Accounting Management Systems in Budgeting Educational Organizations - Article Example

? Accounting management systems and technology in helping educational organisations in budgeting Unit: Introduction The conversation with relation to budgeting in higher education has taken a turn. What had been for most a discussion of how few resources are and how that might impact higher education has rapidly transformed into urgent planning with what is adequately available, managing it in an accountable and transparent manner. The is a difference between the objectives of universities and colleges from commercial enterprises which have profit accrual as their basic objective whereas colleges and universities pursue to provide educational services contained by the existing revenue levels expended, even though a slender rise in revenue is desired by some of the governing boards (Houston, 2008). It is essential therefore for a financially responsible college or university to have a balanced budget within which expenditures remain contained in the available revenues available. A significant reduction in the available net assets of such an institution thus becomes a cause of concern and might signify financial instability. This paper summarizes the ideas expressed in an article done by Dr. Houston Davis. It focuses majorly on higher education, accounting and how technology has affected budgeting in these institutions. Biography of the author Dr. Houston Davis, a native of Clarksville was recently named as the university system of Georgia’s new chief academic officer and executive vice chancellor. Over the years Dr. Houston has been identified for his valuable experience combined with his fine ability in providing leadership in pertinence to the system’s core academic mission purposing to create a twenty first century educational model. He holds a PhD from Vanderbilt University, Nashville; a Master’s in education from Tennessee state university and a bachelor’s in political science from the University of Memphis. He is and has been continuously involved in writing and research projects in areas of governance, higher education access, accountability and fund management in higher education and economic development. He serves on several national and regional advisory groups in higher education policies academic preparation, accountability and degree completion. Dr. Houston Davis has served in the educational sector for quite some time. In (2001-2005) he worked in the field of academic leadership for Austin Peay State University in Clarksville. In addition to these professional duties he served in the role of director for the National Educational Needs Index between 2004 and 2011. This initiative was aimed at measuring educational, social, economic and intense population pressure among the 50 states which affect policy and planning in national, regional and local levels. Following this until 2007, he worked in the same field serving as associate vice chancellor for Academic affairs for the Tennessee Board of Regents. He had also worked previously worked in the Tennessee higher education commission in the areas of fiscal and academic affairs between 1997 and 2001. It is recorded that he worked as a regional student recruitment and advancement representative in the University of Memphis. (1995-1997) Summary of the article Accounting With reference to a 1996-1997 data from the national center for education statistics, net revenues in public institutions have their source in four main channels; tuition and fees (19%), state funds (36%), sales and services (22%) and federal funds (11%). Private institutions on the other hand receive their revenues from the same categories though in different degrees; tuition and fees (43%). State funds (2%), sales and services (21%) and federal funds (14%). Although a significant amount does come from the government in public institutions, both the public and private sector have increased their reliance upon revenues from tuition and fees for their improvement funding (National Center for Education Statistics, 2000). With expenditures majorly being devoted to salaries and benefits the other minor utilizations are like travel, capital assets, supplies, debt service, supplies, contractual services and scholarships. In the accounting system, these institutions maintain expenditures through functional classification which include public service, instruction, research, institutional support, scholarships, auxiliary enterprises, and public service and student services. The current operating undertakings further are identified and categorized with regard to whether the revenue source is restricted or unrestricted. Unrestricted revenues presumably are available for current operations utilizations having no particular eternal restrictions imposed on the expenditure of the resources given (Houston, 2008). On the other hand, restricted revenues available for current operations are limited in their utilization in that the purpose designated for them by the granting entity must be achieved. Apart from the aforementioned major accounts, colleges and universities also have specialized accounts for some unique functions. For instance, there are loan accounts which are used to give record for loans given to students, staff and faculty. Such accounts operate on revolving basis hence accounting for interest, principal and the amounts available for more loans. Another specialized set of accounts are the agency accounts which are employed for resources held strictly by the institution in a custodial role (Cooper, 1998). In addition, there are three specialized types utilized for plant activities. such accounts are include accounts for acquisition of capital assets, resources put aside for the repair and maintenance of capital assets, resources put aside for the payment of interest and principal on capital assets and further construction. The main financial statements essential in higher education include; statement of revenues, statements of net assets, expenses, statement of cash flows and changes in net assets. Private institutions have accounting standards established those Financial Accounting standards Board (FASB) and Government Accounting Standards Board (GASB) for public institutions (National Center for Education Statistic 2000). There are three major financial functions in a particular education structure- accounting, budgeting and auditing. They are all separate and distinct operations but at the same time closely interrelated. They are essential activities in providing fiscal data, accountability and guidance pertinent to the spending of the moneys expended through educational organizations in the United States (). Management systems Institutions operating in the 21st century face a couple of significant challenges including; speed of change, adaptability, growth, technology, competitiveness and globalization. Having these balanced as well as other educational programs can prove to be difficult and daunting a process. That is where effective management systems come in by assisting in unlocking the institution’s potential. It is essential for the directors to incorporate an effective management system that can help the institution to manage and control its social, environmental and financial risks. A good management system serves to reduce costs are brought by incompetent management as well as improve operational effectiveness. Undertakings move smoothly as there is clarity in the institution. Well-articulated and emphasized missions help the institution to promote innovation and therefore increase customer and stakeholder satisfaction (Cooper & Phillip, 2001). As directors of the respective educational institutions they should be concerned with management accounting which primarily relates to making decisions related to the financial operation. This include activities such as financial record management, monitoring and evaluating spending trends, financial management systems, financial risk management, the compilation of budgets and managing accounts. Role of technology Technology has been advancing in a rapid and constant pace. IT departments in the colleges are being greatly affected by the decline in higher education finances. Projects that were once certainties are often being re-planned. The institution’s management has constantly been developing scenarios to make large cuts in operating expenditures so as to meet the needs of the annual budgets. Technology has provided ways in which the organization can cut down costs in the short run. This development has created opportunities for educational institutions. IT leaders share that the IT governance groups available were proving to be valuable in developing budget-reduction scenarios (Cooper & Phillip, 2001). IT governance groups were used to establish priorities for what to cut, what was strategic and should be left alone, and where to alter service levels.in sectors such as user support, server hosting, data storage, and e-mail are prime elements for aggregation to achieve efficient and effective fund management. The institutions IT department need to be ready with a menu of services which are highly cost-effective and attractive to heretofore independent academic and administrative units to adopt. Although some institutions have been reticent in engaging in collaborations or being early adopters of new technologies like cloud computing. This is because perhaps their institutions had little tolerance for risk and provided little reward for innovation. In light with the ongoing necessities, most institutions if not all will have to be more receptive to such risks (Houston, 2008). Analysis of the arguments It is very apparent that our community has been going through difficult times. It is of very little comfort that higher education is not solely dealing with this. The entire economy is being rocked by adverse change. IT leaders are managing by taking reasonable and diligent steps to react to these immediate financial challenges. There is no doubt that some hard choices lie ahead. Nevertheless, with hard times and hard choices there come opportunities. Technology leaders have been seeking an opportunity to spur their institutions so as to make greater use of new technology in all aspects of the institutional mission. Money disbursed is well organized and utilized according to a structured accounting system using a general ledger which standardizes all spending categories and accounts for its use. Computer systems and applications buffered by well-structured accounting systems will make work easier in accessing data collection, storage and dissemination Universities all over the nation have been converging with advances in technology, intensifying the prospect of the organization’s budgeting information in being real time information available for public inspection. With the availability of computers, easier internet accessibility and the heightening public interest, it is presumable that budgeting accounting and auditing procedures will enhance in being more accessible, systematic and transparent to all stakeholders nationwide. Conclusion From the above summary it is clear that proper accounting systems are essential so as to provide a procedure here all the fiscal activities can be controlled while assessing the alignment of the institution’s financial plan with its educational programs. With the slowing economy, Colleges and universities are clearly being hit hard. Endowment revenues have seemingly declined substantially. The private institutions are on the other hand scrambling to fill the gap that this has left in their revenues. The annual Appropriations disbursed to public institutions are evenly being cut in the same manner as poor job prospects and layoffs are sending as many people back to school. Consequently, Individuals have a limited ability to borrow funds for tuition which further stretches the colleges/ universities aid budgets. Institutions are responding by cutting their operating budgets, freezing hiring, and cancelling capital projects References Cooper, B. (1998) “from transactional to transformational accounting” school business affairs 64. : NJ. Lawrence Eribaun Associates Publications Cooper, B., Philip. And Speakman S.., (2001) “advanced budget technology in education: the future is now” school business affairs journal 27. NJ. Lawrence Eribaun Associates Publications Financial accounting standards board (FASB). www.fasb.org/main.html Governmental accounting standards board (GASB). www.gasb.org/main.html HOUSTON, D., (2008) accounting public school budgeting and auditing- budgeting, accounting, auditing, technology and future trends. National Center for Education Statistics. (2000) digest of education statistics. Washington, DC. National center for education statistics. Springfield. George Washington University Press. Philip J. Goldstein (2009) Managing the Funding Gap: How Today’s Economic Downturn Is Impacting IT Leaders and Their Organizations. Robert H., (2001) funding of higher education institutions. Washington. Hamilton Institute. Unger, H. G. (2007). Encyclopedia of American education. New York: Facts on File Guthrie, J. W. (2003). Encyclopedia of education. New York: Macmillan Reference USA McIntyre, J. R., & Alon, I. (2005). Business and management education in transitioning and developing countries: A handbook. Armonk, N.Y: M.E. Sharpe. O'Connor, K., & Sabato, L. (2000). The essentials of American government: Continuity and change. New York: Longman. Cunningham, W. G., & Cordeiro, P. A. (2003). Educational leadership: A problem-based approach. Boston: Allyn and Bacon. Tererai, M., (2009) Financial Management of Courts Budget. Washington. Hamilton Institute.Inc. Houston, Davis. (2008) Accounting systems in higher education- revenue and assets, expenditures. education.stateuniversity.com/pages/1728/Accounting-Systems-in-Higher- Education.html Read More