Done by: Kristina Luis, Abraham Kim, Daysy Chin, and Sarah Chapman

Subject: Cost Accounting

Professor Donegan
Date Due: May 5, 2015

Budgeting for an Academic Department at a State University

1.) What contributions is the unit making currently both financially and otherwise?
The case study begins by having Dean Weller notifying us, as a senior faculty
accounting member, that she needs help acknowledging an issue with the Social Work
department. According to her meeting with the Vice President of Finance, the best course of
action would be simply to terminate the program, which she also is inclined to agree. The
university as a whole is experiencing overall declining enrollment because of changing
demographics and therefore budget cuts are necessary. The social work department has one
of the highest deficits budget wise however both the undergraduate and graduate level social
work programs are doing well. The department has the second largest masters program in
the university with 50 students annually enrolling. On the other hand, undergraduates are
enrolled in general education or elective courses such as human behavior and cultural
diversity. These requirements generate revenue for the department which contributes to the
university as a whole. A majority of the professors are adjuncts and the department pays
close to $100,000 annually, and 60% of the payments are directed towards the graduate

program. Since base budgets for faculty members are not included in the budget it minimizes
expenses and inaccurately calculates financial contributions in the social department.

2.) What affect will the closing of the department have on the university?
We first started by determining the number of credits the department has accumulated
from the last period. We used percentages given by the dean on how many undergraduate
students are expected to declare a social works major on the average number of credits each
student has then multiplying it by the total number of students. The same applied to graduate
students with all their classes being within the department. Based on our calculations, nearly
$920, 227 are collected from graduate students alone. If we were to close the department then
a portion of the revenue would drastically drop. Without actual tuition and fees included in
the budget we cannot determine the exact amount per department and analyze the actual
trends. Furthermore, our calculations have determined that the university is highly dependent
of the social department. Closing the department would result in a net loss of approximately
2 million.

3.) What affect will the closing of the bachelors program have on the university?
Here we studied closely as to which credits and expenditures correlated to which
program of the school. After declaring the revenue stream and expenditure schedule, the
department shows a profit instead of a deficit using the assumptions made by the case study.
This explains the enigma that even though the program has the second highest numbers of

student enrollment in the university, it was showing a deficit. Assuming the social department
closes the bachelors program will result in a decrease of 107 undergrads. From the 2 million
in the budget a majority of the $896,981 are yearly collected by the undergraduate students.
This doesnt include the undergraduate participation and enrollment in elective classes that
contribute to other departments such as math and writing.

4.) Over all, what is the problem? Why does this department look so bad financially?
This case study revolves around the concept of a proper master budget system. The
university lacks one because there is improper management and communication implemented
between the administrators and the faculty. The social work department and its teachers do
not have the chance to challenge the budget as a whole as referred to in the article which
signifies one of the many problems with communication within their budget system. The fact
that allowable expenditures must equal planned expenditures without consideration nor
consultation on the matter beforehand. This leads to miscommunication about certain issues
like the travel deficit that is necessary for the professors to get grants and students to fill their
academic experience. Another main issue was the lack of implementation or consideration of
a revenue schedule within that department. Many grants and donations that earned
exclusively within the department is take by the university and distributed among other
programs. This prohibits any type of insurance of a department being self-sustaining or even
profitable. The reason why the financials look so bad is two main factors. One, student
tuition and revenue are not accounted for in the budget system and therefore unable to tell if

the social work department is profitable. Two, grants and fundraising funds were never
considered previously which creates an unstable deficit due to unreliable income. According
to our analysis, the social work program is $50,000 over their budget. One of many reasons
of the financial disasters is travel expenses. Over half of the budget discrepancies come from
payment for travel ($29,700). Payment for the grant writers travel contributes to the
university but not to the social work budget. Also fixed expenses and overhead charges are
not included in the budget. In conclusion, the deficit of $49,012 in the budget of the
department is far less of a financial indicator than the 1.9 million dollars they contribute to
the university yearly.