Advertisement

Tertiary Education and Management

, Volume 20, Issue 3, pp 207–224 | Cite as

Financial management of Canadian universities: adaptive strategies to fiscal constraints

  • Darren DeeringEmail author
  • Creso M. Sá
Article

Abstract

Decreasing government funding and regulated tuition policies have created a financially constrained environment for Canada’s universities. The conventional response to such conditions is to cut programme offerings and services in an attempt to lower costs throughout the institution. However, we argue that three Canadian universities have reacted with a different response. Instead of cutting costs, the University of Toronto, Queen’s University and the University of Lethbridge have chosen to implement decentralized budgeting and management structures in an attempt to increase efficiency and seek out new revenues. Using interview data and document analysis, this paper discusses the responses of these institutions and what they tell us about the strategies universities employ to cope with financial challenges that are likely to persist.

Keywords

strategic responses budgeting finance management 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Altbach, P. G., Reisberg, L., & Rumbley, L. E. (2010). Trends in global higher education: Tracking an academic revolution. Paris: UNESCO.Google Scholar
  2. Association of Universities and Colleges of Canada. (2008a). Trends in higher education: Finance (Vol. 3). Ottawa: Association of Universities and Colleges Canada.Google Scholar
  3. Association of Universities and Colleges of Canada. (2008b). University funding trends: Challenges in the decade ahead. Ottawa: Association of Universities and Colleges of Canada.Google Scholar
  4. Association of Universities and Colleges of Canada. (2011). Trends in higher education: Enrollment (Vol. 1). Ottawa: Association of Universities and Colleges of Canada.Google Scholar
  5. Beach, C. M., Boadway, R. W., & McInnis, R. M. (2005). Higher education in Canada. Kingston: John Deutsch Institute for the Study of Economic Policy.Google Scholar
  6. Birnbaum, R. (2000). Management fads in higher education: Where they come from, what they do, why they fail. San Francisco, CA: Jossey-Bass.Google Scholar
  7. Bok, D. (2003). Universities in the marketplace: The commercialization of higher education. Princeton, NJ: Princeton University Press.Google Scholar
  8. Cantor, N., and Courant, P. (1997). Budgets and budgeting at the University of Michigan: A work in progress. Ann Arbor, MI: The University Record.Google Scholar
  9. Carnes, B. (1987). The campus cost explosion: College tuitions are unnecessarily high. Policy Review, 40, 68–71.Google Scholar
  10. Clower, R. W. (1965). The Keynesian counterrevolution: A theoretical appraisal. In F. H. Hahn & F. P. R. Brechling (Eds.), The theory of interest rates (pp. 103–125). London: Macmillan.Google Scholar
  11. Clower, R. W., & Howitt, P. W. (1978). The transactions theory of the demand for money: A reconsideration. Journal of Political Economy, 86, 449–466.CrossRefGoogle Scholar
  12. Curry, J., Laws, A., & Strauss, J. (2013). Responsibility center management, a guide to balancing academic entrepreneurship with fiscal responsibility. Washington, DC: National Association of College and University Business Officers.Google Scholar
  13. Davis, C., & Harrison, A. (2011). Financial update from the provost and VP finance and administration. Kingston: Queen’s University.Google Scholar
  14. Davis, D. J., Green-Derry, L. C., & Jones, B. (2013). The impact of federal financial aid policy upon higher education access. Journal of Educational Administration and History, 45, 49–57.CrossRefGoogle Scholar
  15. Eastman, J., & Lang, D. (2001). Mergers in higher education: Lessons from theory and experience. Toronto: University of Toronto Press.CrossRefGoogle Scholar
  16. Esterberg, K. G., & Wooding, J. (2013). Divided conversations: Identities, leadership, and change in public higher education. Nashville, TN: Vanderbilt University Press.Google Scholar
  17. European University Association. (2013). EAU’s public funding observatory (Spring 2013). Brussels: European University Association.Google Scholar
  18. Fallis, G. (2007). Multiversities, ideas and democracy. Toronto: University of Toronto Press.CrossRefGoogle Scholar
  19. Fama, E. F. (1980). Agency problems and the theory of the firm. Journal of Political Economy, 88, 288–307.CrossRefGoogle Scholar
  20. Fama, E. F., & Jensen, M. C. (1983). Agency problems and residual claims. The Journal of Law and Economics, 26, 327–349.CrossRefGoogle Scholar
  21. Fisher, D., Rubenson, K., Jones, G., & Shanahan, T. (2009). The political economy of post-secondary education: A comparison of British Columbia, Ontario and Québec. Higher Education, 57, 549–566.CrossRefGoogle Scholar
  22. Garner, S. (2008). Transition to a new budget model at the University of Toronto. Ottawa: Canadian Association of University Budget Officers.Google Scholar
  23. Gooch, P. (2012). Interprovincial comparison of university revenue. Toronto: Council of Ontario Universities.Google Scholar
  24. Govindarajan, V. (1986). Decentralization, strategy and effectiveness of strategic business units in multibusiness organizations. The Academy of Management Review, 11, 844–856.CrossRefGoogle Scholar
  25. Gros Louis, K., & Thompson, M. (2002). Responsibility center budgeting and management at Indiana University. In D. Priest, W. Becker, D. Hossler, & E. St. John (Eds.), Incentive-based budgeting systems in public universities (pp. 93–107). Northampton, MA: Edward Elgar.Google Scholar
  26. Gumport, P. (2000). Academic restructuring: Organizational change and institutional imperatives. Higher Education, 39, 67–91.CrossRefGoogle Scholar
  27. Harrison, A. (2013). Queen’s University budget communication June 2013. Kingston: Queen’s University.Google Scholar
  28. Hearn, J. C., Lewis, D. R., Kallsen, L., Holdsworth, J. M., & Jones, L. M. (2006). Incentives for managed growth: A case study of incentives-based planning and budgeting in a large public research university. The Journal of Higher Education, 77, 286–316.Google Scholar
  29. Holian, M., & Ross, J. M. (2010). Managing the internal organization of colleges and universities. In J. C. Hall (Ed.), Doing more with less: Making colleges work better (pp. 217–234). New York, NY: Springer.CrossRefGoogle Scholar
  30. Jarvie, D. (2002). The effect of responsibility centre budgeting/responsible centre management on the role of academic deans in a public university. Lethbridge: University of Lethbridge.Google Scholar
  31. Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3, 305–360.CrossRefGoogle Scholar
  32. Jones, D. (1984). Higher-education budgeting at the state level: Concepts and principles. Boulder, CO: National Center for Higher Education Management Systems.Google Scholar
  33. Jones, G. A. (1997). Higher education in Canada: Different systems, different perspectives. New York, NY: Garland.Google Scholar
  34. Kaye, G., Moran, G., O’Heron, H., & Snowdon, K. (2009). Revisiting Ontario college and university revenue data. Toronto: Higher Education Quality Council of Ontario.Google Scholar
  35. Keitiline, R., & Eugenio, A. (2010). Higher education in management: Reinventing the paradigm to gain the capacity to handle today’s complexity. On the Horizon, 18, 45–52.CrossRefGoogle Scholar
  36. Kirp, D. L. (2003). Shakespeare, Einstein, and the bottom line: The marketing of higher education. Cambridge, MA: Harvard University Press.Google Scholar
  37. Kirp, D. L., & Roberts, P. S. (2002). Mr. Jefferson’s university breaks up. The Public Interest, Summer, 70–84.Google Scholar
  38. Kornai, J. (1986). The soft budget constraint. Kyklos, 39, 3–30.CrossRefGoogle Scholar
  39. Lang, D. (1999a). A primer on responsibility centre budgeting. CSSHE Professional File No. 1. Ottawa: CSSHE.Google Scholar
  40. Lang, D. (1999b). Responsibility centre budgeting and responsibility centre management in theory and practice. Higher Education Management, 11, 81–111.Google Scholar
  41. Lang, D. (2001). Responsibility centre budgeting and responsibility centre management at the University of Toronto: Lessons from trial and error. Toronto: University of Toronto.Google Scholar
  42. Lasher, F., & Greene, D. (1993). College and university budgeting: What do we know? What do we need to know? In J. C. Smart (Ed.), Higher education: Handbook of theory and research (Vol. ix, pp. 429–469). New York, NY: Agathon Press.Google Scholar
  43. Lasher, F., & Greene, D. (2001). College and university budgeting: What do we know? What do we need to know? New York, NY: Agathon Press.Google Scholar
  44. Lethbridge. (1994). University of Lethbridge planning and three-year budget forecasting manual. Lethbridge: University of Lethbridge.Google Scholar
  45. Lethbridge. (1999). University of Lethbridge financial statements and supplementary schedules 1991–1999. Lethbridge: University of Lethbridge.Google Scholar
  46. Lethbridge. (2012a). Final report of the President’s Task Force on budget processes. Lethbridge: University of Lethbridge.Google Scholar
  47. Lethbridge. (2012b). The University of Lethbridge 2008–2012 business plan. Lethbridge: University of Lethbridge.Google Scholar
  48. Lethbridge. (2013a). Fact book 2012–2013. Lethbridge: University of Lethbridge.Google Scholar
  49. Lethbridge. (2013b). Report of the University Budget Committee on the 2013–2014 to 2015–2016 university budget. Lethbridge: University of Lethbridge.Google Scholar
  50. Lethbridge. (2013c). University of Lethbridge comprehensive institutional plan 2013/14–2015/16. Lethbridge: University of Lethbridge.Google Scholar
  51. Love, J., & Judson, P. (2012). Ratings direct: Queen’s University. Toronto: Standard and Poors Ratings Services.Google Scholar
  52. Mackenzie, H., & Rosenfeld, M. (2002). University funding cuts: Shortchanging Ontario students. Ottawa: Canadian Centre for Policy Alternatives.Google Scholar
  53. Mahon, M. (2012). The University of Lethbridge–Alberta’s destination university: An open letter to our university communities. Lethbridge: University of Lethbridge. Retrieved from https://doi.org/www.uleth.ca/president/stories/open-letter-our-university-communitiesGoogle Scholar
  54. Massy, W. (1989). Budget decentralization at Stanford University. Planning for Higher Education, 18, 39–55.Google Scholar
  55. Massy, W. (1996). Resource allocation in higher education. Ann Arbor, MI: The University of Michigan Press.CrossRefGoogle Scholar
  56. McConaghy, T. (1997). How Canadian universities are managing change. Phi Delta Kappan, 78, 660–661.Google Scholar
  57. McLendon, M. K., Hearn, J. C., & Mokher, C. G. (2009). Partisans, professionals, and power: The role of political factors in state higher education funding. The Journal of Higher Education, 80, 686–713.CrossRefGoogle Scholar
  58. Meisinger, R. J., & Dubeck, L. W. (1984). College and university budgeting: An introduction for faculty and academic administrators. Washington, DC: National Association of College and University Business Officers.Google Scholar
  59. Merchant, K. (1989). Rewarding results: Motivating profit centre managers. Boston, MA: Harvard Business School Press.Google Scholar
  60. Metcalfe, A. S. (2010). Revisiting academic capitalism in Canada: No longer the exception. The Journal of Higher Education, 81, 489–514.CrossRefGoogle Scholar
  61. Ministry of Training, Colleges and Universities. (2009). The Ontario operating funds distribution manual. Toronto: Ministry of Training, Colleges and Universities.Google Scholar
  62. Oliff, P., Palacios, V., Johnson, I., & Leachman, M. (2013). Recent deep state higher education cuts may harm students and the economy for years to come. Washington, DC: Center on Budget and Policy Priorities.Google Scholar
  63. Ontario Confederation of University Faculty Associations. (2011). University funding–Capital. Toronto: Author.Google Scholar
  64. Paulsen, M., & Smart, J. (2001). The finance of higher education: Implications for theory, research, policy and practice. In M. B. Paulsen & J. C. Smart (Eds.), The finance of higher education: Theory, research, policy, and practice (pp. 545–568). New York, NY: Agathon Press.Google Scholar
  65. Pin, L., Martin, C., & Andrey, S. (2011). Rising costs: A look at spending at Ontario universities. Toronto: Ontario Undergraduate Student Alliance.Google Scholar
  66. Priest, D., Becker, W., Hossler, D., & St. John, E. (2002). Incentive-based budgeting systems in public universities. Northampton, MA: Edward Elgar.Google Scholar
  67. Queen’s. (2010). Report on the annual budget. Kingston: Queen’s University.Google Scholar
  68. Queen’s. (2011). Annual report. Kingston: Queen’s University.Google Scholar
  69. Queen’s. (2012). Queen’s University budget report 2012–13. Kingston: Queen’s University.Google Scholar
  70. Queen’s. (2013a). Queen’s budget model Q&A. Retrieved October 21, 2013, from https://doi.org/www.queensu.ca/provost/responsibilities/newbudgetmodel/qanda.htmlGoogle Scholar
  71. Queen’s. (2013b). Queen’s University budget report 2013–14. Kingston: Queen’s University.Google Scholar
  72. Queen’s. (2013c). Quick facts. Retrieved October 22, 2013, from https://doi.org/www.queensu.ca/discover/quickfactsGoogle Scholar
  73. Queen’s University Faculty Association. (2012). Queen’s University Faculty Association’s voices. Kingston: Queen’s University.Google Scholar
  74. Rodas, D. (2001). Resource allocation in private research universities. New York, NY: Routledge.Google Scholar
  75. Shin, J. C., Toutkoushian, R. K., & Teichler, U. (2011). University rankings. New York, NY: Springer.CrossRefGoogle Scholar
  76. Silverman, B., & Davis, C. (2011). Tackling the challenge of pension reform. Kingston: Queen’s University.Google Scholar
  77. St. John, E. (1994). Prices, productivity, and investment: Assessing financial strategies in higher education. Washington, DC: George Washington University.Google Scholar
  78. Standing Senate Committee on National Finance. (2001). The role of the government in the financing of deferred maintenance costs in Canada’s post-secondary institutions. Ottawa: Author. Retrieved from https://doi.org/www.parl.gc.ca/Content/SEN/Committee/371/fina/rep/rep09oct01-e.htmGoogle Scholar
  79. Statistics Canada. (2008a). Profile of labour market activity, industry, occupation, education, language of work, place of work and mode of transportation for Canada, provinces, territories, census divisions and census subdivisions, 2006 census. (94-579-XCB2006001). Retrieved December 10, 2013, from https://doi.org/www12.statcan.gc.ca/census-recensement/2006/dp-pd/prof/rel/Rp-eng.cfm?LANG=E&APATH=3&DETAIL=1&DIM=0&FL=A&FREE=0&GC=0&GID=0&GK=0&GRP=1&PID=92535&PRID=0&PTYPE=89103&S=0&SHOWALL=0&SUB=0&Temporal=2006&THEME=74&VID=0&VNAMEE=&VNAMEF=Google Scholar
  80. Statistics Canada. (2008b). Table 478-0007–University education expenditures, by direct source of funds and type of expenditures, annual (dollars) (CANSIM). Retrieved February 10, 2014, from https://doi.org/www5.statcan.gc.ca/cansim/a05?lang=eng&id=4780007&pattern=4780007&searchTypeByValue=1&p2=35Google Scholar
  81. Statistics Canada. (2012). Undergraduate tuition fees for full time Canadian students, by discipline, by province (Canada). Retrieved April 9, 2014, from https://doi.org/www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/educ50a-eng.htm
  82. Stocum, D., & Rooney, P. (1997). Responding to resource constraints: A departmentally based system of responsibility center management. Change: The Magazine of Higher Learning, 29 (5), 50–57.CrossRefGoogle Scholar
  83. Strauss, J. C., & Curry, J. R. (2002). Responsibility center management: Lessons from 25 years of decentralised management. Washington, DC: National Association of College and University Business Officers.Google Scholar
  84. Tandberg, E., & Pavesic-Skerlep, M. (2009). Advanced public financial management reforms in South East Europe. International Monetary Fund. Retrieved from https://doi.org/www.imf.org/external/pubs/ft/wp/2009/wp09102.pdfGoogle Scholar
  85. Tavenas, F. (1993). Budgeting for quality in a university. Keynote speech. Retrieved from https://doi.org/www.usask.ca/cirpa/proceed1993/tavenas.htmlGoogle Scholar
  86. Teichler, U. (2006). Changing structures of the higher education systems: The increasing complexity of underlying forces. Higher Education Policy, 19, 447–461.CrossRefGoogle Scholar
  87. Tolbert, P. S. (1985). Institutional environments and resource dependence: Sources of administrative structure in institutions of higher education. Administrative Science Quarterly, 30, 1–13.CrossRefGoogle Scholar
  88. Toronto. (1994). A proposal for integrating OISE and FEUT within the University of Toronto. Toronto: University of Toronto.Google Scholar
  89. Toronto. (2003). Condensed financial report. Toronto: University of Toronto.Google Scholar
  90. Toronto. (2006). Task force to review approach to budgeting final report. Toronto: University of Toronto.Google Scholar
  91. Toronto. (2007). Fund groups used at UofT. Retrieved November 29, 2013, from https://doi.org/www.finance.utoronto.ca/gtfm/fm/fafm/fundgroups.htmGoogle Scholar
  92. Toronto. (2011a). Review of the New Budget Model. Toronto: University of Toronto.Google Scholar
  93. Toronto. (2011b). University of Toronto budget report 2011–12 and long range budget guidelines 2011–12 to 2015–16. Toronto: University of Toronto.Google Scholar
  94. Toronto. (2012). University of Toronto 2012 budget brief. Toronto: University of Toronto.Google Scholar
  95. Toronto. (2013). Quick facts. Retrieved October 21, 2013, from https://doi.org/www.utoronto.ca/about-uoft/quickfacts.htmGoogle Scholar
  96. Toutkoushian, R. (2009). An economist’s perspective on the privatization of public higher education. In C. Morphew & P. Eckel (Eds.), Privatizing the public university: Perspectives from across the academy (pp. 60–87). Baltimore, MD: The Johns Hopkins University Press.Google Scholar
  97. Vancil, R. F. (1980). Decentralization: Managerial ambiguity by design. New York, NY: Financial Executives Research Foundation.Google Scholar
  98. Vonasek, J. (2011). Implementing responsibility centre budgeting. Journal of Higher Education Policy and Management, 33, 497–508.CrossRefGoogle Scholar
  99. Whalen, E. (1991). Responsibility center budgeting: An approach to decentralised management for institutions of higher education. Bloomington, IN: Indiana University Press.Google Scholar
  100. Whalen, E. (2002). The case, if any, for responsibility center budgeting. In D. Priest, W. Becker, D. Hossler, & E. St. John (Eds.), Incentive-based budgeting systems in public universities (pp. 111–135). Northampton, MA: Edward ElgarGoogle Scholar
  101. Wilkins, S., Shams, F., & Huisman, J. (2013). The decision-making and changing behavioural dynamics of potential higher education students: The impacts of increasing tuition fees in England. Educational Studies, 39, 125–141.CrossRefGoogle Scholar
  102. Yudof, M. G. (2002, January 11). Is the public research university dead? The Chronicle of Higher Education, p. B 24. Retrieved from https://doi.org/chronicle.com/article/Is-the-Public-Research-Univ/14345Google Scholar
  103. Zierdt, G. (2009). Responsibility-centred budgeting: An emerging trend in higher education budget reform. Journal of Higher Education Policy and Management, 31, 345–353.CrossRefGoogle Scholar
  104. Zimmerman, J. L. (1995). Accounting for decision making and control. Chicago, IL: Irwin.Google Scholar

Copyright information

© The European Higher Education Society 2014

Authors and Affiliations

  1. 1.Ontario Institute for Studies in EducationUniversity of TorontoTorontoCanada

Personalised recommendations