Suppose in a business, a division runs a deficit. Does the division have to “pay back” the deficit?
In a university, if a division runs a deficit, should it pay it back?
The same question asked a different way: should EMU be in the banking business with respect to its divisions?
My opinion is: it is but it should not be.
The reason a division runs a deficit was because it ran into conditions that precipitated overspending the budget: (1) emergency, (2) accounting practice changes, (3) mal- or nonfeasance by the head of the division. The proper response to any of those conditions is (1) budget better or more flexibly, (2) don’t make draconian short term changes caused by change in perspective, and (3) fire his *ss (respectively). Or, of course, the budget (the plan) was fubared in the first place.
I bring this up because it has become apparent to me that a part of Academic Affairs’ budget woes is pressure to repay past deficits due to accounting practice changes and redirecting income from Academic Affairs to the university’s general fund. (Also, there is another Faculty Council Budget Forum today).
The general principle of repayment on a deficit is wrong in a business or university setting (I think). And the specific principle of repaying a “debt” partly caused when the “bank” decided that a part of your income or a part of your savings account actually belonged to the bank is wrong. And these are what Academic Affairs is being instructed to do.
Accounting numbers are important for telling us what’s going on and for helping us get where we want to go. They are not important for making annual reports look impressive. They are not important for keeping tidy lists of numbers. This university needs to handle its money responsibly, professionally and as a tool for its mission, which is knowledge dissemination and acquisition.
