An efficiency review of university departments

The primary purpose of this paper is to examine an important public issue, namely how the use of a particular fixed budget formula impacts on the input/output structure of the decision-making units directly affected by its implementation. As an example, it assesses short- and long-term effects on the efficiency of academic units of the University of New Brunswick of the budget formula used by the Maritime Provinces Higher Education Commission (MPHEC) of Canada in the resource allocation process to the universities in its midst. Evaluating the efficiency of academic units is a difficult problem to deal with, due to the problems inherent in measuring the inputs and outputs of the system and to the potential implications of the resulting resource allocations in the budget reduction exercises in place at many educational establishments. The contribution of Data Envelopment Analysis to the solution of this problem is evaluated. Practical and research implications are discussed.