Budget, performance evaluation, and cost allocation as resource allocation mechanisms in colleges and universities: A descriptive and positive research study

Date of Award


Degree Type


Degree Name

Doctor of Philosophy (PhD)


Business Administration


Badr Ismail


Accounting, Higher education, School administration, School finance

Subject Categories



One response of colleges and universities to the financial difficulties of their new environment has been the movement toward adopting businesslike systems, such as Responsibility Center Budgeting (RCB). Questions of which of these businesslike systems/tools can be adopted in a college or university (a nonprofit organization) are part of a new research agenda. A critical part of this agenda is to document and analyze the existing practices of such nonprofit organizations. To date, there is no recent documentation of actual experiences of colleges and universities in this regard. This study provides documentation about how college and university environments have changed in recent years and how they have responded to these changes. An attempt was made to document whether the financial environmental changes of colleges and universities have motivated universities to change or adopt new budgetary and evaluation systems. This study relies on field research to develop a description about eight universities' accounting systems and about how these systems affect budgetary and evaluation processes, particularly the uses of budget and performance evaluation as mechanisms of resource allocations. In this concern, major emphasis is placed on the documentation of recent colleges and universities' experiences with RCB systems.

The results of this study support the findings that traditional systems of colleges and universities play a small, or no, role in the resources allocation process and, hence they are inadequate for the new challenging environment. The lack of proper measurements and incentives are the two major reasons of adopting or proposing RCB systems in many colleges and universities. Finally, a positive research question about the uses of cost allocation in the university environment is addressed. The practice of noncontrollable cost allocation is considered inconsistent with the controllability principle of responsibility accounting. A principal-agent relationship, in a university that has adopted RCB, is used to explain why such cost allocations have been used in colleges and universities. This study develops some rationales (four propositions) about the usefulness of allocating such costs. This could provide analysis and background data for future investigations about justifying noncontrollable cost allocations.


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