THE CRIMSON GROUP, INC.
CONSULTING AND LEADERSHIP TRAINING IN HEALTH CARE
Home Programs Faculty Research Curriculum Center Public Resources My Account
Member Sign In
Shopping Cart  
My Account
My E-Packets
Browse Bibliography:
By Keywords:
 

By Type:
New/Updated Items
Popular Items
Cases
Background Notes
Primers and Books

By Functional Area:
Finance/Financial Management
Financial Accounting
Financial Analysis and Management
General Management
Management Accounting
Management Control Systems
Marketing
Operations Management
Organizational Behavior

By Setting:
Developing Country
For Profit
Health Policy
Healthcare Management
Nonprofit
Nonprofit Organization Management
Public Sector Management

Curriculum Center Browse Bibliography Build EPacket Pricing Structure Distribution Process Management Control in Nonprofit Organizations
 
Urban Arts Institute (B)
Author(s):
Young, David W.
Functional Area(s):
   Management Control Systems
Setting(s):
   Nonprofit
Difficulty Level: Intermediate
Pages: 4
Teaching Note: Not Available. 
Copyright Clearance Fee:  $9.00  Sign in to find out if you are eligible for an Academic Price of $5.00 
Add Item to a new E-Packet

Add To Cart

Order an Free Inspection Copy

Back to Bibliography
First Page and the Assignment Questions:

In November 1995, Tim Stanley, president of the Urban Arts Institute (UAI) was considering ways to decentralize the institute’s budget preparation process. It had been eighteen months since he had begun making changes to the institute’s fiscal operations, and he had accomplished a great deal. The financial statements for the fiscal year ending June 30, 1995, had shown a sizable surplus, and the institute was well on its way to recovering from the precarious situation it had faced in May 1994. See Urban Arts Institute (A) for background details.

At the November 1995 meeting of the Board’s Finance Committee, Mr. Stanley and Bruce George, the institute’s chief financial officer (hired about one year ago), presented some summary information on financial performance for FY1995 (Exhibit 1). Mr. George described the effort:

This is a rough cut, and is a little crude in places, but it comes pretty close. I’ve calculated credit units by department, and used these to distribute tuition, financial aid, fees, and salaries for our continuing education faculty. The distributions are not completely accurate since, for example, some faculty teach courses in departments other than their home department, but that doesn’t happen very often. I also have not attempted to allocate overhead, but have calculated a contribution figure instead, and a percent of contribution to net income on a department by department basis.
This analysis responds to the committee’s request for financial information by department, and comes close to showing the contribution of our different programs. Of course, it doesn’t distinguish between the day and evening (or continuing education) programs, but it does separate out summer and precollege. And I’ve set up general institutional as a separate program. Separating day and evening programs would mean that we would need to divide faculty salaries based on where each faculty member teaches his or her courses, and we don’t have that information readily available.

Mr. Stanley discussed some of the issues he felt the analysis raised:

We will be beginning our budget development process for FY1995 in about two months. If we want to, we can prepare an analysis similar to this one for the 1995-94 budget, and for the year to date through, say, December, six months into this fiscal year. That would give us three separate comparisons of the contribution percent: FY1995 actual, FY1996 budget, and FY1996 actual to-date for six months. That doesn’t tell us what those percentages should be, but it does help us decide. I don’t know if I should be looking for the same percent from each department, for example, or a different percent from each. If a different percent, how do I decide what the appropriate level should be?
Also, I’m not sure how I should be bringing department chairs into the budget development process. They’ve never been involved before. We usually give them a small budget for their non-salary operating expenses, but that’s about all. They need to request approval from my office to hire full-time . . .

Assignment

  1. What changes, if any, should be made to Exhibit 1? In considering changes, you should assess who the readers of this statement are, and what sorts of decisions they might make as a result of the information.
  2. How should Mr. Stanley determine an appropriate contribution percentage for each department? What other indicators might be used to measure the performance of a department or program?
  3. Assuming department chairs will be included more fully in the budget formulation and monitoring processes, what steps should Mr. Stanley take to assure their productive involvement? For example, what kind of responsibility center should a department be? How much freedom should a chair have to commit the institute’s resources once a budget has been established? How much freedom to hire full-time or part-time faculty should a chair have?