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While the answer is probably highly dependent on field and institution, I am curious as to the different ways departments get their money from the college/university (how is the amount determined?) and then how does the department spend it? Specifically, do faculty in the department get some set amount for which they can use for supplies, equipment, etc?

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(not US, but Europe)

Some money comes from the government, some comes from students, some comes from research grants (overhead, quite a big part of a grant, sometimes).

Overhead costs are department specific, that is, overhead at the physics department might be more than at the social science department.

Some of the money is to be distributed according to needs, but a lot will be up to discussions among the different boards along the hierarchies.

For purchases, most are done through grants that researchers/faculty obtained, general stuff (paper, pens, ...) is financed through overhead. There are also grants that can be used to buy special equipment exceeding "normal" amounts.

Another part is going to things ranging from cleaning personnel to journal subscriptions. Sometimes, universities have to rent the facilities they are using, some own them (country specific laws apply). This is financed through overhead, which also pays administrative staff.

Your university should have information for researcher/grant applicants, on overhead costs, and what it is used for. This might give you more details (and nightmares).

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This can be extremely complicated. Writing a thorough answer even for the little I know about my small department would be a huge endeavor.

Here are a few bits from my situation: We get base funding by the state, which is distributed to the different departments by the university according to some decade old laws and a ton of internal regulations. A part of this base funding is subject to "performance guided adjustments" among similar departments across the state. Then there is additional funding from the German "Hochschulpakt" which follow a different set of rules. There is a replacement for the student tuitions which, again, have their own rules. Of course there are individual grants for the researchers, but also other grants on higher level (e.g. large teaching projects) and this money has to be distributed…

On top of this, some of these processes change fast and the situation may be very different if a year from now…

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