Faculties’ Behaviour and Response to Decentralized Budgeting at a Large Research-Intensive University.

This explorative descriptive case study examined the extent of budgetary planning and decision-making decentralization under RCB/RCM, and its effects on the quality of decision making as perceived by those involved in budgetary decisions at various levels at a major public research university. In doing so, it adopted a bottom-up approach to determine if what the university sees and expects top-down differs from what the faculties and departments see or how they behave bottom-up. The initial document analysis phase of this study identified the major themes for further development during phase 2 of the study. It also facilitated the identification of the four diverse faculties that formed the basis of the study. During the survey and interview stage of the study, the major themes were explored further, and subsequently, the informational asymmetries that exist between the RCB/RCM model, the process, and the participants were identified. Utilizing the concepts of principal–agency theory, risk and uncertainty, and known unknowns the data were analyzed and the results presented across six categories of asymmetry. This study found that while the university’s intent and design for the decentralized model was for it to allocate budgets to academic divisions only, the faculties in this study responded in a number of ways, from a local decentralized model, to the retention of an incremental process. Moreover, fiscal awareness is dependent on the role, the amount of information that is shared, vested interest in the model, and the types of budget models utilized at the local level. RCB/RCM-Lite models create informational asymmetries. The processes that support decentralized models prompt informational asymmetries particularly within the constraints of a publicly funded university; and create both moral hazard and adverse selection problems, especially as it relates to risk. This study showed that the methodology used to assign shared service costs can create an informational asymmetry when the central administration assigns overhead and indirect costs as average or fixed costs, but faculties recognize marginal costs, and as such, do not recognize or understand the costs that are attributed to them.Ph.D