Budget Management of University Research Funds: The Perspective Based on Contract Theory

Based on Complete and Incomplete Contract Theory, the paper analyzes the root causes of different kinds of problems during the process of budget compilation and implementation of university research funds. These problems include false budget, fiddling on expenditure, and hard to monitor and control. Based on these analyses, the paper also provides corresponding strategy. The analysis in the paper shows that the problems in the budget management of university research funds are from asymmetric information and inconsistent interests between the principals and agents under the principal-agent relationships; and also from the opportunism of project manager in the conditions of limited rationality in the competent authorities and management department. Therefore, aiming at the above three causes, the paper provides the methods to control the opportunism during the management on the budget of research funds in universities. The methods include designing effective information management system, establishing effective performance evaluation system and perfect rewards and punishments mechanism, and improving corresponding governance mechanism.