Hypothesizing Exercise 10: control costs
©2003 Edward G. Rozycki
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edited 9/25/04
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HYPOTHESIZING
EXERCISES
The Public School Board of Metropolis, from a yearly one billion dollar budget, allots $20,000 to each of 150 schools as a Principal's Discretionary Fund. Those funds are audited each year by a duo team of accountants from the prestigious firm of Laburnum &Woods. The firm charges the District $200 per hr. and allots 50 hours to each school for checking the books. Since the Metropolis School District has no taxing authority, it must rely on a critical City Council for appropriations conditioned on a clean bill of health from Laburnum & Woods.
Student Directions
A. Compare the cost of the audit with the amount of money audited. What hypotheses can you formulate about the outcome?
B. Can you combine two or more hypotheses within a more powerful hypothesis?
C. For each hypothesis determine what information you would need to disconfirm its competitors.
D. You will be given additional information. Use it to rule out some of the hypothetical alternatives.
Additional Information (to be supplied by Instructor)
A. Half of the 500,000 children living in Metropolis attend parochial or private schools.
B. Laburnum & Woods, a generous contributor to both political parties in Metropolis, is the School District's general auditor, also.
C. Several years back, a principal in a Metropolis public school was unable to account for $5000 of discretionary funds. This occurred just as the Board requested a budget increase.
D. Metropolis' largest newpaper, The Questioner, opposed that budget increase request and published the story about the missing money. Board incompetence was blamed.
Additional Questions (to be answered after all information is in)
1. What is The Questioner's perception of the relative worth of the public schools in Metropolis?
2. A not-too-well-kept secret is that both major political parties appoint about 100 "ghost teachers" who receive paychecks but who work in no school. Why do school administrators not only tolerate this but keep it covered up?
3. Why haven't teacher's union officials, even during a bitter strike, not exposed the appointments of "ghost teachers"?
4. How many dollars are spent on the audit to protect each dollar of "at risk" Principal Discretionary Funds?