Do you know what they are selling you ?

A SHORT COURSE ON UNIVERSITY ACCOUNTING  Spring 2009

      by Charles Schwartz, Professor Emeritus, University of California, Berkeley   
schwartz@physics,berkeley.edu           http://ocf.berkeley.edu/~schwrtz


For the fiscal year ending 6/30/2007, the University of California reported a total Expenditure of Current Funds for INSTRUCTION that amounted to
>>>>>[Number 1]: $3,570,000,000

What does that mean? Here are some submerged components of that accounting:
University Extension & Summer School …     $259,000,000
Health Sciences Instruction  …                      $1,325,000,000
Other Professional Schools Instruction …        $209,000,000
Subtracting those, along with $121,000,000 of restricted funds, we have the Adjusted Expenditure for Instruction of:
>>>>>[Number 2]: $1,656,000,000

But let’s ask more questions, because we want to find the expenditure for UNDERGRADUATE INSTRUCTION -- that’s where most students are.

It turns out that the accounting rules used by universities say that the full academic year salaries of the professors should be recorded as expenditures for INSTRUCTION, regardless of the fact that they work at their own research throughout the academic year, in addition to their undergraduate teaching and graduate teaching. How can one disaggregate that bundle of costs?

A Faculty Time Use Study conducted by UC earlier lets one allocate faculty costs to the separate missions. The result of the detailed calculations (see my web site) is that the portion of Instruction expenditures attributable to Undergraduate Instruction is a mere  
>>>>>[Number 3]: $490,000,000

That is only 30% of Number 2 and only 14% of Number 1.

This result should also be relevant for any comparable research university, whether public or private.  For four-year or two-year colleges, this critique does not apply.

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NOTES.   The federal government has a huge data repository for higher education, called IPEDS; and they give data on Expenditures for Instruction (per student) based on Number 1. Many respected researchers don’t know how distorted those numbers can be.

When universities say that the unit cost of Undergraduate Instruction is so-many dollars per student per year, they follow the prescription of the National Association of College and University Business Officers, which says: use Number 2. That is very misleading for research universities
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BOTTOM LINE: At public research universities, undergraduate student fees are now about   100% of the institution’s actual expenditure for undergraduate education, averaged per-student.