WASHINGTON, DC—The American Council of Trustees and Alumni (ACTA) announced the latest phase of its Project on Administrative Costs with the release of a new research guide looking at national trends in administrative expenses and urging trustees to monitor and control administrative costs on campus. Entitled How Much is Too Much? Controlling Administrative Costs through Effective Oversight, the guide provides trustees with national benchmarks for the ratio of administrative spending compared to instructional costs as they evaluate their own institution’s financial priorities.
Through original research and analysis of federal data from the National Center for Education Statistics Integrated Postsecondary Education Data System database, the guide provides trustees with information on the median ratios of administrative to instructional spending calculated from over 1,200 four-year, nonprofit institutions. ACTA found the highest administrative-instructional cost ratio at small baccalaureate colleges—over half of which spend 50 cents or more on administration for every dollar spent on instruction—while schools with higher research activity actually have the lowest ratios.
“The link between the growing administrative costs and net price to students has not received sufficient attention. Students and families are making immense personal and financial sacrifices to access the dream of college education,” said Dr. Michael B. Poliakoff, president of the American Council of Trustees and Alumni. “Trustees have a unique responsibility to ferret out the causes of growing administrative costs to find greater efficiency. Leaders and trustees must have a commitment to guard against rising overhead, and all of this starts with an informed analysis of the financial data.”
The publication features a foreword from former University System of Maryland Regent and former U.S. Congressman Thomas McMillen, who served as a member of the distinguished Governance for a New Era panel convened by ACTA in 2014. “As our communities—students, parents, and taxpayers—make crucial investments in higher education, we need resources like this one to analyze the context and impact of our spending decisions,” McMillen wrote in the foreword. “ACTA continues to help boards hold their universities accountable to the public trust through this brief guide.”
To initiate communication between college administrations and board leadership, the new publication includes a four-point action plan for controlling costs. The guide specifically urges trustees to:
- Familiarize themselves deeply with trends in administrative spending at their institution.
- Create and use financial dashboards with at-a-glance metrics to monitor spending.
- Ensure that financial data is reported clearly, accurately, and consistently year-over-year.
- Consolidate and streamline programs wherever possible to achieve greater cost efficiency.
“As the policy debate continues about how to make college more affordable, it’s crucial to remember that, with very few exceptions, administrative costs are inevitably reflected in tuition and net-price,” said Armand Alacbay, vice president of trustee & legislative affairs at ACTA and director of the organization’s Project on Administrative Costs. “Our new guide offers a missing national perspective on the crucial issue of administrative growth and provides schools with benchmarks to their peers. This will be a valuable resource for trustees looking for broader context.”
The research project was funded through a generous grant from the Arthur N. Rupe Foundation based in Santa Barbara, California.