Graduate Thesis Or Dissertation

Determination of indicators for predicting budget balances in accounting units as an administrative tool for higher education

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  • Colleges and universities must be continually seeking means to improve their financial management. One improvement would be to lessen the amount of monies the state-owned university reverts to the state at the end of the fiscal year. Such reversion is caused by numerous departments, each with financial autonomy, incurring greater amounts of surpluses than those departments ending with deficits. Whatever means are developed to control this reversion should, however, not lessen departmental financial autonomy. Budgets and budgetary control are defined and are related to the concepts of feedback and management-by-exception. These concepts provide a model of budgetary control within the university environment and explain the workings of performance, measurement, comparison, evaluation, and the taking of action to affect plans or performance. With feedback and utilizing the management-by-exception principle, a type of budget control indicator might be developed to affect the necessary control without reducing autonomy. This budget control indicator could provide the means whereby the amount of surpluses or deficits at the departmental level would be lessened. It would be relevant to determine a point in time which would permit the identification and hence reduction of potential surpluses or perhaps change the trend leading to deficits. The reduction of a potential surplus at an early enough point in time would permit some funding of significant projects, which otherwise might never have received funding, rather than let the money revert. The indicator was determined from a historical study of the expenditure patterns of a population of 98 Oregon State University departments. The results obtained for 1967-68 indicated that using two-thirds of one standard deviation from the mean of the break-even departments in the month of January would provide the prediction of 50 percent of those departments ending with a surplus and 70 percent of those ending with a deficit. The error of predicting that a department would incur a surplus or deficit when it actually ended breaking even was 41 percent, while the number of ultimate surplus or deficit departments predicted to break even was 38 percent. An early prediction of 50 to 70 percent of those departments which ultimately incur a surplus or deficit is significant in that present practices leave this unknown until it is too late to prevent the reversion. If a smaller predictive range (one-half of one standard deviation) is used, the percent predictions increase, however there is also an increase in the error of saying a department is deviant when it is not. Defining a department as breaking even if its expenditures were within $400 of its budget provided the best criterion for the later prediction of surplus or deficit departments.
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