David D. Perlmutter

Professor and Dean at Texas Tech University

Administration 101: Learn How to Follow the Money

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People go into academic administration for all sorts of good reasons. As far as I know, however, no one ever became a chair, dean, or provost out of love for managing a budget.

Yet it’s vital for any administrator to understand budget and funding processes and to oversee them with fluency and sensitivity. The days of the "academic" chair who shunted all the spreadsheets to a staff member and operated fiscally blind (and clueless) are gone or fading fast. Leadership and financial numeracy go hand in hand today. You cannot plan curriculum, class schedules, or research agendas without knowing where the money for each of those things will come from and go to.

This Admin 101 series focuses on how to become, survive, and thrive as an administrator in higher education. (Browse previous columns in the series here.)

No part of the leader’s job in academic administration is as little discussed as the financials. But the best numerate practices for a good administrator are pretty straightforward, if you are willing to learn and use them.

Study the lingo and how to apply it. The world of budgets and finances offers myriad Pentagon-grade acronyms, codes, and jargon that — unless you were a professor of finance — will be mysterious to you, at least initially. There is no getting around having to learn it all, though.

Now, some five years into my deanship, the nomenclature and codes for my own college’s budget are second nature. At our twice-weekly budget meetings, I employ terms like "16A funds" and "Differential Tuition FOP" and "FY19 Encumbrance Total" — and actually know what they mean.

While the acronyms and codes vary from campus to campus, the basic budgetary functions and rationales do not. Moreover, each word, term, and code has not only a certain meaning but also a specific application. Certain funds, for example, may be used only for certain purposes. Money from one type of account often cannot be crossed into another.

In a senior-level position, you probably will have help learning the how and what of your particular budget. As a dean, I am blessed to work with a college manager and a CFO who, from long experience, know every aspect of every spreadsheet we encounter.

As a department chair, you may not have easy access to financial experts. So find someone to tutor you on the budget process, either in your department or elsewhere on the campus. It’s that important. Our budget meetings would be exercises in failed translation if I hadn’t learned the ropes myself. There is no substitute for rote memorization, so study up. Above all, don’t have an ego about what you may not know or understand.

Connect the dots; sense the patterns. Even if you learn the name, meaning, and purpose of every item on a spreadsheet, you can still fail your unit if you don’t see how those items interrelate. Budgets constitute a four-dimensional puzzle in time and space. What you spend here is money you can’t spend there; a deficit on line 37 of spreadsheet 59 is an opportunity on line 78 of spreadsheet 12.

Take a typical cost for many departments: student workers. As chair, do you know what rate you are paying them? While you want to be fair, how does that rate compare with those of analogous departments? Have you checked to see if any of your student workers are eligible for work-study money, fellowships, or donor funding to help cover their wages? You may end up saving money in your department’s precious discretionary kitty by simply scoping out all alternative ways of paying student workers.

Timing is important in budget management. It’s unlikely that your budget revenues will show up in an account as one big deposit at the beginning of the academic year. The ebb and flow of money will affect your decision making throughout the year.

Some funding may be predictable — for example, your set-in-stone base budget. Other funds might fluctuate wildly because they are linked to a variable like semester credit hours. Still other sources of institutional funding will be available to you only in special circumstances — such as money for a counteroffer to retain a faculty member or for a spousal hire. Lobbying and budget allocations always interweave.

Some funds stay in your accounts from one year to the next; others are swept to zero by central administration at the end of the fiscal year. And in these uncertain times, you don’t know when funds that your unit has received regularly every year will, out of the blue, be taken away permanently.

Timing is also important when it comes to how your office spends its money. Some funds are better spent on certain dates. What you spend in November affects what you will have left at the end of the fiscal year, in July.

Trust but verify. One term new administrators should know cold is "subcertifier." Basically it means that, in your role as an administrator, you are responsible for what you sign off on budgetarily — even to the point of criminal prosecution or firing.

It scares me how many academic administrators don’t learn enough about their own budgets to know when error or even fraud may be occurring. No one is omniscient, but if you are the head of the unit, you may be held responsible for any fiscal "mistakes."

So don’t always believe what you read or hear — even if it’s presented on a tidy spreadsheet or a snappy pie chart. For one thing, different software packages may provide contradictory information. Or, as I like to put it: No two dashboards look alike.

Besides, data is only as good as the data entry. The calculations may look fine at a glance, even though somebody entered the raw numbers incorrectly.

Check and recheck. The best protection is to make sure you have reliable people reporting to you. But even then, take care to know the numbers yourself. Redundancy — having more than one pair of eyes verify any budget numbers — is the best method of risk reduction.

Meet often on the numbers. The college I lead is within a large public research university. I hold dedicated, sit-down budget meetings two to three times a week. In addition, we have probably dozens of short, impromptu meetings to talk money. At least half of the emails I receive every day involve some budget issue — a faculty member seeking more research dollars, a department looking to make a new hire, a researcher estimating the cost of a new lab, a staff member asking to replace a broken camera tripod.

From thousands of such financial requests, I have gleaned a simple lesson: When it comes to discussing numbers, you can’t have too many meetings.

Over and over again we (staff members, other administrators, professors in charge of various programs) have found solutions by sitting down and looking at the numbers, asking questions — even ones that at first seemed to have obvious answers — and spinning alternative scenarios.

Often a re-review or a re-re-review of a budgetary issue or spreadsheet will break an impasse. Complexity cannot be managed by a cursory discussion. Treat budgets with the same care as you would in conducting an important research project or teaching your favorite class — that is, with deliberation and meticulousness but also imagination.

To succeed as an academic leader, you must become, yes, a bean counter — an accurate one. Never lose sight of the fact, however, that the financials act as a vital tool to do what you should be focused on every day and restive night: advancing people, projects, and ideas.

If you like solving problems, then the numbers are a place to start … and often end. The same visionary creativity that you apply to the classroom and the lab can be found in the budget spreadsheets, if you dedicate yourself to knowing why, where, when, with whom, and how to look.

 

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