Cost and Revenue Allocation in Universities’ Operational Budgeting

In recent years, there has been a strong push to establish operational budgeting to set clear goals for activities in government agencies. Thus, universities, as executive agencies in the governmental financial system, are obligated to implement operational budgeting. One of the main objectives for imposing operational budgeting is making the subunits responsible as well as a fair distribution of budget through cost and revenue allocation. A game theory approach is presented for a better allocation of budget to sub-sectors in a university. More precisely, budget allocation is modeled as a co-operative game with departments as the players where their benefits form the characteristic function. First, the core concept is applied for the allocation, so all players’ interests are saved to guarantee the continuation of their collaboration. Then, regarding the possibility of no-existence of the core, the nucleolus is applied to minimize the players’ dissatisfaction. Finally, the novel suggested method in the paper is applied in a university where the results are per experts’ expectations to a good amount