Trustees | Costs

Study finds University of Arkansas spends higher ratio on administrative costs than similar schools

ARKANSAS DEMOCRAT GAZETTE   |  September 3, 2017 by Jaime Adame

FAYETTEVILLE — For every dollar spent on teaching, colleges and universities spend a lesser amount on administrative costs.

But the ratio between the two types of expenditures varies among schools.

The University of Arkansas, Fayetteville’s ratio of administrative spending to academic spending was higher than other public universities with similar levels of enrollment and research activity, according to an American Council of Trustees and Alumni report and an Arkansas Democrat-Gazette analysis.

“Out of 21 institutions in that bracket, the University of Arkansas had the fourth-highest administrative cost ratio of that group,” said Armand Alacbay, the council’s vice president of trustee and administrative affairs.

Administrative spending “is not necessarily a bad thing,” Alacbay said. His group advocates for college and university trustees to pay closer attention to spending priorities.

“When the primary mission of your institution is the educational mission, like any enterprise you want to make sure that the resources you devote to operations are going to what’s most closely aligned to the mission,” Alacbay said.

The challenge with comparing schools has to do with differences in the way expenditures are calculated, said Robert Kelchen, an assistant professor of education leadership, management and policy at Seton Hall University. He was not involved with the council’s analysis.

“Not every college will put the same activity in the same expenditure category,” Kelchen said, explaining that spending on advising and information technology, for example, could be classified differently depending on the school.

In a written statement, UA spokesman Mark Rushing said the university’s method of reporting expenditures may be different from that of other schools included in the council’s report.

“For example, the university includes Information Technology services, graduate student waivers, other employee benefits, public safety expenses [the UA Police Department], work study programs, etc. in the institutional support category — all items that may be charged to various other functional categories by other institutions,” Rushing said.

Rushing said that if, for example, half of spending on police, information technology expenses, and graduate student waiver expenses were reclassified, the administrative spending ratio would come down to be “consistent with our peers.”

Ben Hyneman, chairman of the University of Arkansas System board of trustees, said in an email that the “rate of administrative spending is always something we are concerned about, and I know the system and campus leadership shares that concern.”

Much of administrative spending involves salaries, according to federal data for UA.

Hyneman said personnel costs are “largely market-driven, like most businesses.” He said another factor is “increasing regulation our campuses face,” adding that more government regulations have required additional administrative personnel.

The council, in its July analysis, used data reported by colleges and universities to the federal government. Schools are asked to report spending in various categories, with the data made publicly available online.

The federal spending category of “institutional support,” as used by the council in its calculations, for UA-Fayetteville totaled $54.5 million in fiscal year 2015 after subtracting spending defined as depreciation, interest and costs for operating and maintaining facilities.

Of that $54.5 million, salaries and employee benefits made up more than 75 percent, totaling $42.8 million. Fiscal 2015 is the most recent year with federal data published for colleges and universities.

In its methodology, the council lumped together a school’s spending on instruction and academic support, two separate categories in federal data. For UA-Fayetteville, the combined categories totaled $224.1 million after subtracting depreciation, interest and costs of operating and maintaining facilities.

Democrat-Gazette analysis found that UA-Fayetteville’s administrative spending ratio, as defined by the council, was 0.24, meaning that 24 cents was spent on administration for every dollar spent on instruction.

The council’s July report, titled “How Much is Too Much? Controlling Administrative Costs through Effective Oversight,” concluded that the median administrative ratio was 0.16 for public universities with the highest levels of research activity and undergraduate enrollment from 20,138 to 26,148 students.

Louisiana State University, the University of Texas at Arlington, the University of Missouri and the University of North Texas were included in the 21-school grouping with UA and also had lower administrative cost ratios, Alacbay said.

The University of Tennessee was one of three schools in the 21-school grouping to have a higher administrative cost ratio than UA, along with the University of Utah and Washington State University, Alacbay said.

The council’s analysis did not compare how schools differ in spending on instruction.

Federal data published online show that UA in fiscal 2015 spent $9,362 on instruction per full-time equivalent student, less than the $11,034 spent by LSU, $11,956 spent by the University of Missouri and $12,236 spent by the University of Tennessee.

UA spent more on instruction per student than the $8,181 spent by the University of North Texas and the $5,712 spent by the University of Texas at Arlington, according to the online data.

“There’s research that shows that additional institutional spending — at least from a modest start — does improve student outcomes,” Kelchen said.

As far as administrative spending by colleges and universities, Kelchen said more needs to be known to understand whether increases in such spending are a concern.

“I think we need to know which parts of administrative spending are growing and which parts of administrative spending can directly improve student outcomes,” Kelchen said.

Hyneman and Rushing each referred to changes under UA Chancellor Joseph Steinmetz, the university’s leader since January 2016. Steinmetz last year called for reallocation of 1 percent of administrative funds over the next three years, with the money going to support academics, Rushing said.

“With Chancellor Steinmetz’s reallocation of administrative spending toward academics and other measures, I think we’re going to see the ratio at UA-Fayetteville come down some,” Hyneman said.

Hyneman also noted pending changes to state funding of colleges and universities that he said address the ratio of administrative to academic spending. The changes to state funding have yet to be finalized.

“Our board and the UA System are very supportive of this effort. The focus on productivity will further encourage our campuses to ensure every dollar is spent as efficiently as possible to achieve positive outcomes for our students,” Hyneman said.


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