Alternative ways to provide administrative services in higher education: The cost implications and effect on reported administrative expenditures

Administrative costs in higher education have been a public concern for several decades. This study examines the nature and character of administrative costs, which is an important area of research needed to inform current efforts to limit administrative expenditures at colleges and universities. This research emphasizes the need to gather organizational information in national data sets to avoid incomplete expenditure reports and invalid comparisons of administrative expenditures among institutions. Because the role of organization has not been adequately considered, the current debate about administrative expenditures misrepresents reality and misguides the policy response.; I examine in detail the relationship between administrative expenditures, costs, and organization in four administrative areas: (1) facilities planning and construction, (2) auditing, (3) legal services, and (4) development. I conducted semi-structured interviews with 62 directors at 4 system offices, 9 state agencies, and 12 campuses in 6 states to clarify and define the major transactions in each area.; Transaction cost theory was used as the guiding framework for several reasons. The pilot study showed that variations in organization created substantial differences in accounting practices among institutions and revealed the need to better understand the reasons for such diversity in organization at colleges and universities. Transaction cost theory focuses the researcher on the organizational alternatives and their cost implications. The framework requires detailed analysis at the transaction level, which magnifies the effect of organization on reported expenditures. The use of the framework significantly changes one's conceptual view of expenditure data and budgets to show that they are often a reflection of alternative institutional arrangements rather than consistent measures that are readily comparable among institutions.; The study calls into question existing studies and policy. A more sophisticated analysis of administrative costs that considers the effect of organization on a broader range of costs and outcomes such as efficiency, effectiveness, and quality is needed versus reports dependent upon incomplete expenditure data. These changes would provide administrators and the public with a more meaningful analysis of the trade-offs and cost implications of alternative ways to provide administrative services in higher education.