Introduction
Proper budgeting and analyzing of finances is essential in ensuring the success of projects. Institutions, in most cases, tend to face many problems and challenges in their financial management. Misappropriation of funds is likely to lead to financial gaps since the intended purpose will not be met. This will eventually lead to the activities of the institution being paralyzed, affecting the institution negatively. Budgeting is a crucial element of accounting in that it gives institutions guidelines on how to use the available resources effectively without experiencing shortages. In the modern time, however, some trends, challenges and dilemmas are faced in budgeting for higher education. Most of these challenges are because of poor budgeting because of poor financial institutions.
In higher education, budgets represent the key to having a successful financial management. In order to prepare and manage a budget of a university, for instance, there is a lot of information that is necessary to be taken into account. Different higher education institutions may adopt different approaches in keeping the financial statements and budgeting. However, despite adopting different approaches, the institutions aim to provide a set of information that can be easily interpreted for the analysts to get the relevant information. As such, the budgeting process has several intricacies.
Budgeting in higher education tends to take two approaches. Some institutions may prefer to use the centralized system while others use the decentralized approach (Green, 2001). To a certain extent, both approaches are effective. However, they all have their advantages and disadvantages that may make them appropriate or inappropriate to use. The centralized approach ensures that there is a greater probability for congruence between the priorities of the institutions and the budget. This makes it to be admired and be used by several higher education institutions who seek to be transparent in their dealings. The centralized approach also means that there is minimum tension caused during the budget process. Its simplicity has seen it being preferred by many institutions. Important to note is the fact that when the institution of higher learning is under some form of pressure, the centralized approach has been employed to success. The decentralized approach, on the other hand, means that unit heads are empowered. Through being given the opportunity to participating in the budgeting process, there is a shared responsibility in that most people participate to make decisions that influence the manner the institutions are operated. The decentralized approach, in a way, brings a sense of ownership. However, its main disadvantage is that it will lead to unhealthy competitions within the budget, bringing difficulties to the higher education institutions.
Higher education budgets are driven by the revenue that is collected from the tuition and fees. This applies to all higher education institutions, whether private, public, profit making or non-profit making institutions. However, most public institutions are boosted by some governmental appropriations. The hard economic times experienced in all parts of the world has had a direct impact on the contribution that governments offer the public institutions. In essence, because the governments are under financial pressures, there has been a tendency of reducing the revenue allocations towards institutions. Because of this, there is a change of attitude since the institutions qualify to be termed as state supported rather than state funded. One major difference between public institutions and private institutions is that the public institutions have a tendency to be partly controlled by the state. This is because the state has invested in them, hence must exercise some degree of control in their budgeting process. This is unlike the private institutions that cater for all the revenue, hence have exclusive control of their budgeting process.
Budgeting in higher education institutions depends on a number of issues that are unique to individual institutions. Because of this reason, it would prove to be ineffective to adopting a budget that belongs to another institution. The structures of the higher education institution and the developmental goals often determine the priorities that an institution may have. The total revenue contributed by the students towards the institution’s kitty dictate the extremes of the spending power, hence giving the brackets within which the budget should lie. The fact that the cost of living is increasing and the tough economic times people are facing has played a role in ensuring that budgets are squeezed to meet the basics of survival. This means that the available revenue has to be effectively allocated to cater for the core issues, while others may be forgone.
Most public universities have sought to differ and go the private way. The major reason for this is that through being sponsored by the government, their budgeting process will in a way be controlled by the government (Morphew et al. 2009). This would seem to be curtailing their freedom of making proper choices that are beneficial to the institutions. This is why the private institutions have performed well as compared to the public institutions. In order to address this issue, most public universities have sought to go the private way through the privatization of public universities. Perhaps this will help them effectively compete.
References
Green, J. L. (2001). Budgeting in higher education. Athens: University of Georgia Business and Finance Office, University Bookstore.
Morphew, C. C., & Eckel, P. D. (2009). Privatizing the public university: Perspectives from across the academy. Baltimore: Johns Hopkins University Press.
