Performance audit, universities, administration and support

              PERFORMANCE AUDIT
UNIVERSITIES
ADMINISTRATION AND SUPPORT
Report to the Arizona Legislature
By the Auditor General
December 1995
Report # 95- 14
DOUGLAS R. NORTON, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
DEBRA K. DAVENPORT, CPA
DEPUTY & YOITOR GENErlAL
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I 2 9 1 0 NORTH 44TH STREET rn SUITE 4 1 0 m PHOENIX, ARIZONA 8 5 0 1 8 m ( 602) 553- 0333 . FAX ( 6 0 2 ) 5 5 3 - 0 0 5 1
December 8, 1995
Members of the Arizona Legislature
The Honorable Fife Symington, Governor
Members, Arizona Board of Regents
Dr. Frank H. Besnette, Executive Director
Arizona Board of Regents
Dr. Lattie Coor, President
Arizona State University
Dr. Clara Lovett, President
Northern Arizona University
Dr. Manuel Pacheco, President
The University of Arizona
Transmitted herewith is a report of the Auditor General, A Performance Audit of the
Universities: Administration and Support. This audit was conducted pursuant to the
provisions of Session Laws 1993, Second Special Session, Chapter 1, Section 79. This is
the second performance audit of the universities conducted by our Office.
We found that most university employees are involved in either administrative or
support activities. Twenty- five percent are performing administrative duties while 37
percent staff serve in a variety of support functions. The remaining 38 percent are
directly involved in teaching, research, or public service. While all three universities
have taken a number of steps to reduce administrative and support overhead, we believe
further opportunities exist to streamline both instructional and noninstructional units.
December 8, 1995
Page - 2-
The universities should consider such approaches as flattening organizational structures,
increasing spans of supervision, making process improvements, and consolidating
duplicative or overlapping functions. The Board of Regents and the Legislature can
support these efforts by establishing goals and performance measures, and by creating
budgetary incentives that promote efficiency.
My staff and I will be pleased to discuss or clarify items in the report.
This report will be released to the public on December 11, 1995.
Sincerely,
~ o! i+$ s R. Norton
Auditor General
SUMMARY
The Office of the Auditor General has conducted a performance audit of the administration I of Arizona universities. This audit was conducted pursuant to the provisions of Session
Laws 1993, Second Special Session, Chapter 1, Section 79. This audit is the second of two
i performance audits conducted under these provisions.
The universities operate under the governance of the Arizona Board of Regents. In addition
I to employing thousands of student workers and grant- funded employees, the universities
had 13,540 state- authorized full- time equivalent employees in fiscal year 1994- 95. State
general fund appropriations for the universities in fiscal year 1994- 95 were over $ 573
million while the universities' total projected revenues from all sources exceeded $ 1.75
billion.
Administrative and Support
Staffing Consumes More than
Half of All Personnel Resources
at the Universities
( See pages 7 through 14)
Although relatively few employees work in top executive positions, we found that many
university positions are administrative or support in nature. High- level administrators
comprise 7 percent of employees, 18 percent are lower- level administrators, and 37 percent
are in support positions. Only 38 percent work in direct service positions such as faculty,
researchers, librarians, athletic coaches, and museum curators.
Even small reductions in the number of administrative and support positions would
generate substantial savings. A reduction of just 1 percent, if achieved through restructuring
or improvements in efficiency, would generate almost $ 5 million in salary savings alone.
Such a reduction should be feasible: Stanford University, for example, expects to achieve
savings totaling 13 percent of administrative costs. Savings can also be achieved, without
reducing staffing, through technological innovations and process improvements. Several
universities around the country have made significant progress in planning and
implementing changes in how they are structured and administered. Projected savings from
these efforts range from over $ 5 million to $ 29 million per year.
Non- Instructional Units May
Offer the Best Opportunities
to Improve Efficiency
( See pages 16 through 25)
Some of the best opportunities to reduce administrative and support overhead and improve
efficiency may be found in the universities' non- instructional units. h o s t 44 percent of all
university employees work in units that are not part of the academic colleges and do not
offer courses. While these units include some non- instructional academic and public service
functions such as the libraries and museums, most, for example, the business and budget
offices, perform strictly administrative and support roles. These units often have structures
and functions similar to those in other agencies or businesses, and lend themselves to a
businesslike approach to streamlining and improving efficiency. Effective approaches would
include streamlining and flattening out organizational structures, increasing spans of
supervision, centralizing multi- university functions, making process improvements, and
consolidating duplicate functions. In addition, the universities could do more to develop and
use performance measures and benchmarks in these areas.
Administrative and Support
Overhead Can Be Streamlined
in Academic Units
( See pages 26 through 37)
While non- instructional units may offer the best opportunities to streamline and improve
administration and support, opportunities also exist in the academic units. We found a
significant portion of administrative and support overhead within the colleges. Although
most college staff directly serve one of the three university missions ( teaching, research, and
public service), and the colleges generally have a leaner, more collegiate organizational
structure than the more hierarchical model found in the non- instructional units, there is still
room for administrative streamlining. Eliminating duplicative functions, consolidating
compatible units, and eliminating non- essential programs could reduce academic unit
overhead. As in the non- instructional units, the universities should use performance
indicators to make more effective use of their resources by identifying academic areas where
efficiencies can be acheved.
Board of Regents and Legislative
Involvement Are Needed
( See pages 39 through 44)
To achieve the greatest possible improvements in administrative efficiency, action by the
Board of Regents and the Legislature will be needed. All three universities have initiated
noteworthy efforts aimed at cutting costs. However, university culture presents barriers to
change that have limited the success of these efforts. For example, research has shown that
universities make many decisions by consensus and set priorities based on institutional
prestige. In other states, external events, such as a major budget crisis, have forced
universities to overcome these barriers, and generated significant savings in administrative
costs. Therefore, the Regents and the Legislature should consider a number of ways, such
as the use of performance measures like those called for under Arizona's Budget Reform
Act, to encourage and reward improvements in administrative efficiency.
iii
Table of Contents
Introduction and Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Finding I: Administrative and Support
Staffing Consumes More Than
Half of All Personnel Resources
at the Universities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Universities Lack System to
Monitor Administrative
and Support Staffing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Administrative and Support
Overhead Is Significant When
All Positions Are Examined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Reducing Administrative and
Support Positions Could
Generate Significant Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 2
Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Finding 11: Non- Instructional Units May
Offer the Best Opportunities to
Improve Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Non- Instructional Units Have
Significant Administrative
andSupportOverhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Opportunities Exist to Streamline
Non- InstructionalUnits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Benchmarking Performance Important
to Identify Best Practices and Cost
Savings Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Table of Contents ( cony)
Page
Finding Ill: Administrative and Support
iOnv Aerchaedaedm Cica nU nBites Str. e. a. m. l. in. e. d. . . . . . . . . . . . . . . . . . . . . . . . . . 26
Administrative and Support Overhead
Exists Throughout Academic Colleges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Shifts in Funding of Staff May Shdt
Priorities in Academic Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
There Are Opportunities to Reduce
Administration and Support
in the Academic Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 3
Universities Should Use Performance
Indicators to Identify Areas for Improvement . . . . . . . . . . . . . . . . . . . . . . 35
Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 7
Finding IV: Board of Regents and
Legislative Involvement
AreNeeded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Significant Barriers Frustrate
University Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Board of Regents and Legislative
Involvement are Needed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Agency Response
Appendix I
University Administration Data
Validation Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a- i
Tables
Table 1 October 1993 Employees
byEEOCode . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Table 2 Changes in Funding of FTEs in
Academic Units by University . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Table 3 Change in Academic
Efficiency Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Figures
Figure 1 Number of Positions Surveyed by Job Type . . . . . . . . . . . . . . . 11
Figure 2 Surveyed Positions in
Non- Instructional Units by Job Type . . . . . . . . . . . . . . . . . . . . . 18
Figure 3 Supervisory Levels Above the
U of A Student Records Office . . . . . . . . . . . . . . . . . . . . . . . . . 21
Figure 4 Surveyed Positions in Academic
Units by Job Type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Figure 5 Total Academic Unit FTEs
by Source of FTE Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
vii
INTRODUCTION AND BACKGROUND
The Office of the Auditor General has conducted a performance audit of the
administration of Arizona universities. This audit was conducted pursuant to the
provisions of Session Laws 1993, Second Special Session, Chapter 1, Section 79. This is
the second of two performance audits conducted in the universities. The first, released
in October 1994, covered the undergraduate student experience.
Arizona's three universities operate under the governance of the Arizona Board of
Regents. Arizona State University ( ASU) in Tempe, with a main campus enrollment of
42,189 students, is one of the largest universities in the nation. The University of
Arizona's ( U of A) 35,306 students and Northern Arizona University's ( NAU) 19,242
students place those universities, too, into the top 10 percent of universities in the
nation in size.(') In addition to employing thousands of student workers and grant-funded
employees, the universities had 13,540 state- authorized full- time equivalent
employees ( FTEs) in fiscal year 1994- 95. All three universities offer a variety of
baccalaureate, master's, and doctoral degrees. State general fund appropriations for the
universities in fiscal year 1994- 95 were over $ 573 million, whle the universities' total
projected revenues from all sources exceeded $ 1.75 billion.
The universities are complex organizations both in terms of the number of individual
organizational units and the range and diversity of functions and activities that take
place on university campuses. Almost 17,000 FTE positions ( excluding students) are
supported by state, federal, and local funds to carry out these functions and activities.
At each university, a top academic officer, called the provost, reports to the president
and oversees the academic colleges. In addition, from one to three other vice presidents
or senior vice presidents report directly to the president, and each president also has
direct oversight of a number of functions including the legal counsel and affirmative
action.
In addition to instructing students, the universities provide housing, meals, medical
services, counseling, and assistance in finding jobs upon graduation. Each university
also has extensive functions related to the day- to- day operations of a community of
20,000 to 50,000 people: police, facilities and grounds maintenance, recreation and
entertainment, and other functions, from parking to postal services to procurement.
Other functions include those pertaining to research and public service. Finally, each
university engages in fund- raising activities, referred to as " development," and other
activities directed toward promoting the university and protecting its interests.
Student numbers cited in this paragraph are total student head counts for fall 1994, and include NAU
Yuma and U of A College of Medicine.
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Differences in the universities' histories and roles contribute to variations in their
organizational structures. While all three share a mission to teach, conduct research,
and provide public service, each has unique characteristics. ASU's location in the State's
major urban center provides it with a high proportion of part- time students, while its
recent successful efforts to achieve Carnegie Research I status have created other
demands.(') NAU's residential campus and more remote location contribute to a greater
need for support services for the university community. U of A's cooperative extension
responsibilities and mature research program influence the type and level of
administrative efforts required there.
Universities Can Improve
Administrative Efficiency
We studied the universities' administrative structure and their administrative and
support staff, and concluded that despite barriers to change, the universities could take
action to streamline administration in both instructional and support units. The
administrative structure at each university is large and complex, and overall, over half
of university employees are engaged in administrative, clerical support, and other
overhead functions. The magnitude of university overhead means that any incremental
improvement in efficiency could save substantial dollars, which could be redirected to
funding the universities' teaching, research, and public service missions.
The greatest opportunities for improvement probably lie in the universities' non-instructional
units ( including business offices, facilities management, and student
support services), and indeed, the universities have focused most of their own efforts
on these units. However, there are also opportunities for improving efficiencies within
the academic colleges. While the support units lend themselves to traditional business
efficiency improvement methods, the academic colleges require a different approach,
and present barriers that must be surmounted in order to accomplish any change.
Audit Scope
To provide the broadest and most comprehensive view of university administration, we
defined administration in three ways:
' The Carnegie Foundation classifies postsecondary institutions according to the kinds and numbers of
degrees awarded and the amount of federal support awarded to the institution. Research I
universities, including ASU and U of A, offer a full range of baccalaureate programs, are committed
to graduate education through the doctorate, and give high priority to research. They award 50 or
more doctoral degrees each year. In addition, they receive annually $ 40 million or more in federal
support. Doctoral I universities, which include NAU, offer a full range of baccalaureate programs and
are committed to graduate education through the doctorate. They award at least 40 doctoral degrees
annually in 5 or more disciplines.
Most narrowly, as top- level administrators identified through university personnel
codes as executives and administrators, and
As both high- level ( e. g., vice president, dean, legal counsel) and lower- level ( e. g.,
business manager, senior engineer, program coordinator) administrators, and
As all staff whose functions could be considered " overhead: high- and lower- level
administrators, plus support staff ( e. g., secretary, administrative assistant,
accountant). This definition corresponds to the statutory definition in the Budget
Reform Act:
". . . any supportive activity relating to management, supervision, budget or execution
of the aflairs of the budget unit as distinguished porn activities relating to its primary
direct service finctions . . . "
In addition, we present information on all staff who work in university operating units
that are outside the academic colleges and do not offer instruction.
Finding I ( see pages 7 through 14) provides an overview of the universities' administration
and support staffing as a whole. Finding 11 ( see pages 16 through 25) focuses on units
outside the academic colleges, while Finding III ( see pages 26 through 37) covers the
administration and staffing of the academic colleges and other instructional units. Finding
IV ( see pages 39 through 44) describes the universities' own efforts to streamline administra-tion,
and the barriers that have limited their success, and suggests some ways the
Legislature and the Board of Regents can influence the universities' administrative overhead.
Although much of our work covered the entire main campus employee population at all
three universities, we also conducted a detailed review of the colleges at each university that
encompass the liberal arts and sciences ( including the social sciences), and the units under
the vice presidents responsible for student support services. These areas represent a variety
of fields of study and administrative tasks. For our purposes, we excluded student workers
and U of A College of Medicine personnel from the main campus employee population. In
addition, some of our analyses exclude NAU's hourly employees because NAU could not
provide complete information for those workers. Due to time constraints and the relatively
small number of employees at ASU West and NAU Yuma, we did not include those sites
in our review.
We expanded our scope to gain a perspective on how Arizona's universities compare to
similar institutions regarding faculty and administrative salaries, and tuition growth. Our
review of recent salary studies found that faculty are not compensated equally across the
three universities. On average, U of A faculty have higher salaries ( ranging from $ 41,100
average salary for assistant professors to $ 64,800 average for full professors) than faculty at
ASU ($ 39,900 to $ 60,300) and NAU ($ 35,900 to $ 51,100). At least 40 percent of public
doctoral institutions nationally compensate faculty at a higher average rate than ASU and
U of A. NAU ranks in the lower 20 percent of these institutions in faculty compensation.
Salaries of administrators at each of the 3 universities range between 1 and 8 percent below
the median administrative salary at other doctoral institutions of similar budget size,
according to information reported by the College and University Personnel Association.
Additionally, tuition at each university between fiscal years 1990 and 1994 has not increased
as rapidly as tuition at other universities across the country. Compared to an average
national increase of 43.9 percent during this time period, resident tuition at Arizona's
universities increased only 30.5 percent. Similarly, non- resident tuition increased only 32.8
percent at ASU and U of A and 31.8 percent at NAU.
Audit Methodology
To provide a comprehensive overview of the universities' administrative and support
overhead, we obtained and reviewed information from a variety of perspectives. First, we
obtained detailed information on university main- campus personnel for the pay period
closest to October 1, 1989 ( ASU and U of A), 1990 ( NAU), and 1993 ( all three universities),
and used the universities' own classifications by the Equal Employment Opportunity
Commission ( EEOC) coding scheme to identify top- level executives and administrators.
Using the same data sets, we also analyzed staffing levels by organizational unit, and
determined the number of employees and total salaries inside and outside the academic
colleges. Second, we conducted a telephone survey of a statistically valid sample of
employees, and identified those who were high- level or lower- level administrators, those
who served as support staff, and those who directly accomplish the missions of the
universities ( public service, research, and instruction). Third, we obtained or developed
organization charts for specific areas of the universities, evaluated the administrative and
support structure, and identified potential areas for improving efficiency.
In addition to those major methodologies, we used a combination of several methods to
study the universities' administration. For example, we:
Conducted an extensive review of literature, including journal articles, books, and
studies and reports from other states and universities,
Reviewed the Joint Legislative Budget Committee Higher Education Research Advisory
Board's study of administrative positions and costs,
Interviewed administrators at universities engaged in efforts to improve their own
efficiency,
Interviewed experts in the field of higher education administration, including some who
are faculty at Arizona's universities,
Reviewed results of the National Association of College and University Business Officers'
( NACUBO) Business Process Improvement benchmarking study, and replicated a
portion of their study at the two Arizona universities that did not participate in
NACUBO's own study,
Compared administrative salaries at Arizona universities with those of their peers as
reported by the College and University Personnel Association,
Compared university budget and tuition growth against national trends, and
Collected and reviewed descriptive information about each academic department within
the liberal arts and sciences.
This audit was conducted in accordance with government auditing standards.
The Auditor General and staff express appreciation to the administration, staff, and faculty
at all three universities for their cooperation and assistance throughout the audit.
FINDING I
ADMINISTRATIVE AND SUPPORT STAFFING
CONSUMES MORE THAN HALF OF ALL
PERSONNEL RESOURCES AT THE UNIVERSITIES
Most staff employed by the universities do not teach or conduct research; rather, they are
involved in a variety of institutional support activities that, from a comprehensive
perspective, can be viewed as administrative in nature. A study of university administration
that looked only at top- level administrative positions would be incomplete. Our analysis
shows there are relatively few top executive and administrative positions, and the number
of these posts has declined in recent years. When administration is defined more broadly
to include all nondirect service overhead and support, however, the number of administra-tive
and support employees that emerge is substantial, comprising about 62 percent of all
positions. Whle only 7 percent of employees are top administrators, 18 percent are lower-level
administrators and another 37 percent are in support functions. Because of the
magnitude of this overhead, the universities should more aggressively explore opportunities
to streamline administrative structure and support functions. Even modest, incremental
improvements could generate millions of dollars in savings.
Universities Lack System
to Monitor Administrative
and Support Staffing
The universities do not maintain the information they would need to monitor their
administrative and support staffing patterns and trends. Personnel classification schemes
maintained by the universities do not adequately identify all administrative and support
staff. Further, the universities do not maintain complete organization charts. According to
the experts, this lack of information is not uncharacteristic of universities.
Administrative and Support
Overhead Is Significant When
All Positions Are Examined
When conducting a study of university administration, the initial tendency may be to focus
on the high- level administrators, such as vice presidents and deans. In reality, these
positions are only a small portion of all administrative and support positions. A far more
significant administrative and support overhead emerges when all categories of positions
are reviewed. Analyzing all university positions using two different analyses, we found that
up to 62 percent of all positions are either primarily administrative in nature, or are clerical
and support positions.
Analysis of EEO codes - Although it understates the total number of administrative
positions, analyzing personnel data prepared by the universities using EEO codes still
provides a useful indicator of the relative proportions of top- level administrators, faculty,
and certain other types of employees. This analysis shows that high- level administrators
constitute a small percentage of total positions, but a significant number of university
positions in other classifications are administrative or support in nature. Only 19 to 27
percent of all positions are faculty positions. Even when professional non- faculty positions
( employees who generally have at least a four- year degree, including instructors,
researchers, and administrators) are combined with faculty positions, only 55 to 59 percent
of total positions fall within these two categories.
To analyze university administration and support, we requested personnel and funding
source data for employees at all three universities.(') The data was collected for two different
times: October 1989 and October 1993.( 2) T he universities provided information at the job
level, including the title, department, college, and total salary ( not including employee-related
expenses) for each position. Additionally, the universities identified the amount of
each salary contributed by state, grant, and local funding.( 3) W e analyzed and reviewed the
personnel data by EEO code. The universities assign their employees to one of seven EEO
code categories for federal reporting. EEO staffing data is collected biennially by the
National Center for Education Statistics of the U. S. Department of Education, which
maintains staffing information on post- secondary institutions. The EEO categories classify
positions according to their primary occupational duties.
As shown in Table 1 ( see page 9), although relatively few personnel - a total of 902 in
October 1993 - were classified as top executives and administrators, the proportion of
faculty positions at the universities is relatively low. Top executive positions, which
comprised 4.6 to 4.8 percent of all employees at the two larger campuses and 10 percent of
the salaried employees at NAU, include the presidents, vice presidents, deans, and legal
counsel. More numerous are personnel who fall into four other categories, particularly the
professional non- faculty classification. This category, with almost 6,000 FTEs, includes not
only academic positions such as graduate assistants, instructional specialists, and researchers,
but also many administrative and service staff, such as accountants, business managers,
(') Employees at the U of A College of Medicine, ASU West, and NAU Yuma were excluded from the
analysis, as were all student employees. NAU's hourly employees were also eliminated from our data
analysis ( although they were included in the statistical sample surveyed, see page 9) because salary
and FTE fractional information was unavailable for these employees. Therefore, comparisons should
not be made across universities.
(') NAU provided data for October 1990 because its 1989 personnel data had been inadvertently
destroyed.
Grant funds include private, state, and federal grants. The local fund category consists of revenue
generated by non- academic units, and includes residence hall fees, student union revenues, and
athletic event income.
buyers, and computer specialists. A total of 3,751 FTEs - 19.1 percent of all FTEs at U of
A, 24.7 percent at ASU, and 27.2 percent of salaried FTEs at NAU - fall into the faculty
classification. Even if the professional non- faculty category ( because it includes instructional
and research staff as well as administrators) is added to the faculty group, these positions
together account for only 55 to 59 percent of all positions employed at the universities.
We could not rely solely on EEO codes to estimate the number of administrative and
support positions. The executive/ administrative category captures only the highest level
administrators. Supervisors and middle management positions below the top executive level
are often placed in other categories, and therefore cannot be distinguished under the EEO
coding scheme from line employees. Therefore, the EEO categories understate the total
number of administrators.
Table 1
October 1993 Emplovees bv EEO code'")
("' Comparisons between universities are not meaningful. Because NAU could not provide FTE information
for hourly employees, proportions of categories that consist of salaried employees ( execu-tive/
administrative, faculty, and professional non- faculty) appear greater than they otherwise would. Other
differences between the universities, such as U of A's use of employees instead of contractors to provide
food service, also make such comparisons inappropriate.
' b) The " other" category consists mainly of technical/ paraprofessional, skilled craft, and service and
maintenance employees. In addition, ASU's and U of A's other category includes 316 and 266 temporary
workers, respectively.
Source: Auditor General analysis of personneI data provided by universities for all main campus employees
in October 1993. Data for student workers, U of A College of Medicine employees, and NAU hourly
workers are excluded from this analysis.
Significant adlninistratiue and support ouerIwad - We conducted a second type of analysis
to develop a better overall estimate of the number of administrative and support positions
at the universities. This analysis of a statistically significant sample of positions ( including
NAU's hourly employees) found that most positions are not involved directly in serving the
missions of the universities, but instead perform administrative, clerical, or support
functions. We determined that approximately 25 percent of positions across the universities
can be classified as administrative. Moreover, another 37 percent perform support functions,
leaving less than 40 percent of employees directly conducting the missions of the
universities.
To validate university data and get a more accurate estimate of the true number of
administrative and support positions, we randomly sampled university positions for further
analysis. We interviewed 738 employees, representing 758 positions, and asked detailed
questions about the nature of their positions and their work activities.(') Based on their
responses and position job descriptions, we then assigned each position in the sample to one
of the following four categories:
High- level administrators - included positions such as managers, executives, or
directors. Generally, people in these positions direct the work of others, as opposed to
doing the work themselves.
Low- level administrators - comprised positions that supervise as well as complete
tasks directly. Positions such as business manager, senior engineers, and program
coordinators would fall into this category.
Support personnel - included positions that provide support services for other
employees and work units. Secretaries, file clerks, and custodians are examples of
employees in this category.
Direct service employees - represented all positions that contribute directly to one of
the universities' three primary missions: teaching, research, and public service. Included
in this category are faculty, research staff, librarians, and certain employees in the
athletic departments, television and radio stations, theaters, and museums.
As shown in Figure 1 ( see page ll), the results of our analysis reveal that over 60 percent
of employees across the universities are principally involved in performing either
administrative functions or support activities. Only 38 percent of positions are principally
involved in direct service.
( I' The sample included 255 positions at ASU, 277 at U of A, and 226 at NAU. The sample size provided
a 95 percent confidence level and a precision margin of 5 percent. The number of jobs is greater than
the number of employees because some employees have two or more part- time positions, or have a
part- time position in addition to their regular full- time job.
Figure 1
Number of Positions Surveyed by Job Type
Statistical Sample Results ( All Universities)
Direct Service
High- Level Admin
55 17.3%) A
~ w- LeveAl dmin.
134 ( 1 7.7%)
Support
279 ( 36.8%)
Source: Auditor General survey of randomly selected statistical sample of 738 main- campus
employees as of October 1993 ( excluding U of A College of Medicine).
Our finding that one out of every four positions is an administrator initially appears higher
than the estimates of a recent study by the Higher Education Research Advisory Board
( HERAB). HERAB, working under the staff direction of the Joint Legislative Budget
Committee, examined administrative positions and costs in fiscal years 1987,1991, and 1993.
Their study, which included only state- funded administrators, found that the percentage of
administrative positions ranged from 14.6 percent at U of A to 21.1 percent at NAU.
However, our inclusion of positions supported by grant and local funds, and HERAB's
narrower definition of " administrator," explains our higher estimate of administrative
positions. For example, we considered department chairs as administrators since many
spend more than 50 percent of their time on administrative tasks, while HERAB counted
them as faculty.
Reducing Administrative and
Support Positions Could
Generate Significant Savings
The universities should aggressively explore ways to reduce the overall size of their
administrative and support staff. Even incremental improvements in efficiency would
generate significant savings.
Potential savings - Successful efforts to streamline administrative structure and reduce
administrative and support staffing would produce significant savings. A reduction of just
1 percent in total FTE administration and support, if achieved through restructuring or
improvements in efficiency, would generate almost $ 5 million in salary savings alone.
Reductions in the 2 to 5 percent range would generate from $ 10 million to $ 25 million in
savings. Savings can also be achieved, without reducing staffing, through technological
innovations and process improvements.
Significant cost savings are possible given what other universities have been able to
accomplish. Other universities around the country have also made substantial progress in
planning and implementing changes in how they are structured and administered. These
efforts may result in savings ranging from $ 5 million to $ 28.5 million in operational costs.
For example, Stanford, which has 14,000 students, plans to reduce operating expenses by
$ 22 million ( 13 percent of its administrative and support staff) by simplifying its
organizational structures and processes. The following universities are also implementing
structural and administrative changes for increased efficiency and reduced costs:
Oregon State University ( OSU), a campus with 14,300 students, launched a model TQM
effort and used business reengineering principles to make its administrative structure
and administrative processes more efficient For example, a major management
consulting firm recommended OSU reengineer selected business processes and activities
and undertake efforts to streamline and simp@ processes and procedures such as
accounting, computing, and functions related to its physical plant. This reengineering
effort is expected to generate cost savings ranging from $ 5.1 million to $ 8.6 million. In
addition, the University has consolidated and eliminated academic programs and
streamlined both academic and non- academic administration. For example, OSU merged
the geography and geology departments, closed the poultry science department, and
restructured its extension services program. In addition, ten departments in the business
and finance area have been consolidated into a total of five departments. Through this
effort, OSU has eliminated or reassigned approximately 200 support positions, and may
save an additional $ 2.2 million to $ 2.6 million. Altogether, savings from these efforts
could represent approximately 2.3 to 3.3 percent of total annual expenditures. OSU
administrators expect these reductions to have minimal impact on the quality of
academic programs.
Virginia Tech University, with 23,873 students, has made numerous changes in its
organizational structure over the past four years. These changes include the elimination
or consolidation of academic and administrative departments, reduction in the number
of middle- and senior- level administrative positions, and realignment of redundant
functions. For example, the University reduced its structure from three separate divisions
( teaching, research, and extension services) into two. Research and extension services
were combined, eliminating the need for duplicate administrative structures. Four
departments - admissions, financial aid, the registrar's office, and student computer
services - were integrated into an enrollment services unit Further, seven academic
programs have been closed. Since 1990, the University's efforts have reduced expenses
by $ 28.5 million and allowed the University to reallocate an additional $ 15 million to
high priorities University- wide. And, according to a University report to the State
Council for Higher Education, Virginia Tech spends a smaller percentage of its budget
on administration than any of its peers in the southeastern United States.
Northwestern University, a private university with approximately 8,000 main campus
students, applied business process reengineering principles and methods to redesign
processes and organizational structures in both academic and non- academic units
throughout the University. For example, the University recently reengineered its
procurement and payment function and discovered that investments in new technology
could generate annual cost savings of about $ 7.9 million.
To achieve similar improvements in efficiency, Arizona's universities could set goals for
administrative and support reductions based on a percentage of total budget The concept
of using percentage of budget as a basis for goal setting is not new to higher education. For
example, several states such as Ohio, Tennessee, and Texas have considered or enacted
performance- based funding systems that link university performance to a percentage of total
budget Likewise, legislative cuts that have been mandated in some states are frequently
based on an initial percentage of total budgets. Given results that have been achieved at
other universities, goals in the range of 2 to 5 percent would be reasonable for the
universities to consider.
Findings IT and III describe some specific ways the Arizona universities can improve
administrative efficiency.
RECOMMENDATIONS
1. The Board of Regents should revise its personnel classification system for all three
universities to enable more accurate identification and tracking of all administrative and
support positions.
2. The universities should monitor changes in administrative and support staffing patterns
on an annual basis. The information contained in this report could serve as a baseline
for identdying staffing trends over time.
3. The Board of Regents and the universities should work with their peer institutions to
develop comparative data on administrative and support staffing patterns.
4. The universities should establish goals, based on a percentage of total budget, and a
timetable for achieving these goals, aimed at reducing overall administrative and support
overhead.
FINDING II
NON- INSTRUCTIONAL UNITS MAY
OFFER THE BEST OPPORTUNITIES
TO IMPROVE EFFICIENCY
Some of the best opportunities to reduce administrative and support overhead and
improve efficiency may be found in the universities' non- instructional units. At all three
universities, these units are large, employ many administrative and support personnel,
and in many cases are hierarchical and bureaucratic in their organizational structure.
Effective approaches to improving their efficiency would focus on eliminating duplicate
functions, streamlining and flattening organizational structure, and consolidating or
eliminating activities that are inefficient or unnecessary. The universities could develop
benchmarks or performance measures to help identify areas that need the most
improvement.
Non- Instructional Units
Have Significant Administrative
and Support Overhead
Compared to academic units, non- instructional units have a proportionately greater
number of administrative, support, and clerical personnel. Although organized somewhat
differently at each of the universities, the non- instructional unit workforces are typically
comprised of non- faculty professionals, secretaries and clerical positions, technical and
paraprofessional employees, and administrators. The organizational structures of these
units tend to show more reporting layers and more differentiation of functions between
units than the structures we found in the academic units.
As part of our analysis, we grouped all departments and units into one of two categories:
( 1) academic, or ( 2) non- instructional. The academic classification includes all units in
the colleges and other units providing classes. Units classified as non- instructional
include a variety of important functions that support the diverse mission and
responsibilities of the university. Generally, the classification includes the president's
and provost's offices, and several student- related support services such as admissions,
enrollment, and student affairs. Business and maintenance functions, such as budgeting
and accounting, fiscal control, and facilities, also fall within this category.
Stnflco~ ityositiosrn szd strrrctrrre - Almost half of all university employees work in non-instructional
units. Non- instructional units employ from 42 percent of all employees at
U of A to 53 percent of salaried employees at NAU. ASU's non- instructional staffing
accounts for almost 45 percent of its workforce. As shown in Figure 2 ( see page IS), the
mix of administrative and support personnel in non- instructional units varies somewhat
Figure 2
Surveyed Positions in Non- Instructional Units
by Job Type
Statistical Sample Results
I) Direct Service High- Level Admin. 0 Low- Level Admin. Support
Source: Auditor General survey of randomly selected statistical sample of 738 main- campus employees
as of October 1993 ( excluding U of A College of Medicine).
among the universities. The University of Arizona employs proportionately fewer high-level
and low- level administrators ( 18 percent) in its non- instructional units than either
ASU ( 37 percent) or NAU ( 43 percent). However, U of A employs the most support
personnel ( 65 percent) compared to ASU and NAU ( 49 percent each.)
We found that non- instructional units at the universities often look more hierarchical
in their organizational structure than academic units. They exhibit what appear to be
some of the same inefficient characteristics that have been found in many business and
governmental organizations.
To determine how one major non- instructional function, student affairs, is structured,
we constructed detailed organization charts identifying each employee's position and
reporting and supervisory relationships, from the lowest level employees to the vice
president in charge of the function. This was necessary because comprehensive and
accurate organization charts did not previously exist for about 25 percent of the units
examined.
While each university organizes its student affairs function differently, some common
patterns are evident. For example, many of the structures examined were complex,
exhibiting considerable duplication and overlap of similar functions across several units
( such as business and accounting functions, information services, and support staff).
Structures were often multi- layered, with several middle management levels of control
and supervision. By contrast, academic units tended to have fewer middle management
levels.
Opportunities Exist to Streamline
Non- Instructional Units
Non- instructional units could benefit from some of the same analytic strategies and
approaches that have been successfully used to streamline and improve efficiency in
business and government. These approaches include business process reengineering
( BPR), total quality management ( TQM), and other techniques borrowed from the fields
of organizational development and industrial engineering. In other settings, these
methods have allowed organizations to " downsize" staffing levels and improve quality
and productivity. While all three universities have initiated efforts of this type ( see
Finding IV, pages 39 through 44), more can be done.
In our examination of the student services area, we looked for fragmentation, redundant
activities, and organizational characteristics that may indicate inefficiency. The following
are examples of just a few areas where it may be possible to reduce administrative and
support overhead by eliminating duplicate functions, streamlining structure, improving
processes, or consolidating activities. While some of the specific potential savings may
appear small in the context of the total university budgets, the units highlighted here
represent only a few out of hundreds of units at the universities. The combined effect
of even small savings from so many units would be great.
Due to the complexity of the universities' organizational structures and the lack of
comprehensive information, it would be impossible to accurately predict the number
of units that could improve efficiency using the methods recommended in this report.
Personnel data prepared for the audit showed that employees reported to a total of 288
different non- instructional units ( 80 at NAU, 137 at U of A, and 71 as ASU). However,
some of these units are further subdivided into additional units, while others are
subdivisions so precise that they include only a few employees and may not really be
operating units at all. For example, U of A's Student Affairs is divided below the vice
president into three major areas, each of which in turn is divided into four, six, or ten
sections that range in size from the Asian/ Pacific Islanders Student Services Unit, with
only one non- student employee, to the Health Services Unit, which is itself further
divided into five additional units of varying complexity.
Reducing management layers - The student affairs function at U of A, as currently
organized, illustrates the hierarchical and multi- layered nature of some non-instructional
units. For example, at the time of our review, the student records office,
a unit in Student Affairs which maintains student transcripts and grades, was staffed
by two senior office specialists, five office specialists, and a senior office assistant.
There were nine supervisory levels above the office workers. As shown in Figure
3 ( see page 21), above the first line supervisors were an office supervisor, the assistant
registrar, the associate registrar, the registrar, the assistant vice president for
enrollment services and academic support, the vice president for student affairs, the
provost, and the university president. While this may be a particularly hierarchical
and inefficient structure, it is not atypical of other units in student affairs at U of A.
Significant efficiencies may be possible by eliminating one or more supervisory levels
and flattening the reporting structure. When Project SLIM found similar management
layering in the Department of Public Safety, it recommended eliminating at least one
management layer. A recent article in IM, a business journal, stated that " In most
instances, three or four management layers will serve most companies and four or
five layers will be adequate for all but the largest and most complex organizations.
This was illustrated by Eastman Kodak Company a few years ago when 13 levels
of management were reduced to four levels with no loss in production."( 1)
Increasing spans of supervision - Our review of detailed organization charts and
position job descriptions suggests that the universities may have many areas with
excessive supervisory positions. For example, about one- third of the positions in ASU
Student Affairs ( Student Health was excluded from this analysis) are directors,
assistant directors, associate directors, managers, deans, or supervisors, although half
of the managers and one- fourth of the assistant and associate directors supervise one
or no other employees. A detailed review of these kinds of positions might yield
significant savings.
' Hattrup, George P., and Brian H. Kleiner, " How to Establish the Proper Span of Control for Managers,"
IM, November/ December 1993, pp. 28- 29.
Figure 3
Supervisory Levels Above the
U of A Student Records Office
Source: U of A Office of the Registrar
I
5 -- --
I
Dlredor
- '
Exec & st Mmssms B Ne* r
Dnectoi Omce of
TO & st VP Sludsn
Re@& rm
Student Enrolment F m i a l & d
DlreaorNn8versUy DredorlEarly DlredorlCaren
Leamlng Center Outreach Ser~ lces
Making processes more efficient - Implementing more efficient operational and
decision- making processes would reduce the number of administrative staff needed.
At U of A, one Continuous Organizational Renewal ( CORe) team identified an area
where some financial transactions were reviewed up to ten times each. One university
official told us he has reduced the number of items that come to him for approval,
such as travel requests. Eliminating unnecessary layers of review and making other
process improvements can enhance timeliness and quality of service in administrative
units, as well as reducing costs, according to reports from the CORe teams. Portland
State University, forced to find ways to reduce costs when a property tax initiative
in Oregon reduced all state university budgets, focused some of its efforts on
eliminating layers of decision making and on making its work processes more
efficient.
Consolidating duplicate functions - At ASU and U of A, custodial services are
provided by two separate departments. Both the residence life departments, which
are responsible for student dormitories, and the centrally organized facility
management departments maintain custodial employees. Residence life custodial
functions have their own administrative and supervisory structure, at a cost of
$ 102,480 to $ 113,460 ( including salaries plus employee- related expenses). By contrast,
NAU's custodial workers are all housed in a single facilities management department,
and service both residence halls and other campus buildings. The unified structure
at NAU operates under one administrative and supervisory structure and appears
to be a more efficient way to organize custodial services. Consultants who studied
administrative systems at Oregon State University and the University of Iowa
recommended the consolidation of functions that are highly standardized, routine,
required at regular intervals, and do not require high levels of expertise.
In addition to these areas, which each university could review independently, the Board
of Regents should consider the potential for improving efficiency statewide by:
Centralizing multi- university functions - The processing of student applications
for admission, for example, is a major activity at all three universities. Process
improvements, achieved through technological innovations and consolidation, hold
the potential to generate significant savings. The universities may be able to
consolidate centrally some processing done redundantly by all three universities. Each
university currently performs its own assessment of student applications, although
the same admissions criteria are applied by all three. If undergraduate applicants
were screened centrally based on the statewide requirements, each university would
have to separately review only the discretionary admissions. Currently, the
universities employ a total of 124 regular employees and many student workers in
their admissions offices; centralization could reduce the number of staff required.
In Minnesota, a task force of the Board of State Colleges and Universities identified
a number of areas, including human resources, telecommunications, and student
services, that could be consolidated statewide, eliminating the need for redundant
processing.
Benchmarking Performance Important
to Identify Best Practices and
Cost Savings Opportunities
To help identify areas where administrative savings can be achieved, the universities
should develop and monitor performance measures or benchmarks for functions and
activities in the non- instructional units. While two of the universities have taken part
in a national initiative in this area, more local efforts are needed to benchmark
administrative performance.
Performance benchmarking can be useful in efforts to improve administrative efficiency.
First, benchmarking helps identify functions and activities that may be inefficient when
compared to like functions and activities in other organizations. Best or model practices
may be identified that, if implemented, could generate significant savings. In addition,
benchmarking can be useful in tracking performance over time, measuring changes in
efficiency, and evaluating efforts to reduce costs. The Board of Regents recognized the
importance of benchmarking in the academic arena by establishing, in 1994, requirements
that the universities report progress against measures of academic performance and
student success.
Both ASU and NAU have participated in a national benchmarking initiative sponsored
by the National Association of College and University Business Officers ( NACUBO).
Between 1992 and 1994, NACUBO collected performance data on a number of non-instructional
functions from universities participating in this effort. The data developed
by NACUBO allows universities to compare performance against other institutions from
around the country.
We found the available NACUBO data useful in our study of administrative efficiency.
Because only ASU participated in the 1993 NACUBO study ( NAU participated in 1992),
we supplemented the NACUBO data by obtaining equivalent data from NAU and
U of A for three functions: admissions, sponsored project offices, and development. The
following examples demonstrate how benchmarking data can be potentially useful in
raising questions about the efficiency of revenue- raising functions that are often
overlooked when examining administrative efficiency at the universities:
Sponsored projects - These offices administer activities related to externally funded
research grants and other projects. Universities comparable to both U of A and ASU
have an average of 28 sponsored project employees. ASU has 67 sponsored project
employees, and U of A has 39 positions. However, a review of performance measures
shows that U of A's per- FTE productivity levels exceed those of ASU and the peer
institutions: for instance, U of A workers process 422 proposals each, while ASU's
process only 54. Their peers at other universities process, on average, 117.
NAU has a different peer group than U of A and ASU. NAU's sponsored projects
staff, at 10 FTE, is similar in size to its peers', which also averages 10 FTE, and its
staff are more productive than their peers on all measures, including processing 74
proposals per FTE compared to the peer average of 52.
The data raise important questions that the universities need to address in order to
determine whether sponsored projects offices are properly staffed. The universities
need to investigate the reasons for the higher productivity levels at U of A, and
determine if productivity can be raised, and staffing reduced, at the other two
universities.
Development - Development officers raise funds for the university by soliciting
gifts from alumni and other donors. Again, both ASU and U of A have more
employees than their peers, which average 35 FTE. In fact, U of A has more than
twice as many, at 72 FTE, while ASU is closer to the norm at 46. ASU's officers,
however, were less productive per FTE than their peers in total dollars raised
($ 349,000 each, compared to peer average of $ 482,000), while U of A's officers
averaged 23 percent more than the peer average, or $ 594,000.
In this case, unlike in sponsored projects, NAU's record is below its peers: NAU has
18 FTE compared to the peer average of 15, and raised 50 percent less donations
overall ($ 3 million compared to $ 6 million) and 57 percent less per FTE ($ 168,000
each, compared to peer average $ 395,000 each).
Differences in numbers of development officers and their productivity suggest that
the universities should determine the levels of productivity needed to justify the
number of development officers employed. Further, the universities should study
whether it is more efficient to organize development activities centrally, or to allow
the colleges and departments to operate independent development efforts. As with
sponsored projects, the central question is how to maximize revenue while at the
same time limiting the costs to administer the program.
Whether or not the universities elect to participate in the national project, they should
begin to measure their own performance in these and other non- academic areas and
monitor their improvements over time.
RECOMMENDATIONS
1. The universities should develop, and present to the Legislature and the Board of
Regents, comprehensive plans to improve administrative efficiency in non-instructional
units. University plans should specify:
the scope of administrative and support activities to be examined;
a schedule for examining each activity or unit;
deadlines for reporting study results; and
a schedule for implementing recommended actions.
2. In reviewing administrative and support activities, the universities should address,
at a minimum:
the number of management levels or layers;
spans of supervision;
processing steps, procedures, and requirements; and
the extent to which activities are duplicated.
3. To help assess the efficiency of non- instructional functions on an ongoing basis, the
universities should develop and annually monitor performance benchmarks.
4. The Board of Regents should consider developing a plan and timetable for reviewing
multi- university functions, such as admissions, for possible centralization.
FINDING Ill
ADMINISTRATIVE AND SUPPORT
OVERHEAD CAN BE STREAMLINED
IN ACADEMIC UNITS
While non- instructional units may offer the best opportunities to streamline and improve
administration, opportunities also exist in the academic units. Despite the collegial
structure of academic units, there is a significant portion of administrative and support
overhead within the colleges. In recent years, increased reliance on external funding has
contributed to expanding administrative and support staff to seek and account for funds.
The colleges could reduce administrative and support overhead by eliminating
duplicative functions, consolidating compatible units, and eliminating non- essential
programs. As in the non- instructional units, the universities should use performance
indicators to make more effective use of their resources by identifying academic areas
where efficiencies can be achieved.
Administrative and Support
Overhead Exists Throughout
Academic Colleges
Fundamental differences between academic units and non- instructional units are reflected
in the manner in which academic units are organized and in the composition of staff.
Nonetheless, there is a significant amount of administrative and support overhead
present within the academic units.
Co~ lzpositio~ nsrz d ovgnstizntion of staff - In contrast to staff in the universities' non-instructional
units, most staff in the colleges are directly involved in one of the
universities' three missions, i. e., teaching, research, or public service. Even so, many of
the employees in the colleges perform administrative and support functions. Figure 4
( see page 28) illustrates the results of our employee survey, where we categorized
employees based upon their job duties. In this chart, those employees in the blue areas
are directly involved in one of the three missions. Thus, 68 percent of NAU's academic
unit staff, 63 percent of ASU's, and 61 percent of U of A's directly serve the university
missions. The rest - ranging from 32 percent at NAU to 38 percent at U of A - could
be considered administrative and support overhead. Analysis of data for the entire
academic unit employee population using EEO categories confirms the presence of many
non- faculty positions. Although the largest single group of employees in most colleges
falls into the faculty category, all colleges also have a significant proportion of executive,
professional, and clerical staff.
Figure 4
Surveyed Positions in Academic Units
by Job Type
Statistical Sample Resutts
Direct Service High- Level Admin. n Low- Level Admin. Support
Source: Auditor General survey of randomly selected statistical sample of 738 main- campus
employees as of October 1993 ( excluding U of A College of Medicine).
Administrative and support overhead exists throughout the collegial structure of the
academic units. Colleges are typically led by a dean, who usually has two or more
assistant or associate deans. Reporting to the dean are several departments, each overseen
by a chairperson. Department chairs also frequently have one or more assistant or
associate chairpersons. Organization charts for academic units may be characterized by
larger spans of control and fewer layers of management than those of non- instructional
units. For example, 38 positions report directly to ASU's Dean of the College of Liberal
Arts and Sciences, and in most departments under this college, there are only 1 or 2
layers of management between the lowest level worker and the dean. However, even
in ths comparatively lean college, there are many administrative and support overhead
positions. The Dean's Office includes development officers, a systems analyst, and an
office specialist. Additional clerical and administrative support staff such as administra-tive
associates, secretaries, business managers, and accounting specialists are present in
academic departments.
Shifts in Funding of Staff
May Shift Priorities in
Academic Units
Changes in funding patterns on the academic side raise important policy questions that
do not arise when looking at non- instructional units. Between fiscal years 1990 and 1994,
the Arizona universities have increased reliance on self- funding and grant monies. The
shift in funding brings with it a different set of priorities, which have implications for
the universities' teaching mission and administrative overhead.
In the past several years, all three universities have turned to an increased share of self-funding
and other sources of revenue to supplement state support, which has not always
kept pace with inflation.(') This change is more apparent in the academic units than in
the universities as a whole.
The proportion of state- funded FTEs in academic units has declined, as shown in Figure
5 ( see page 31). Our analysis of each university's personnel data showed that ASU and
U of A increased the number of FTEs in academic units over a four- year period, while
NAU maintained approximately the same level of FTEs over the three- year period
studied. At the same time, as shown in Table 2 ( see page 32), the number of state- funded
FTEs decreased at all three universities. The universities were able to maintain or increase
total academic unit FTEs by using grant funds and local revenues.
" ' Over the four years from 1989- 90 through 1993- 94, unrestricted state appropriations increased by 13.25
percent at ASU and 5.65 percent at U of A, while the overall Consumer Price Index ( CPI- U) increased
by 15.2 percent and the portion of the CPI- U for college tuition rose by 43.9 percent. Over the three- year
period 1990- 91 through 1993- 94, NAU's unrestricted state appropriations increased by 11.1 percent,
while the CPI- U rose 9.2 percent and the CPI- U for college tuition increased 32.3 percent.
Figure 5
Total Academic Unit FTEs
bv Source of FTE Fundinq
.....................................................................................
..........................................................................
ASU NAU UofA
Oct. ' 89 Oct. ' 93 Oct. ' 90 Oct. ' 93 Oct.' 89 Oct. ' 93
State Other
Source: Auditor General analysis of personnel data submitted by the universities for main
campus employees as of October 1989 ( ASU and U of A) or October 1990 ( NAU)
and October 1993 ( all three universities). Data for undergraduate student
workers, U of A College of Medicine employees, and NAU hourly workers are
excluded from this analysis
Table 2
Changes in Funding of FTEs in
Academic Units by University
Source: Auditor General analysis of payroll/ personnel data submitted by the universities for employees
as of October 3989 ( ASU and U of A) or October 1990 ( NAU) and October 1993 ( of all three
universities). Includes all main campus employees with the exception of undergraduate students
and U of A College of Medicine employees.
State- Funded
FTEs
Other Funded
FTEs
Total Funded
FTEs
Reduced reliance on state funds may redirect university attention away from the teaching
mission and toward revenue- generating activities, according to the authors of a recent
publication in the Jorrriuzl of Higlzer ~ dzrcation.( I') n the article, which sought to explain
the rising costs of higher education, one proposed explanation was that a shift to
alternative funding sources contributed to a shift in expenditures, away from instruction
and toward research and administrative growth. The emphasis on fund- raising leads
to more administrative overhead to obtain and account for these funds. Furthermore,
as some faculty members at U of A explained, students may suffer because faculty spend
their time raising money instead of teaching their students.
Leslie, Larry L., and Gary Rhoads, " Rising Administrative Costs: Seeking Explanations," Journal of Higher
Education, March 1, 1995, Volume 66, Number 2, page 187.
ASU
FTEs
10189
1 0193
2,944
2,805
484
71 6
3,428
3,521
ASU
Change
in FTEs
- 139
+ 232
+ 93
U of A
FTEs
10189
10193
3,585
3,400
1,182
1,572
4,767
4,972
U of A
Change
in
FTEs
- 185
+ 390
+ 205
NAU
FTEs
10190
10193
920
865
75
130
995
995
NAU
Change
in FTEs
- 55
+ 55
No
Change
There Are Opportunities to
Reduce Administration and
Support in the Academic Units
Opportunities to streamline administrative and support overhead in the academic units
do exist. The universities could reduce administration in the academic units by pursuing
strategies that focus on the elimination of duplicative functions, consolidation of academic
departments, and elimination of non- essential programs. Examples of areas where these
strategies might apply include the following:
Eliminating duplicative functions - As in the non- instructional units discussed in
Finding 11 ( see pages 16 through 25), we found indications of duplication of effort
in the academic areas as well. Academic units are performing business and develop-ment
functions, while the central university administrations have large units
performing the same functions. For example, ASU's business and accounting functions
are centralized under the comptroller's office, which employed 96 FTEs in October
1993. At the same time, the College of Liberal Arts and Sciences ( CLAS) had an
additional 14 business and accounting positions. Although a CLAS official described
the staff in these positions as essential, and it appears to make sense to house them
near the research and instructional activities that generate their workload, there
remains a potential overlap between CLAS and the comptroller's office. A close
examination of business and accounting positions throughout the university's
academic colleges, including CLAS, could identify opportunities for interdepartmental
sharing and other efficiencies. Similarly, both ASU and U of A have centralized
development offices and also have development functions in the colleges. As
discussed in Finding 11, the presence of development officers in both central
administration and within the colleges may be duplicative.
Combining departments - A recent study of institutions conducted by the American
Council on Education found that almost half of the research/ doctoral public
institutions surveyed had consolidated some academic programs. Our research into
efforts at other universities found that the University of California at Los Angeles
( UCLA), a large public doctoral university, recently restructured colleges and
academic programs within its professional schools. The restructuring plan may save
the University up to $ 3.2 million annually by sharing a reduced number of
administrative support positions in consolidated academic units.
An example of academic areas that could be consolidated was proposed by U of A's
Strategic Planning Budget and Advisory Committee ( SPBAC), but has since been
withdrawn. SPBAC reported that it made " intellectual sense" to explore the possibility
of combining the biochemistry department and the molecular and cellular biology
departments. While SPBAC's proposal was based on streamlining the delivery of
undergraduate instruction in biology, we believe that consolidating these units could
also result in some administrative efficiencies. Organization charts for these
departments show that 11 of biochemistry's 93 positions ( 12 percent), and 11 of
molecular and cellular biology's 65 positions ( 17 percent) are administrative, clerical,
or computer support positions. These numbers do not include academic advisors,
research and lab staff, or support positions held by students. Under the current
structure, the 2 departments have a total of 54 faculty positions and 22 administrative
and clerical support staff, yielding a combined ratio of only 2.45 faculty per
administrative or support position. If these departments were combined, there might
be opportunities to reduce the total number of these positions through sharing
administrative staff. At ASU, where biochemistry and chemistry share a single
department, the ratio of faculty to administrative and clerical support positions in
that department is 3.17. If U of A were to combine biochemistry and microbiology
and achieve that ratio, they could reduce their support staff by about five positions.
Eliminating peripheral programs - Ultimately, eliminating non- essential academic
units may be necessary to preserve the quality of academic units that are more central
to the university's mission. The American Council on Education found that most of
the 406 institutions they surveyed had reviewed their current programs to evaluate
each program's contributions to the institution's overall mission. The study also found
that 55 percent of the 124 public research/ doctoral institutions surveyed have
eliminated academic programs in response to budget constraints. For example,
Virginia has closed 44 academic programs at its 11 institutions as of June 1995.
Both NAU and U of A have made some effort toward this end. U of A's provost
articulated the need for such efforts when he announced the formation of the
Strategic Planning Budget and Advisory Committee, stating that:
" to preserve quality, [ U of A] cannot continrie to provide the full range of services
that it currently offers ... It is inevitable that, as a result of this effort, we zuill
elinlinate some of our 133 i~ nde~- graduadteeg ree programs, a number far in excess
of the niinzber offered at the U of A's peer institutions. I am convinced that we
have no porn prograrns at the U of A. Consequently, proposals for program
elimination will be met with the question, ' Why cut a good prograni?' Wzy,
indeed. The answer is that we are conznlitted to excellence. vwe are afiaid to make
tough decisions, thereby saving all the ' good' programs, we ensure a level of
mediocrity for all. "
NAU's former president presented a similar explanation when he announced his plan
to " right size" the university by eliminating certain programs. Finding IV ( see pages
39 through 44) provides further information regarding the recommendations and
current status of SPBAC, and some of the reasons the right sizing plan was never
implemented.
Universities Should Use
Performance Indicators
to Identify Areas for Improvement
Universities should use performance indicators in making decisions about where
efficiencies can be achieved. Research in higher education and our data analysis suggest
that performance indicators are useful tools for evaluating academic units and allocating
resources. In The Redesign of Governance in Higher Education, a publication from the Rand
Institute on Education and Training, the authors assert that for universities to
strategically deploy resources, they need evaluation criteria and information that permits
comparison between academic units competing for resources. In Developing Statewide
Performance Indicators Fur Higher Education: Policy Themes and Variations, author Peter T.
Ewell found 18 states that have higher education performance indicators in place.
Performance indicators used in other states include total credits taught, graduation rates,
total degrees awarded, ratios of students to faculty, and program costs. Arizona's
universities routinely report graduation rates to the Board of Regents, and, at the Board's
request, recently established university- wide performance measures in several key areas
related to success of the university missions. Similar performance measures related to
administration could enhance efforts by the Legislature, the Board, and the universities
to improve efficiency.
As part of our data analysis effort, we collected performance indicator data at the
department level. These indicators included student credit hours taught, enrollments,
number of graduates, number of degrees granted, and the number and expenditures
of sponsored research projects. When these data are combined with information about
the number of employees, salaries, and other costs, they provide a measure of
department efficiency. Some of these measures are shown in Table 3 ( see page 36) where
the numbers shown in red indicate a decline in efficiency university- wide over the period
studied.
Ratios and other efficiency measures like those shown in Table 3, when computed for
individual departments, can suggest a starting point for qualitative assessment of specific
areas within the universities. In making resource allocation decisions regarding academic
units, the universities typically rely on qualitative indicators such as an evaluation of
the quality of programs offered, their centrality to the universities' mission, and whether
continued support of an inefficient unit is appropriate because the unit is unique to the
State or offers some comparative advantage for the universitv. Adding performance
indicators and cost efficiency information to these qualitative fktors would strengthen
the decision- making process and could serve to give the results more impact.
Table 3
Chanae in Academic Efficiency Ratios
Table Key: Figures in Black represent an increase in efficiency.
Figures in Red represent a tk, c~ i. cicr. cci, n efficiency.
Ratio@)
Student Credit
Hours per FTE
Salary per Student
Credit Hour
Enrollment per
FTE
Salary per En-rolled
Student
Degrees per FTE
Salary per
Degree
'"' FTE and salary figures used in these ratios include employees in both academic and non- instructional
units.
' b' NAU data cannot be compared to ASU or U of A data. NAU provided data for October 1990 instead
of 1989 because 1989 personnel data were unavailable.
Source: Personnel data included all main campus employees as of October 1989 ( ASU and U of A) or
October 1990 ( NAU), and October 1993 ( all 3 universities). Data for undergraduate student
workers, U of A College of Medicine employees, and NAU hourly workers are excluded fmm
this analysis. Student credit hours information provided by Arizona Board of Regents.
ASU
IW89
10193
70.630
69.761
$ 349.40
$ 398.98
6.559
6.405
$ 3,762.43
$ 4,345.45
1.182
1.263
$ 20,877.24
$ 22,041.85
ASU
%
Change
- I .23 Yo
+ I4. lQo0
- 2.35 Oo
- 15.00
+ 6.83%
+ 5.58' 50
UofA
I 0189
10193
50.790
48.719
$ 484.93
$ 605.30
4.378
4.156
$ 5,625.51
$ 7,096.20
0.698
0.802
$ 35,292.69
$ 36,759.01
UofA
%
Change
- 408a, 1
+ 24.82" 0
- 5.08%
+ 26.14%
+ 14.96%
+ 4.15%
NAU
lOJ90
1 0193
94.971
100.722
$ 292.35
$ 292.99
8.162
8.906
$ 3,401.75
$ 3,315.12
1.405
1.844
$ 19,759.43
$ 16,011.43
NAUb)
%
+ 6.11%
+ .002 00
+ 9.12%
- 2.55%
+ 31.23%
- 18.97%
RECOMMENDATIONS
1. The universities should track or monitor on an annual basis any shifts in staffing
between faculty and non- faculty positions in instructional units to determine potential
impacts on the teaching mission.
2. The universities should develop and present to the Legislature and the Board of
Regents comprehensive plans to review the efficiency of administrative and support
functions within instructional units. These reviews should address, at a minimum:
The extent to which administrative or support activities are duplicated,
The potential for combining units, and
The feasibility of eliminating peripheral programs.
3. The universities should develop and monitor performance benchmarks such as:
Student credit hours per FTE
Salary per student credit hour
Enrollment per FTE
Salary per enrolled student
Degrees per FTE, and
Salaries per degree.
FINDING IV
BOARD OF REGENTS AND LEGISLATIVE
INVOLVEMENT ARE NEEDED
Action by the Board of Regents and the Legislature will be needed to fully realize the
potential for improving administrative efficiency. In recent years, all three universities
have initiated a number of noteworthy efforts aimed at cutting costs. Results of these
efforts, however, have been modest because university culture imposes significant
barriers to change. Experiences of colleges and universities in other states suggest that
external forces and events are often required to overcome these barriers. Therefore, the
Regents should consider the use of benchmarking strategies to encourage and reward
improvements in administrative efficiency. The Legislature, in enacting the Budget
Reform Act, has already established a framework for promoting increased efficiency in
all state agencies, and could use this framework to effect changes at the universities.
Significant Barriers
Frustrate University Efforts
Barriers unique to university culture often stall efforts to improve administrative
efficiency. All three universities have initiated a number of noteworthy and promising
efforts to reduce administrative costs. However, these efforts, at least over the past three
years, do not appear to have stemmed the overall growth in university staffing levels.
University governance practices, preoccupation with institutional status and prestige,
and other factors make it difficult to implement significant changes.
U~~ iversiteyf forts - During the past few years, all three universities have undertaken
important initiatives aimed at improving efficiency and reducing costs. These initiatives
have included evaluations of selected administrative areas, total quality management
programs addressing a variety of administrative processes, examination of academic
programs, and budget reviews. The universities have engaged internal administrative
resources, faculty, and outside consultants to assist in these efforts. Some of the more
notable initiatives include the following:
ASU established a Total Quality Service ( TQS) program in 1993 to apply total quality
management analytic principles to administrative processes. As of May 1995,30 teams
had been formed, and 21 had recommended or implemented improvements to their
processes. These improvements, in Human Resources, the Lock Shop, Public Safety
( parking registration), Travel, and Computer Services, among other departments, have
included improving employee training, redesigning forms, clarifying signs posted
in offices that serve walk- in customers, and eliminating duplicative processes.
Improving customer satisfaction is the most common goal of the TQS teams.
NAU began a team- based process improvement project in October 1992. The project
Quality in Learning and Leadership ( QUILL), is designed as a grassroots approach where
departments volunteered to participate. Although implementation was deliberately slow,
11 teams had been trained by the end of October 1995, and were pursuing improvements
in Postal Services, Facilities Management, Library Cataloging, the Registrar's Office, and
Telecommunications, among others. One of the most recently trained teams, Statewide
Programs, has as its goal improving communication between NAU and sites around the
State. One Postal Services team is composed of student workers, who earn course credits
while they learn skills they will carry into their professional lives.
U of A began its total quality management program, called Continuous Organizational
Renewal ( CORe), in 1992. By June 1995, over 100 projects had been initiated in both
academic and non- academic units through CORe, which received an exemplary leadership
award from the American Association of University Administrators. One goal of the CORe
program is to coordinate across the institution, and one aspect of the university- wide work
has been an effort to improve human resources areas including performance evaluations,
training, and a suggestion program, with the intent of more effectively motivating and
developing all university employees. Other specific projects have worked to improve
effectiveness and efficiency of student- related administrative processes such as outreach,
recruiting, admitting, providing financial aid, and career planning and placement.
While these efforts have all been important and noteworthy, their scope has, in some cases,
been very limited, and their overall impact on staffing levels is questionable. For example,
the total quality management programs on all three campuses have often focused on smaller,
more minor administrative functions, such as mail sorting and travel claim processing.
Projects with limited scope, by their nature, do not have a broad impact until many such
projects have been completed. By contrast, initiatives focusing on academic programs have
resulted in significant recommendations calling for major restructuring, program reductions,
and program elimination. However, few of these recommendations have been implemented.
For example, a " right sizing" program at NAU called for the elimination of 20 academic
programs deemed peripheral to the University's mission, saving $ 3.5 million in administrative
and other costs. The plan met considerable faculty resistance and was never implemented.
Likewise, a Strategic Planning Budget and Advisory Committee ( SPBAC) at U of A has
resulted in few program reductions, although SPBAC initially recommended eliminating or
consolidating 12 programs and departments out of 29 they reviewed. Currently, only the
physical education program and statistics department have been eliminated, and the nuclear
and energy engineering department has been combined with aerospace and mechanical
engineering.
Cultiiral bam'eys - Perhaps largely due to the cultural barriers that are unique to higher
education, universities do not make changes quickly or easily. A recent study by 3 Vanderbilt
University professors found that it took almost 26 years for half of the 200 institutions they
studied to adopt 30 different innovations after the innovations were adopted by the frrst
institution. By contrast, it took an average of 8 years for companies in the coal, steel, brewing,
and railroad businesses to adopt 12 important innovations in their industries. According to
the researchers, none of these industries had been well noted for embracing innovation.
Speculating on the reasons why universities are so slow to change, the researchers argue that
colleges and universities are " insulated from competitive pressures that would force them
to stay on the cutting edge." They have no stockholders, and university governing boards
lack measures to assess performance. And trustees ( regents), who balance sometimes vague
and conflicting goals, seldom establish incentives for universities to pursue innovation
aggressively.(')
Other factors within the university environment acting as barriers and slowing the pace of
change include consensus management, and prestige building ( or tradition).
Coiiserrs~~~ sr zaiuzger~ zetz- t Because many university decisions require the approval of
numerous constituencies, i. e. the acquiescence of faculty, staff, students, and others, higher
education experts argue that it is difficult to achieve agreement to make significant changes.
A report prepared by ASU as part of a 1992- 93 accreditation study notes that structural
changes in academic programs require: ( 1) obtaining review and approval by the appropriate
dean, ( 2) informing faculty senate members at large, ( 3) obtaining a recommendation from
a faculty senate committee and the Board of Regents chief academic officer, ( 4) gaining the
approval of the university president, and ( 5) getting the approval of the Board of Regents.
According to a University of Arizona vice president, the traditional consensus management
style of decision making " breeds mediocrity" and makes tough decisions hard to make. A
former NAU official told us the right sizing reorganization plan at NAU failed because it
was not possible to gain a consensus among faculty, administrators, and the Board of Regents.
Prestige biiilding - Likewise, according to higher education experts, the tendency of
universities to set institutional objectives and priorities based on factors such as university
prestige or tradition, rather than need, also inhibits efforts to streamline administration and
implement significant change. For example, some academic programs may receive substantial
funding while graduating very few students. While some of these programs may provide
an important public service, others are apparently continued because they contribute to the
institution's prestige and status. Similarly, competition between and among institutions over
status and funding makes it difficult to direct limited resources toward programs and
activities of greatest need.
John J. Siegried, Malcolm Getz, and Kathryn H. Anderson, " The Snail's Pace of Innovation in Higher
Education," The Chronicle of Higher Education, May 19, 1995, page A56.
Board of Regents and Legislative
Involvement Are Needed
The Board of Regents and the Legislature can play an effective role in helping the universities
overcome barriers to change. Experiences at other universities indicate that external events
and pressures were instrumental in stimulating successful implementation of major
administrative restructuring. Several strategies for encouraging and rewarding effective
university efforts to restructure and reduce adn~ inistrativec osts need to be explored.
Otlw uniuersities - In examining the experiences at other universities where significant
steps have been taken to reduce administrative costs and streamline operations ( see
Finding I, pages 7 through 14), we noted that, in several cases, changes were stimulated
by external events that created strong fiscal pressures on the universities. For example,
Oregon State University had to take steps to organizationally restructure when a property
tax initiative passed and revenues declined. Similarly, Virginia Tech University was forced
to make organizational changes when it faced a $ 40 million loss in general fund revenues
beginning in 1989.
Regent nlid kgislntiue nctiolzs - For significant change to occur at Arizona's universities,
the Board of Regents and the Legislature will need to play a strong role in stimulating
action. Experts in higher education whom we consulted, literature in the field, and
experiences in other states suggest that a variety of promising strategies could be
considered.
The Board of Regents could initiate steps to benchmark administrative efficiency modeled
after similar efforts to benchmark student outcomes and student achievement In 1994, the
universities were requested by the Regents to establish performance measures in several areas.
These areas included time to graduation, credit hours accumulated to graduation, graduation
rates, faculty mentoring, and faculty involvement in undergraduate teaching. Each university
has developed measures appropriate to these areas and will track changes in performance
over time.
Goals and performance measures could also be developed focusing on university
administration. As discussed in Finding IIf, ( see pages 26 through 37) our work suggests that
relevant descriptive data and various ratios could be developed and monitored over time.
Using the EEO codes and payroll data, for example, ratios that compare position types to
student credit hours, enrollment levels, numbers of graduates, and other factors could be
generated for academic units and colleges. Other measures, such as numbers of administrative
and support personnel compared to workload, could be generated for non- academic functions
and activities. Consistent tracking and reporting of these types of measures would help in
discerning trends, assessing the impact of university efforts, and allocating any rewards.
Without measures of this type it will be difficult, if not impossible, to determine if the
universities are making sufficient progress in realizing their individual potential for improved
administrative efficiency.
The Legislature can also take steps to encourage responsible and effective university efforts
to examine administrative efficiency. Some states have developed legislative initiatives that
offer incentives to reduce administrative costs and improve efficiency in their state colleges
and universities. For example:
Virginia's General Assembly enacted legislation in 1994 requiring all 15 colleges and
universities to develop a restructuring plan that will increase efficiency while maintaining
quality of services to students. Initially, the General Assembly intended to retain 1.5
percent of each institution's budget until a satisfactory restructuring plan was submitted.
However, the General Assembly has since decided to exempt the colleges and universities
from across- the- board budget cuts if they submit a satisfactory restructuring plan. In
addition, institutions will be allowed to retain savings realized through restructuring and
reallocate these monies to high priority areas. According to an official of the State Council
of Higher Education for Virginia, all but six institutions submitted plans on schedule and
many institutions are exceeding the cuts detailed in their restructuring plans. Once plans
are fully implemented, $ 93.3 million in savings is expected, representing 6 percent of all
university funding.
w Colorado's General Assembly, facing budget limitations and public demand, made some
university appropriations contingent upon progress achieved in several areas, including
administrative productivity. In fiscal year 1994- 95, universities will be rewarded for
reducing administration orddemonstrating low administrative overhead costs, personnel
efficiency, and reduced administrative paperwork. Early indications suggest that this
budgeting strategy has been effective in improving awareness among elected
representatives and university administrators about the importance of reducing
administrative costs and improving efficiency.
Other budget strategies could also be considered by the Legislature, the Joint Legislative
Budget Committee WBC), and the Office of Strategic Planning and Budgeting ( OSPB) as
part of Arizona's budget reform effort. The Budget Reform Act of 1993 and related
amendments enacted in 1995 place a new emphasis in budget development on strategic
planning and performance measurement. Under budget reform, all budget units, which
include the universities, are required to develop three- year strategic plans that specify
missions, goals, objectives, and performance measures for each program and subprogram.
Strategic plans will be used to conduct a limited number of program authorization reviews
( PARs). PARs will entail a self- assessment of individual programs for possible modification
or elimination and an independent review by JLBC and OSPB. Further, beginning in fiscal
year 1998, agency budget requests must separate administrative costs from direct costs of
providing services.
Several steps could be taken within the framework of budget reform to promote efficiency
and reduce university administrative costs. First, the universities could be encouraged or
required to develop within their strategic plans efficiency measures related to administrative
overhead. As an example, academic colleges might include the cost of all administrative and
support positions per number of students enrolled ( an input measure) or number of degrees
awarded ( an outcome measure). While strategic plans submitted in 1995 include similar
performance measures, they do not currently tie these measures to administrative costs.
In addition, the Legislature may want to ensure that university programs with potential for
significant cost savings are scheduled for program authorization reviews. The legislative
amendments enacted in 1995 specify 10 programs subject to PAR in 1996 and 15 programs
in 1997, selected from all state- funded programs, including those at the universities. However,
only two university programs ( the law schools at ASU and U of A) are among the 25
programs selected for review. The 50 additional programs that will be subsequently reviewed
in 1998 and 1999 have not been specified. Therefore, the Legislature could decide to select
more university programs for PAR during those years.
Finally, beginning in 1998 under budget reform, the Legislature may want to require the
universities to report administrative cost data in a format compatible with the data we present
in this report. This would appear to be feasible since our broader definition of administration
conforms closely to the statutory definition. The Budget Reform Act defines administrative
as:
"... any supportive activity relating to managett~ ent, supervision, budget ur execution of the
afairs of the budget unit as distinguishedfioni activities relating to its primmy direct service
fi~ nctions.. . N
If compatible data is collected beginning in 1998, it could be compared to our baseline data
to determine what progress the universities have made in achieving greater administrative
efficiency.
RECOMMENDATIONS
1. The Legislature should consider focusing budget reform efforts on university programs,
by requesting Program Authorization Review ( PAR), and JLCB staff analysis of
administrative cost data.
2. The Board of Regents should consider establishing a program to benchmark administra-tive
efficiency and performance at the universities.
Agency Response
-
ARIZONA BOARD OF REGENTS
2020 NORTH CENTRAL, SUITE 230
PHOENIX, ARIZONA 85004- 4593
( 602) 229- 2500
December 5,1995
Douglas R. Norton, Auditor General
Office of the Auditor General
291 0 North 44th Street, Suite 41 0
Phoenix, Arizona 8501 8
Dear Mr. Norton:
On behalf of the Arizona Board of Regents, Arizona State University, Northern Arizona
University, and the University of Arizona I am forwarding responses to your report on
The Universities: Administration and Support. We appreciate the opportunities you
and your staff have provided for us to discuss preliminary drafts of this report. We
accept your offer to include these responses in the text of the published report.
Sincerely,
Frank H. Besnette Lattie F. Coor
Executive Director President
Arizona Board of Regents Arizona State University
Manuel Pacheco Clara M: Lovett
President President
The University of Arizona Northern Arizona University
I THE UNlVERSrrY OF ARIZONA
TUCSON, ARIZONA 85721
ARIZONA STATE UNIVERSITY
TEMPE. ARIZONA 85287
NORTHERN ARIZONA UNIVERSITY
FLAGSTAFF AR17ONA M I 1
Universities' General Response to Auditor General's
Performance Audit of the Universities: Administration and Support
Responding to legislative mandate, the Arizona Auditor General has completed a review of the
administrative and support staffing levels of the three state universities in Arizona. The study
was the second in- depth look at administrative costs of the universities during the last two
yem. Another comparative analysis of university administrative costs was conducted by the
Higher Education Research Advisory Board ( HERAB) sf the Joint Legislative Budget
Committee and published in 1994.
A key finding of the Auditor General's report is that administrative and support staffmg
consumes more than half of all personnel resources at the universities. The report used non-standard
classifications and unorthodox research methods to place employees into one of four
categories: high- level administrators, low- level administrators, support personnel ( including
secretaries, file clerks, custodians, etc.) and direct service employees.
The Auditor General's findings are in conflict with those of the legislatively sanctioned
HERAB report, which found that administrative positions constitute from 15 to 21 percent of
the universities' human resources, that the universities were focusing more of their scarce
resources on non- administrative functions, and that actual expenditures on administration have
declined. The HERAB report used research methods and classifications that are standardized,
and employed national statistical sources that compare colleges and universities on the basis of
peer institutions.
In weighing the two conflicting studies, the Arizona Board of Regents and the Arizona
Universities are concerned about the value of the Auditor General's fmdings. Because of the
non- standard classifications and proprietary methods employed, the findings lack value as
benchmarks for the Board and the universities to use in comparing administrative costs to other
institutions of higher education. The Auditor General's findings will be of limited utility in
measuring growth or shrinkage of administrative costs in the future.
The HERAB findings, in contrast, provide the Legislature and the leadership of
Arizona's public university system the means to measure and track administrative costs
in a standardized, comparable manner. The study relied on data generated by the National
Center for Education Studies and the Integrated Post- secondary Education Data System; these
data currently are used by Arizona's Universities to compare cost structure, efficiency and
administrative effectiveness against colleges and universities of similar size and mission. It is
this type of data, generated by organizations that are knowledgeable about the inner workings
of modem institutions of higher learning, that will continue to be valuable in analyzing
administrative costs and developing budget recommendations.
The Auditor General's report observes that direct service employees -- those whose activities
the Auditor General deems to contribute directly to the primary institutional missions of
instruction, research and public service -- constitute the largest single category at more than
38 percent.
The Auditor General's report also observed that high- level administrators across the
three universities represent the smallest category - about 7 percent -- and that the
number of those high- level administrative positions is declining. Low- level administrators
( 17 percent) and support personnel ( 36 percent) represent the remaining employee body.
When the last three categories are combined -- high- level administrative, low- level
administrative and support personnel -- the total equals about 62 percent, and is the basis for
the Auditor General's conclusion that " more than half of all personnel resources" are engaged
in either administrative or support activities.
Perhaps the more troubling observation of the Auditor General's performance audit is that by
inference, " less than 40 percent of the personnel at Arizona's universities are principally
involved in direct service," that is, carrying out the primary missions of instruction, research
or community service. This observation is assumed to be based on employee responses to a
telephone questionnaire, responses which the Auditor General's office has declined to provide
to the universities.
The resulting conclusions tend to distort and understate the contribution and value
provided by a large segment of University employees, located in academic and non-academic
units as well as in administrative positions. Examples of positions which, contrary to
the Auditor General's report, contribute directly to the success of instruction, research and
community service include financial aid officers, computing assistants and faculty department
heads.
While the Auditor General's review is intended to focus on ways to improve the efficiency
and effectiveness of Arizona's public universities, it unreasonably reaches conclusions
about the value and contributions made by large segments of the university employee
body. It reaches those conclusions using methods or job function classifications that no other
audit team or administrative review group ever have used, and is based on data that are
unavailable to the universities.
Speciifically, the Board of Regents and the Universities share the following concerns about the
report:
1. The report understates the number of employees who directly contribute to the primary
missions of the universities because it arbitrarily classifies all employees who maintain
and support large residential campus resources as " administrative overhead." In fact,
providing a clean, safe and healthy campus setting contributes directly to the university
goals of persistence and providing an academic- friendly environment.
2. The audit utilizes methodology and classifications that are non- standard, proprietary to
the Auditor General's office and cannot be replicated or adopted for future tracking and
measurement. Recent studies of university overhead using standard classifications/
methods show administrative and support levels to be comparable to those of other
institutions of similar size, scope and mission.
3. Maintenance of the large physical plants at university campuses is comparable to
operating small communities. Campus opexations functions are most effectively
performed by personnel other professional faculty and researchers, who are
higher- cost employees and who should not be occupied with buildings, grounds,
campus security tasks, etc. The Auditor General's report fails to recognize the logic
and value of having support staff operate these large, complex physical facilities, and
the importance of maintaining prime state physical assets.
4. The universities have a solid record of, and on- going commitment to, improving the
efficiency and effectiveness of their institutions. The Auditor General's report
underestimates or ignores the progress of the Universities toward benchmarked,
performance- based management, including the Total Quality Systems initiative at
Arizona State University, the Continuous Organizational Renewal program at the
University of Arizona, and the QUILL Total Quality Initiative at Northern Arizona
University. A more thorough review indicates that the Universities already have
accomplished many of the recommendations contained in the audit. Each university
provides more detailed information about these initiatives in their responses.
The Board of Regents and the Universities appreciate the positive findings of the Auditor
General' s Review :
1. The single, largest category of University employees is involved directly in
teaching, conducting research and providing service to the community. The
Auditor General's findings reinforce the commitment of resources made to accomplish
the primary purpose and goals of NAU, ASU and U of A.
2. Toplevel administration is lean, and becoming leaner. The report fmds that size of
top- level administration and low- level administration are adequate and in- line with
findings from other studies and other institutions.
3. When all personnel classified as traditional administrative staff are combined, the
Universities dedicate about 25 percent of their human resources to administration.
That percentage is in line with findings by the Legislature in the HERAB study and
compare favorably to other universities of similar size and mission.
Specific Recommendations for the Board of Regents
The Auditor General's report contained specific recommendations for the Board of Regents, in
addition to recommendations for the universities. The Board has not yet reviewed the specific
recommendations. The following are preliminary observations on those recommendations by
Board staff. The recommendations are:
1. The board should revise its personnel classzjication system to enable more accurate
tracking of administrative and support personnel, and work with peer institutions to
develop comparative data on administrative and support staflng pattern.
Response:
Personnel classification is an important way to measure and track administrative costs
and efficiencies. However, creating additional methods or systems at this time may not
be necessary, and would be duplicative of the budget and payroll classification systems
that now exist at the universities and which utilize Equal Employment Opportunity
codes. Any job classification system must produce data that is comparable across the
industry; those data generally are available from existing resources.
2. The board should develop a plan and timetable for reviewing multi- university finctions
for possible centralization.
Response:
The issue of centralizing multi- university functions merits continuous review.
Currently, the three universities share furniture purchasing efficiencies and a
computerized library circulation system. Additional opportunities will be reviewed as
part of the Board's strategic planning process and review of goals and objectives.
3. The board should benchmark administrative eflciency and per$ omance at the
universities.
Response:
The benchmarking and measurement of administrative efficiency is a large part of the
Board's current focus. The Board agrees that benchmarking is important to effective
management, but submits that benchmarking should include every aspect of university
operations, not just administration and support staffmg patterns. To that end, progress
toward administrative and operational benchmarks are scrutinized as part of the annual
review of university goals and objectives. Specific measurements have been included in
the university strategic plans during the last five years, and will continue to be
discussed at the Board level at least twice a year.
The Auditor General's findings that more than half of the Universities' human resources
are not focused directly on carrying out the primary missions is based on non- standard
data and unorthodox research methods that provide little opportunity for replication or
application to the on- going operation of the institutions. The study cannot be used to
develop benchmarks or to measure changes in administrative costs.
The study's findings are in conflict with those of another recent, legislatively sanctioned
study, which found that the universities have focused more resources on non- adminis-trative
functions, and that administrative costs have declined. Data generated by
organizations that understand the inner workings of today's universities can help in analyzing
administrative costs and budgets.
The classification of positions as ' support staff" by the Auditor General is largely
subjective. As the classification was applied to the universities, it defines jobs as not
having direct linkage to the primary missions of the universities. On the contrary, many
of the jobs that the Auditor General placed in this large classification contribute directly
to the success of classroom instruction, research projects and community service.
Many of the employees in this " catch- all" category should be recognized for their
contributions to the primary mission of the universities. Of that group, many are integral
to the success of instructional, research or community service activities, including financial aid
officers, computing assistants and all department heads. Many academic department heads
have direct, daily interaction with instructional and research activities.
The Auditor General's recommendations for streamlining administrative processes,
reducing overhead and finding ways to shift more resources toward serving students,
research and community service fail to acknowledge recent progress made by all three
Universities.
Capturing a view of administrative overhead and establishing measurements and targets
for shrinking overhead is valuable. The intent of the Auditor General's review, along
with that of the JLBC, will continue to be pursued by all three Universities and the
Board of Regents.
Detailed responses by each University follow. They echo and amplify what is contained in the
general response above. They provide specific examples of findings that are both problematic
and cannot be replicated or applied.
Response to Auditor General's Report
The Arizona State University is pleased to present our response to
the Auditor General's report on university administration and
support. Recognizing the challenging task of conducting a
performance audit of institutions as complex as Arizona's
universities, we appreciate the opportunity to respond to the
study' s findings .
In general, we concur with the spirit of the recommendations
included in the report. We believe it is essential that we
demonstrate through planning and performance measurement that the
state of Arizona is well served by sound, efficient management of
its investment in higher education. ASU is committed to enhancing
the efficiency of university operations using performance measures
and benchmarking processes which enable the Board of Regents,
legislature and the general citizenry to compare our productivity
with other universities across the country.
Regrettably, however, the report has several serious shortcomings
which undermine its usefulness in this regard. First, the
methodology cannot be replicated or used in subsequent comparative
studies, and the data sets from Arizona's universities are not
comparable. Second, the overly broad definition of administration
and support does not accurately portray the role of a large number
of direct service employees at the universities. Third, the
report presents descriptions of planned actions at other
universities without discussing their comparability. More
importantly, the report does not recognize the significant economy
and efficiency achievements of Arizona's universities. The result
is that the report produces findings which conflict with earlier
studies of university administration and preclude its use for
comparative purposes. The following issues illustrate these
points.
FINDING I
* U t i l i z i n g a non- standard d e f i n i t i o n of administration and support
s t a f f i n g , the report concludes that t h i s group of employees
comprises more than one- half of a l l u n i v e r s i t y personnel.
While the study found that the largest single category of
employees were direct service employees, it failed to include
large numbers of employees in this category who are directly
involved in the teaching, research, and public service functions
of the university. For example, department chairs, adjunct
faculty, graduate associates/ assistants, academic advisors,
financial aid officers, admissions and registration staff, and
computing staff are clearly direct service providers that the
report did not include in the direct service category of
employees. Had the report done so, a significantly different
and more accurate representation of university staffing would
have resulted.
Response to the Auditors' Report
December 5, 1995
Page 2
In contrast, the Higher Education Research Advisory Board study
directed by Joint Legislative Budget Committee staff,
" Administrative Costs Study of Arizona's Public Universities and
Community College Districts," used 1989, 1991, and 1993 data to
comDare the Arizona universities to their Deers. That study
found the following:
* ASU's administrative costs per student were 13 percent l e s s
p
* Total administrative FTE personnel a t ASU were 17.3 percent
of t o t a l university FTE employees.
* Total administrative costs a t ASU were 18.2 percent of the
FY 1993 s t a t e operating budget and 20.6 percent of the All
Funds budget.
The methodology utilized in the Auditor Generalf s report is not
replicable, and the use of a non- standard definition precludes
any opportunity to utilize the findings from the study in
comparing ~ rizona universities with other universities across
the country.
* The report s t a t e s that Arizona u n i v e r s i t i e s do not maintain the
informa tion they need t o monitor t h e i r administrative s t a f f i n g
patterns and trends and that using EEO codes for employee
c l a s s i f i c a t i o n s r e s u l t s i n " misleading" data and understates the
" true" number of administrators.
The federal Equal Employment Opportunity Commission mandates the
maintenance and reporting of employees by EEO category. In
addition, the use of EEO codes is a widely accepted method of
employee classification for both public and private
organizations.
In accordance with Arizona Board of Regents' policy, the ASU
payroll and budget systems maintain information on five employee
categories-- faculty, classified, academic professional, service
professional, and administrative staff-- with which we monitor
employee staffing patterns and trends. The universityf s job code
set is structured to allow easy summary statistics for various
employee groups such as graduate assistants or administrative
staff.
The report's grouping of administration and support employees
ignores their varying degrees of direct involvement and
diminishes the essential role they play in carrying out the
university's mission. For example, academic advisors have a
more direct involvement than do groundskeepers; however, they
would be similarly classified under the report's schema.
Moreover, the elimination of groundskeeper and custodial
positions would result in the deterioration of state capital
Response to the Auditors' Report
December 5, 1995
Page 3
resources. Additionally, such a broad grouping results in no
opportunity for benchmarking with other universities or making
best practice comparisons.
* The report presents analyses and recommendations based on
admittedly inconsistent and non- comparable d a t a for t h e three
Arizona u n i v e r s i t i e s .
The i n f o r m a t i o n ' p r e s e n t e d in the tables in the r e p o r t are
d r a m a t i c a l l y skewed by the non- comparability o f the data sets
used. For example, a s shown below, when ASU's data in Table 3
are adjusted t o reflect 1990 data excluding h o u r l y employees,
the p r o d u c t i v i t v r a t i o s for SCH per FTE and Enrollment per FTE
chancre from necrative t o p o s i t i v e , r e f l e c t i n c r an i n c r e a s e in
p r o d u c t i v i t y r a t h e r than the reported d e c l i n e , and the c o s t
r a t i o s chancre from p o s i t i v e t o necrative, reflectincr an i n c r e a s e
in efficiencv r a t h e r than the reported decrease. All three
universities ' data should have been adjusted t o be comparable.
Table 3 Change in Academic Efficiency Ratios
( W i t h adjustments f o r Corrections t o Errors in 1993 d a t a , u s e
o f 1990 data, and Excluding Hourly Employees)
I I ASU I ASU 1
Ratio
SCH per FTE
Salary per SCH
10/ 90 to
10/ 93
69.172
73.690
Enrollment per
FTE
Percentage
Change
+ 6.53%
$ 415.57
$ 398.91
Salary per
Enrolled
- 4.01%
6.410
6.820
Student
Degrees per
FTE
- Without conducting any comparisons between the i n s t i t u t i o n s , the
report says that Arizona ' s u n i v e r s i t i e s can drama t i c a l l y improve
e f f i c i e n c i e s based on the planned improvements of other
u n i v e r s i t i e s .
ASU welcomes comparisons with Stanford and Northwestern-- two of
the richest and most selective private universities in the
nation. The a l l funds budget a t Stanford for 14,000 s t u d e n t s in
1992- 93 t o t a l e d $ 1.574 b i l l i o n - - n e a r l y 3.6 t i m e s g r e a t e r t h a n
+ 6.40%
$ 4,484.83
$ 4,310.05
Salary per
Degree
- 3.90%
1.258
1.334
+ 6.04%
1
$ 22,852.92
$ 22,041.85
- 3.56%
Response to the Auditors' Report
December 5, 1995
Page 4
ASU's budget of $ 441.4 million which supported 42,000 students.
Thus, a comparison of ASU to Stanford along the dimensions
suggested by the report reveals that ASU is far more e f f i c i e n t
and productive in terms of the number of students we serve and
in minimizing the percentage of and absolute dollars expended on
administrative support activities.
The following U. S. News & World Report data for 1994- 95 compare
Arizona universities with those institutions mentioned by the
auditors as examples of the savings which may be realized by
reducing administrative costs. U. S. News calculates a standard
measure of " Educational Expenditures per FTE Student," which
includes amounts spent on instruction, administration, student
services, and academic support ( including libraries and
computers), using standard IPEDS categories.
The report cites Oregon State and Virginia Tech as already
having significantly reduced their costs, and yet they s t i l l
spend 31 percent and 24 percent more respectively, than does
ASU. Clearly, using the auditors' own examples, ASU is already
very efficient in terms of the amount of money spent per FTE
student.
University
Stanford
Northwestern
Oregon State
Virginia Tech
UA
ASU
FINDING I1
* The report says that no systematic examination of support areas
such as student a f f a i r s currently e x i s t a t the u n i v e r s i t i e s .
At ASU, student affairs annually conducts two comprehensive
program reviews of its departments, scrutinizing professional
and accreditation standards, budgets, staffing patterns, and
performance outcomes-- all measured against national norms. In
addition, the budgets and staffing of all three universities
student affairs operations were reviewed in August 1995 by the
Arizona Board of Regents. ASU's funding for student affairs as
a percentage of the total university budget has remained flat
over the past decade.
* The report recommends consol i d a tion o f various a c t i v i t i e s i n
order t o enhance e f f i c i e n c y .
Educational
Expenditures per
FTES
$ 36,450
28,052
9,951
9,409
9,970
7,571
Classification
Research I
Research I
Research I
Research I
Research I
Research I
Response to the Auditors' Report
December 5, 1995
Page 5
There is no evidence to support the contention that a central
admissions office would operate more efficiently than three
distributed offices. Each university currently processes
sufficiently large numbers of applications that economies of
scale are already achieved. In addition, we believe that a
campus based admissions office is much better able to respond
directly to questions and is more customer oriented.
When contacted with regard t o the Minnesota task force
recommendations mentioned i n the auditors' report, the Minnesota
Chancellor's O f f i c e responded that they had no plans t o
consolidate u n i v e r s i t y student a f f a i r s o f f i c e s . Consolidation
efforts in Minnesota focused almost exclusively on the community
college and technical college systems. Students apply directly
to the campus at which they seek admission. Moreover, the
Minnesota official was surprised that ASU was calling him
regarding efficiency practices. The previous year he had
visited a few universities-- one of which was ASU-- that were
viewed nationwide as models of " best practiceN in student
a f f a i r s .
FINDING I11
* The report suggests that receipt of external funding from
research and development d i s t r a c t s the u n i v e r s i t y from i t s primary
mission.
Teaching, research, and public service are the activities which
make up the university's mission. External funds enable the
university to dramatically enhance the scope and quality of each
of these activities. Without such support, the opportunities
for students to receive a truly first rate education would be
seriously impaired due to the lack of resources and concomitant
loss of knowledge. Recently, the university has received a
number of grants, totaling several million dollars, specifically
to enhance undergraduate instructional programs. In addition,
the infusion of millions of dollars into the state and local
economy directly results from the external funding the
university receives.
* The report says that the u n i v e r s i t i e s should improve e f f i c i e n c y
i n academic units through consolidation and elimination of
programs.
The ASU has eliminated several programs including among others,
Textiles and Clothing, TV Production, Microelectronics MFG
Engineering, Sys terns Engineering, and Nuclear Engineering. For
the last three years, ASU imposed a moratorium on the creation
of new programs despite the fact that the university has a
rather lean inventory of programs vis- a- vis peer universities.
In addition, we notified the Board of Re