Industry Expertise · July 21, 2020

The Basics of Budgeting for Nonprofit Universities

Budgeting for nonprofit universities can be complex. Tuition is an important part of the picture, because it makes up such a large portion of the school's income. However, funding can also come from state and federal governments, businesses, donors and nonprofit organizations. Administrators need to decide how to use different sources of revenue to pay for essential school operations.

One way to allocate funds is to focus on expenses that generate a healthy return on investment. The first step is to evaluating the core components of your university's operations, how much revenue they produce and what level of budgeting makes sense for each.


Faculty and staff

A college's operating expenses can include several line items, but the one that often requires the biggest budget is compensation for faculty and employees. Faculty salaries are often benchmarked against other schools, and bringing on the best academic staff make a college more competitive in the hiring process. 

Spending on faculty and staff can also be an outward sign that a school invests in student success. By maintaining a good student-to-staff ratio, schools create an environment that's dedicated to educating, providing greater access to professors and advisors and establishing smaller class sizes that encourage more personalized learning.

While investing in faculty is vital to a university's success, this expense makes up just part of the university operating budget. In addition, schools need support staff including administrators, IT professionals, maintenance personnel and more. This team will ensure that the campus stays up and running.

Student supplies and services

How much a nonprofit university decides to dedicate to supplies and services will depend on its mission, priorities and plans. For example, an institution that prides itself on research may allocate more money to laboratory supplies, and a school that focuses on athletic programs may choose to invest in the latest equipment. 

How your school chooses to spend this part of its budget will impact the students it attracts—make the investments that best reflect the needs and desires of your core demographics. Consider allocating funds for scholarships or grants that further your college's mission, as well, and that play to the strengths of your applicant pool.

Facilities

The amount of money spent on facilities will include maintenance and utilities for current structures, as well as funds earmarked for capital investments. Investing in facilities ensures potential and current students enjoy modern facilities that make the college experience more pleasant. 

For example, schools will often invest in updating classrooms, libraries, dorms, cafeterias, health facilities and sporting centers to create an engaging campus setting. Constructing new buildings demonstrates that your university is investing in the future of learning.

Technology

Another area that requires careful consideration is technology. To stay relevant, educational institutions must have the latest tools, as well as the highest level of security to keep students and information safe. Schools that offer a greater amount of online learning opportunities may decide to allocate a larger portion of their budget to technology.

Marketing

Attracting students requires funneling part of your budget into marketing and admissions. Some schools may need to spend more than others, depending on their size, reputation and goals. Recently, many universities have increased their spending on marketing to stay competitive in social media-driven market, while others have found success sticking with traditional marketing budgets and practices. 

To be competitive, it's important to use this portion of the nonprofit operating budget wisely, ideally once you know what type of marketing yields the highest return for your university.

How to allocate funds

Some revenue sources may have requirements or restrictions on how you can spend those dollars. For example, a donor may contribute money that's intended for a new building or a specific student service. You'll be able to manage other funding more holistically, based on your institution's goals and where its needs lie.

Budgeting for nonprofit universities is an exercise in priorities. How you spend your money demonstrates what you deem to be important—and the image you project to potential students and their families. Make the investments that create the culture and environment your university wants to embody.

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