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Finance and Budgeting In Education

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1. Use the Internet to research the current state of the economy and how it is affecting higher education institutions. What evidence can you find that colleges and universities are addressing financial problems through the process of retrenchment?

Provide your sources of information. Use examples from your own experience if applicable.

2. Which approach to preparing an annual budget for an academic institution such as Virginia Tech Polytechnic Univ. at: http://www.vt.edu/

Would you recommend: informal, consultative, or participative? Explain your choice.

3. Discuss how you would allocate roles and responsibilities for completing the budget in a timely and effective manner.

Outcome:
Develop a budget strategy that aligns with an institution's strategic plan.

Learning Objective:
Explain the three approaches to engage community support in the budget process.

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1. Use the Internet to research the current state of the economy and how it is affecting higher education institutions. What evidence can you find that colleges and universities are addressing financial problems through the process of retrenchment?

There are universities that retrench because they are not able to overcome their financial problems. This means jobs lost, even faculty jobs are lost, programs are reduced, and the services provided by the university decline. The financial crunch that universities face is exacerbated by the fact that endowments have become very difficult to sell. A large number of universities have put up intent to retrench faculty and this intention has been conveyed to all the stakeholders of the universities. When the donors reduce their contributions because of economic weakness, the financial resources of universities go down and faculties are retrenched. It is believed the retrenchment is critical for the university to regain its position. ...

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CAFR Ratios
One of the objectives this week is about identifying key performance measures. It boils down to this...once all the numbers are journaled and reported out...what do they mean? You want to understand the financial position (status of your assets/liabilities at a certain point in time) AND your financial condition (are you solvent, do you have resources to accomplish goals, and so on). And then there is the economic condition (high or low unemployment, stable neighborhoods, etc.).

One way to analyze the financial condition of your community is to analyze the numbers on the CAFR. The book gives us 14 ratios offering different perspectives on the financial condition. For the discussion for this last week, you will briefly report out on the financial condition of your community as follows:

Instructions: Using your CAFR, take at least 4 of the following 14 condition indicators and do the following:

1. Name the condition
2. Show the ratio formula, state what it is assessing and then your CAFR data compute the actual ratio
3. Interpret the results.

The 14 conditions you have to choose from are:
1. Revenues per capita
2. One time revenues
3. Expenditures by function
4. Employees per capita
5. Fund balances
6. Liquidity
7. Long-term debt
8. Debt service
9. Pension obligations
10. Interperiod equity
11. BTA self-sufficiency
12. Unrestricted net assets
13.Revenue dispersion
14. Financing margin - property taxes per capita

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