Bill and Melinda Gates Foundation grant

Activity-based costing

The National Higher Education Benchmarking Institute (NHEBI) at Johnson County Community College is taking the lead on a national project called “Maximizing Resources for Student Success,” thanks to a Bill & Melinda Gates Foundation grant.

What will the project do?

The project looks at 20 activities related to teaching, student services and academic support and benchmarks them. The process of “benchmarking” involves collecting data from enrolled partners (in this case, other community colleges across the United States) and finding the average cost for each activity.

“Activity-based costing” is an innovative and up-and-coming approach to higher-education budgeting that focuses on the activities that contribute to student success.

Once the average – or benchmark – is found, partner institutions can gauge how their costs compare.  For example, one institution in the pilot study discovered it was spending far too little on career services, and it now plans to invest more in this area.

This national research is being conducted by the NHEBI at JCCC.

How much was the grant?

The grant, given in March 2013, was for close to $500,000.  NHEBI partnered with Delta Cost Project at the American Institutes for Research, based in Washington. The AIR will contribute to the project by developing a budget guide for activity-based costing.

Why do community colleges need benchmarks?

Patrick Rossol-Allison, executive director of institutional effectiveness, planning and research at Johnson County Community College, noted, “Community colleges are not likely to get more funding over the next decade.”

In fact, a 2013 survey conducted by Inside Higher Ed reported that 57 percent of the college and university business officers think new spending at their institutions will come from reallocated dollars rather than new revenue.

Victoria Douglas, research analyst for NHEBI states, “’Maximizing Resources for Student Success’ will give institutions new insight on their spending, helping them reallocate their budgets to better serve their students.”

What is involved in this benchmarking research?

After several national advisory board meetings, a pilot survey was developed and implemented in October 2013. Douglas worked with 23 nation-wide institutions to collect the data on their activity- based costs. The results of the pilot will be analyzed to refine the web-data collection process and develop an on-going, membership-based benchmarking tool

The NHEBI and the Delta Cost Project also created an outline for a new budget guide. The guide introduces administrators to activity-based costing (ABC) in higher education, explaining to them how to use the ABC concept to answer the question, “How much does that cost, exactly?”

Don Perkins, JCCC’s associate vice president for finance services/CFO, contributed to the project by serving on the budget guide advisory board.

How will the project help community colleges improve student success?

According to Lou Guthrie, new director of the NHEBI, the project will help instill a culture of using data to make strategic decisions at community colleges.

Improving efficiencies, Rossol-Allison said, could help higher education leaders meet President Obama's 2009 challenge to produce the highest proportion of college graduates in the world by 2020.

Community colleges are in a unique position to respond to the challenge because of their affordable tuition, open admission policies and flexible course schedules.