Budgeting for the Academic Department

Richard E. Talbott, Ph.D.

University of Oklahoma Health Sciences Center

John Ferrarro, Ph.D.

University of Kansas Medical Center

Nicholas Bankson, Ph.D.

James Madison University


May those who love us--love us. And for those who donít love us --may God turn their hearts to love us. And for those whose hearts canít be turned, may He turn their ankles THAT THEY MAY BE KNOWN BY THEIR LIMPS.


Of the most often asked questions from individuals new to Departmental administration, budget management, innovative budget approaches, and overall budgetary models is typically at the top of the list. A major thesis of this presentation is that while it is not necessary for Department chairs to obtain a degree in accounting to be effective leaders of academics and academic leaders, a general understanding of budgeting principles, the overall budget process within the University, the sources of budget allocation decision points, and the like are important for effective budgetary stewardship. To this end, this presentation is divided into three major sections: (1) overview of some of the basic accounting principles and definitions; (2) a presentation of one model for providing financial incentives to faculty for successful grant writing, and (3) a discussion of some of the potential revenue sources for Departments outside the institutions budget allocation process.


Note: The definitions and examples presented are from the reference texts listed at the end of the paper.


GAAP: Generally Accepted Accounting Principles

GASB: Governmental Accounting Standards Board

AICPA: American Institute of Certified Public Accountants - recognizes GASB as the designated body to establish accounting principles for state and local governments

FUND: Fiscal and accounting entity with a self balancing set of accounts recording each and every financial resources, together with all related liabilities and residual equities or balances, and changes therein, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations

ACCRUAL BASIS: The basis of accounting under which revenues are recorded when earned and expenditures (or expenses) are recorded as soon as they result in liabilities for benefits received, notwithstanding that the receipt of cash or the payment of cash may take place, in whole or in part, in another accounting period

CASH BASIS: The basis of accounting under which revenues are recorded when received in cash and expenditures (or expenses) are recorded when cash is disbursed

MODIFIED ACCRUAL BASIS: Revenues are recognized in the period in which they become available and measurable, and expenditures are recognized at the time a liability is incurred pursuant to appropriation authority

MODIFIED CASH BASIS: A plan where revenues are recognized on the cash basis, but expenditures (expenses) are recognized on the accrual basis

BUDGETARY ACCOUNTS: Those that reflect budgetary operations and conditions, such as estimated revenues, appropriations, and encumbrances, as distinguished from proprietary accounts

PROPRIETARY ACCOUNTS: Those that show actual financial position and operations, such as actual assets, liabilities, reserves, fund balances, revenues, and expenditures

INDIRECT COST: A cost incurred that cannot be identified specifically with a cost objective but rather benefits multiple cost objectives (e.g., data processing department, accounting department, etc.)

OVERHEAD: Those elements of cost necessary in the production of an article or the performance of a service that are of such a nature that the amount applicable to the product or service cannot be determined accurately or readily. Usually they relate to those objects of expenditures that do not become an integral part of the finished product or service, such as rent, heat, management, etc.

ZERO BASED BUDGETING: A budget based on the concept that the very existence of each activity must be justified each year, as well as the amounts of resources requested to be allocated to each activity

RESTRICTED FUND: A fund established to account for assets whose use is limited by the requirements of donors or grantors. Institutions may have three types of restricted funds: specific purpose funds, endowment funds, and plant replacement and expansion funds

SINGLE AUDIT: An audit prescribed by federal law for state and local governmental units, colleges and universities, and not-for-profit organizations that receive federal financial assistance above a specified amount. Such an audit is conducted on an organization-wide basis rather than on the former grant-by-grant basis. The single audit act of 1984 imposes uniform, and rigorous, requirements for conducting and reporting on single audits



DLP: If you do not have a management accounting plan you are probably squandering precious resources: a plan--any plan will help!



Formula Based Budgets:

Goal: Develop an argument for additional faculty lines on the basis of a formula based FTE analysis

DLP: This process can become complicated; however, the level of analysis is dependent upon the chair's knowledge of decision point individuals (e.g., deans, provosts, chancellors).


Assumptions Underlying FTE Analyses:

Normative workload factors: student FTE needed to generate 1.0 FTE

Typical: 400 student credit hours (SCH) - (credit hours per class x number of students in class)-- freshman/sophomore

300 SCH for junior or senior

200 SCH for beginning graduate

100 SCH for advanced graduate

Example Justifying 1.0 instructional FTE based on above -

One undergraduate course: 3 CH x 54 students = 162 SCH/400 =.405 FTE

One masters level course: 3 CH x 20 students = 60 SCH/200 = .30 FTE

One doctoral level course: 3 CH x 10 students = 30 SCH/100 = .30 FTE

Total FTE justified = 1.05 FTE/yr


Supervision: FTE must account for actual supervision time, student conference time, report review, general administrative time, etc. It is best to relate supervision in some way to SCH if possible since this is "the coin of the realm."

Research, Administration, Support Personnel: Usually based on some ratio to instructional FTE. For example, 1.0 research FTE for each 5 instructional positions, or one administrative FTE for each 10 instructional FTE, or one support FTE for every four instructional FTE.

DLP: Ratios must be varied as a function of the mission of the department and as a reflection of the mission of the organization (i.e., RI, RII, MI).


DLP : Most effective chairs know not only the formula but the zeitgeist.

Very little, if any, data across several studies indicate that any existing cost analysis-formula driven systems are effective at improving or managing higher education. However, many states still use this approach and most have student FTE somewhere in their allocation process. The result is usually a reward to the teaching institutions to the detriment of research institutions.

Good news: Several states/institutions ( North Carolina is one of first) have established different systems/formulas as function of the type of institution (i.e., RI, RII, Comprehensive I, etc.).


Total Budget Institut. Support Other Support Faculty Salaries FTE

RI $467,821.00 $355,464.00 $112,357.00 $313,688.00 4.73

$810,243.00 $661,903.00 $148,340.00 $616,360.00 8.85

$869,911.00 $466,384.00 $403,527.00 $456,046.00 6.53

$873,366.00 $655,706.00 $217,660.00 $631,993.00 9.015

$2,885,018.00 $1,510,878.00 $1,374,140.00 $1,219,455.00 13.15

$2,964,007.00 $611,719.00 $2,352,288.00 $567,361.00 11.65

$2,075,964.00 $508,345.00 $1,567,619.00 $1,229,639.00 12.97

$2,979,184.00 $794,276.00 $2,184,908.00 $754,123.00 11.00

$930,169.00 $510,505.00 $419,664.00 $492,324.00 7.88

Avg $1,650,631.44 $675,020.00 $975,611.44 $697,887.67 $9.53


RII $1,253,545.00 $863,449.00 $390,096.00 $762,777.00 12.76 $1,463,727.00 $1,294,733.00 $168,994.00 $1,268,412.00 14.15 $571,641.00 $513,853.00 $57,788.00 $493,356.00 6.83 $1,946,529.00 $1,379,635.00 $566,894.00 $1,284,635.00 23.1

Avg $1,084,671.00 $923,292.00 $161,379.00 $755,856.00 7.135


$453,174.00 $371,453.00 $81,721.00 $268,101.00 4.5

$727,193.00 $679,026.00 $48,167.00 $630,727.00 5.75

$379,106.00 $379,160.00 $304,106.00 6.725

$406,342.00 $402,342.00 $4,000.00 $359,822.00 3.55

$2,496,674.00 $2,121,983.00 $374,691.00 $871,536.00 10.9

$483,000.00 $410,600.00 $72,400.00 $410,600.00 7.7

$590,781.00 $551,881.00 $38,900.00 $519,971.00 7.0

$338,603.00 $187,050.00 $151,553.00 $178,938.00 6.75

$895,989.00 $742,155.00 $153,834.00 $710,155.00 12.40

$446,161.00 $412,569.00 $33,592.00 $384,569.00 5.45

$269,952.00 $242,656.00 $27,296.00 $221,256.00 5.50

$2,125,072.00 $1,018,136.00 $1,106,936.00 $996,136.00 17.44

$545,532.00 $511,411.00 $34,121.00 $424,256.00 12.10

$355,644.00 $327,239.00 $28,405.00 $308,644.00 4.75

$661,532.00 $475,412.00 $186,120.00 $411,375.00 6.50

$621,136.00 $306,358.00 $314,778.00 $284,630.00 4.40

$542,961.00 $538,596.00 $4,365.00 $458,048.00 6.17

$615,829.00 $600,282.00 $15,547.00 $534,718.00 6.80

$592,731.00 $582,011.00 $10,720.00 $568,275.00 4.95

$288,748.00 $271,548.00 $17,200.00 $230,340.00 2.32

$298,764.00 $168,410.00 $130,354.00 $164,681.00 3.00

$706,746.20 $565,013.90 $141,735.00 $462,044.20 $7.23



School of Allied Health

University of Kansas Medical Center

Critical Assumptions

Policy for Faculty Salary Incentives

The first priority in utilizing grant salary-release money is to assure that there are adequate replacement costs for any release time (i.e., if replacement costs and salary enhancement are greater than the total funds released by the grant, the salary enhancement will be reduced accordingly).

The maximum salary enhancement will be equivalent to a cap of 25% of the faculty memberís base salary for 12 months (e.g., if a faculty member is earning $50,000/year, the maximum new salary would be $62,500/year).

Determination of Salary Enhancement: Time Reduction

A salary reduction will be necessary for each month that the faculty member is "released" by the grant. Salary reduction will be 1/3 of the monthly salary times the number of months released (up to 3 months).

Example: If the number of months released = 2, the new appointment will be for 10 months with a salary reduction of 2/3 of 1 monthís salary.

Determination of Salary Enhancement: New Salary

The new yearly salary will be computed based on the new monthly salary.

Example: A faculty member earns $50,000/year ($4,166/month) and has received a grant which contains salary support for 2 months ($8,332). The faculty member will then have a 10-month appointment and his/her salary will be reduced by 2/3 of the monthly salary ($2,777 in this example). The new 10-month salary becomes $47,223 ($4,722/month and $56,667/year). Salary enhancement = $6,667 (13%) with $1,665 left over for other uses



Base salary is reduced for each month P.I. is released by 1/3 of the monthly salary times the number of months released:

- Base salary: $52,217/year or $4,351/month

- Number of months released: 2.5

- 1/3 of monthly salary X months released: $1,450 X 2.5 = $3,626

- Adjusted salary for 9.5 months: $52,217 - $3,626 = $48,491

- New 9.5 month salary: $48,491

- New monthly salary: $48,491/9.5 = $5,115

- New 12 month salary based on adjusted monthly salary: $5,115 X 12 = $61,378

- New yearly salary: $61,378

- Salary enhancement: $61,378 - $52,217 = $9,161 (17.5% of base salary)

- Leftover release dollars: $10,982 - $9,161 = $1,820 (used for clerical support)



Salary adjustment for P.I. 12,500

Graduate Teaching Assistant 4,000

Secretaries 4,000

Administrative Assistant 2,000

Dept operating expenses 2,500

TOTAL 25,000




SECTION 3-SOURCES OF INCOME (supplementary to the departmental budget)

Grants from the State Department of Education

- All states get money from USDE through IDEA legislation.

- All states have plans and priorities, but given the shortages of SLP Personnel in the schools, it is not uncommon for some of these funds to be directed toward educating speech-language pathologists.

- This source is going to become even more important as there is talk that the Part D funding we are familiar with is going to go in a block grant to the states.

- Presently James Madison University is receiving state money for these projects:

(1) Development of a video-based course to prepare clinical supervisors, especially those who will supervise SLPAís

(2) Determining the efficacy of various proficiency criteria for sign language personnel

(3) Money to support teaching courses for part-time students who work in school settings. This also provides the department with supervisory assistance

(4) We are receiving approximately $100,00 per year

Endowment Funds

- These are designated monies that are donated to a university/department, often for specific uses. They involve enough money that they can support a funding objective year after year.

1. Scholarships

2. Distinguished Chair (Southeastern Louisiana, Northwestern)

3. Clinic (Barkley Foundation at U. of Nebraska Ė building, faculty, clinic support)

Foundation Monies

- Universities often have Foundation monies that represent contributions from alums. Sometimes departments can tap these, particularly those donated by their own alums

- Usually such monies may be donated toward a specific cause, or are general contributions, but not large enough to be self perpetuating

Private Foundations

_ Scottish Rite Foundation Ė summer program, scholarships, clinics, faculty

Faculty Practice

- A means for faculty to supplement their income and for the department/ clinic to allow students the opportunity to capitalize on faculty expertise.

- A problem in a research based university if tenure track people want to do this.

- Typically involves some splitting of fees between the faculty provider and the clinic.

- It also allows the department to hire someone "full-time" (e.g. supervisors) by sharing them with a clinical enterprise.

- Can be a mixed bag. Conflict of interest in terms of time allocation, recommendations on clients.


Clinic Revenue

- Central Issue: How much is generated? Where do the funds go? Do they supplement the university monies or are they a replacement?


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