University: Unappreciated and Soon To Be Unneeded,” where I discuss the concept of the Super Invisible College Virtual University, can adopt the Oxbridge model ab initio. If a future wealthy benefactor or benefactors started such an SICVU, in the way that John D. Rockefeller created the University of Chicago in 1891 with his endowment, the donors would be well advised to begin by first appointing and hiring the core faculty, and then to let that faculty hire the administrators, who would continue in their tenure at their sufferance. Since external forces on the university are very powerful in any case, the outcome would not be completely different from those under the present governance arrangements, but the evidence presented here strongly suggests that it would be significantly different, and that the outcome would be a better university.
Just think of it: universities in this day and age with governing structures that truly reflect what they are and always have been in their essence—communities of scholars.
What a concept.
APPENDIX: METHODOLOGY FOR THE MATERIAL ON FINANCES AND BUDGETING
I used HESA Tables for the 2000-01 academic year, even though I used more recent data for the U.S., because only data through 2000-01 was available online for the UK. (More recent data from HESA is available on CD-ROMs, but there is a fairly hefty fee for the more recent data.)
The data I used was provided by RESOURCES OF HIGHER EDUCATION INSTITUTIONS 2000/2001: Table 6: Expenditure of each institution by Activity 2000/01.
The definitions that justify my use of the two categories “Academic departments” and “Administration & central services” are given here:
Academic Departmental Cost Centres
This includes all expenditure directly incurred by or on behalf of academic departments (including departments of continuing education) and expenditure incurred in connection with special and short courses, which is not reimbursable by research councils or other bodies in respect of work carried out on their behalf. There are 40 departmental cost centres to which this expenditure can be attributed. They are: ...
Administration and Central Services
This includes expenditure incurred on central administration, general educational expenditure and staff and student facilities and amenities
Central administration & services includes expenditure in respect of central administrative staff and such payments to Heads of Institutions, Professors, Deans, Tutors, Faculty Officers and the like as are made in respect of central (as distinct from departmental) administrative work. This category also includes expenditure associated with the running costs of an administrative computer and the following other costs if not charged to their relevant cost centre; public relations, advertising and recruitment, removal expenses of all staff, publications (excluding educational publications), advisors, contributions to organisation and methods unit, security of wages, bank charges, central postage, superannuation management, expenses of head of organisation, legal and audit fees, general insurance costs not included elsewhere and telephone costs where centrally charged.
General educational expenditure includes expenditure incurred on examinations, fellowships, scholarships, prizes and other expenditure of a general educational nature. It includes the direct costs of examinations for example of external examiners, salaries, printing, etc. Also included in this section are provisions for bad debts in respect of unpaid fees, and the following items that cannot be appropriately charged elsewhere; educational publications, public lectures and exhibitions, subscriptions and contributions to learned societies and representative bodies, works of art, research projects, representation at conferences, explorations and expeditions, administration of non-departmental arts centres, schools liaison and student recruitment costs from home and overseas.
Staff & student facilities includes expenditure incurred on the provision of facilities and amenities for the use of students and/or staff e.g. Careers Advisory Service, all grants to student societies, emoluments to wardens of halls of residence, accommodation office, athletic and sporting facilities (excluding maintenance) and the institution’s health service.
For generating the tables I used the Executive Peer Tool (one of the “Data Tools”). This involved selecting the focus institution (I chose Harvard) and a set of comparison institutions. I used four of these. The first three were Yale, Princeton, and Stanford, which Harvard had selected as its own “peer group” for the IPEDS data base. I also included the University of California at Berkeley, in order to add a major public research university to the comparison group, as Oxford and Cambridge are public universities.
For the variable(s), I chose “Expenditures.” I used the IPEDS Executive Peer Analysis Tool to generate the “Core expenses per FTE enrollment, by function, Fiscal Year 2007.”
In the case of the UK data, I was able to use just two categories, “Academic departments” (i.e., Academic Departmental Cost Centres) and “Administration & central services” (see above). IPEDS does not use these two categories, but I found that four categories in the IPEDS database could be combined to make two categories that were comparable. I used the “Instruction” and “Research” categories in IPEDS to get a close equivalent to the “Academic departments” category used in HESA, and the “Student services” and “Institutional support” categories in IPEDS to get a close equivalent to the “Administration & central services “ category. (See above, for HESA).
Instruction (FASB and GASB unaligned form reporters)
A functional expense category that includes expenses of the colleges, schools, departments, and other instructional divisions of the institution and expenses for departmental research and public service that are not separately budgeted. Includes general academic instruction, occupational and vocational instruction, community education, preparatory and adult basic education, and regular, special, and extension sessions. Also includes expenses for both credit and non-credit activities. Excludes expenses for academic administration where the primary function is administration (e.g., academic deans). Information technology expenses related to instructional activities if the institution separately budgets and expenses information technology resources are included (otherwise these expenses are included in academic support). FASB institutions include actual or allocated costs for operation and maintenance of plant, interest, and depreciation. GASB institutions do not include operation and maintenance of plant or interest, but may, as an option, distribute depreciation expense.
Research (expense-- FASB and GASB unaligned form reporters)
A functional expense category that includes expenses for activities specifically organized to produce research outcomes and commissioned by an agency either external to the institution or separately budgeted by an organizational unit within the institution. The category includes institutes and research centers, and individual and project research. This function does not include nonresearch sponsored programs (e.g., training programs). Also included are information technology expenses related to research activities if the institution separately budgets and expenses information technology resources (otherwise these expenses are included in academic support.) FASB institutions include actual or allocated costs for operation & maintenance of plant, interest, and depreciation. GASB institutions do not include operation & maintenance of plant or interest but may, as an option, distribute depreciation expense.
Student services (expenses -- FASB and GASB unaligned form reporters )
A functional expense category that includes expenses for admissions, registrar activities, and activities whose primary purpose is to contribute to students emotional and physical well - being and to their intellectual, cultural, and social development outside the context of the formal instructional program. Examples include student activities, cultural events, student newspapers, intramural athletics, student organizations, supplemental instruction outside the normal administration, and student records. Intercollegiate athletics and student health services may also be included except when operated as self - supporting auxiliary enterprises. Also may include information technology expenses related to student service activities if the institution separately budgets and expenses information technology resources(otherwise these expenses are included in institutional support.) FASB institutions include actual or allocated costs for operation and maintenance of plant, interest, and depreciation. GASB institutions do not include operation and maintenance of plant or interest but may, as an option, distribute depreciation expense.
Institutional support (FASB and GASB unaligned form reporters)
A functional expense category that includes expenses for the day-to-day operational support of the institution. Includes expenses for general administrative services, central executive-level activities concerned with management and long range planning, legal and fiscal operations, space management, employee personnel and records, logistical services such as purchasing and printing, and public relations and development. Also includes information technology expenses related to institutional support activities. If an institution does not separately budget and expense information technology resources, the costs associated with student services and operation and maintenance of plant will also be applied to this function. FASB institutions include actual or allocated costs for operation and maintenance of plant, interest and depreciation. GASB institutions do not include operation and maintenance of plant or interest, but may, as an option, distribute depreciation expense.