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  1. Financially sustainable universities through full costing and income diversification Thomas Estermann Head of Unit Governance, Autonomy and Funding EUA 19.11.2009 UNICA Meeting for EU Research Liaison Officers University of Ljubljana

  2. Financial sustainability • Provide evidence to debate on universities’ financial sustainability through analysis of institutional data and funding patterns from institutional perspective

  3. Terminology Lack of a commonly understood terminology in accounting and of financial terms in the Higher education sector in Europe Diverging interpretation and adaptation influenced by: EU FPs Management accounting theory (ABC) TRAC in the UK National context Ability to define costs as direct, define cost objects and allocate them Full costing – ability to identify and calculate all direct and indirect costs of an institution’s activities including projects …3…

  4. Diversity • Impact on the development, design and implementation of full costing • Analysis of these elements helps benchmarking and finding similar universities for exchange

  5. Development of full costing • Huge diversity in development both in countries and universities: • No or only preliminary development of full costing (CZ, PL, Estonia) • Development/implementation process started (SE, IE, FI) • Full costing implemented (UK, NL) • All 3 stages comprise a broad spectrum • Partly conditional on • information systems • types of costing models already existing • External support received => National coordinated initiatives & financial support from government = faster development

  6. Benefits Universities National level Europeanlevel

  7. Obstacles to implementation of full costing

  8. The role of external support

  9. The role of external support

  10. The role of European funding schemes • A driver but also a potential obstacle • Forms for cost recovery need to allow for wider scope of different methods and respect diversity • Need to simplify full funding cycle from application over reporting to audit • Unclear rules and regulations • External funding only partly covers costs = endangers financial sustainability => potential reduced participation

  11. Multi-level recommendations

  12. Recommendations to all funders

  13. Financial Sustainability • 2nd pillar: Diversified funding structure • Top priority: how to increase and diversify funding • How to mitigaterisk? • How to achieve more autonomy? • Challenges: • Increase of co-funding sources endangers financial sustainability • More and diverse income sources add to complexity

  14. EUDIS – EuropeanUniversitiesDiversifyingIncomeStreams • explores how universities with different missions and profiles are diversifying their income streams • identifies the essential external conditions for this, the incentives, obstacles and pitfalls involved • Analyses the effect of economic crisis on universities • investigates the challenges that diversified funding brings for managing and governing institutions and the impact of autonomy

  15. Questionnaire results: A few key figures • 140 universities • Over 2 million students (around 800,000 FTE) • 156,000 academic staff & 110,000 administrative staff • 260,000 degreesawarded • 27 participating countries • Close to € 20 billion (all types of funding) • € 13 billion public funding(national & regional)

  16. Expectations on incomestreamsevolution The sources that are mostwidelyexpected to increase are:

  17. Number of funding sources & complexity • Some universities have over 600 public funding sources • Requirements differ with smaller public funders, especially regarding targeted / project-based funding. • Variations include the use of different accounting systems, reporting frequency, auditing requirements, amount of documentation needed • Competitive funding often co funding High costs to secure additional funding Increase in funding gap through co funding - endangers financial sustainability

  18. Nextsteps by EUA • Full costingtake-upactivities • Promoting the implementation of full costing in universities • Funded by the European Commission under FP7 • National / regionalevents • Studyvisits • EUA to joinFunders Platform for Common Fundingprinciples • Work with EC and Parliament to design appropriatefundingmechanisms

  19. Discussion& Questions • Where are your in then process of implementation of full costing? • What are the challenges you are facing in respect to FP7? • Suggestions for FP8 rules and regulations

  20. For further information : thomas.estermann@eua.be