Do Colleges and Universities 'Manage' Their Financial Reporting?

Abstract

Prior to 2008 public universities, private universities, and liberal arts colleges made small changes in the proportion of total cost accounted for by instruction, research, and public service. After 2008 these institutions reported dramatic increases in the share of total cost accounted for by instruction, research, and public service. These shifts may be legitimate examples of resource reallocation or they may be examples of widespread reclassification of expenses. The latter case suggests financial reports are “managed” in higher education, as they frequently are among corporations. I explore the relationship between these shifts and changes in staffing.

Keywords: financial reporting, activity ratio

JEL Classification: I23, I28