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Setting the context: Full costing and the financial sustainability of universities
Country Workshop: POLANDEUIMA – Full Costing Project
University of Warsaw13 May 2011
Thomas EstermannHead of Governance, Autonomy and Funding Unit
European University Association
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Overview
Financial sustainability
Funding Trends 3 challenges
Full Costing Key issues
Recommendations
Financial Sustainability
UniversitiesFunders
Public authorities
Funding context
Challenging environment Globalisation (global markets for HE and Research) Growing competition for talent, resources, excellence
Need to do “more”…. Growing participation rate Contributions to economic growth and innovation Social outreach activities Focus on excellence and global competitiveness
… with “less” GROWING COSTS OF TEACHING AND RESEARCH REDUCED PUBLIC FUNDING
Funding Challenge 1:Reliance on Public Funding Sources
On average, almost ¾ of universities’ funding comes from public funding sources
Impact of the economic crisis Reduced public funding Uneven impact on teaching and research Increase in competitive and targeted funding Private funds are also affected
Funding challenge 2:
Increasing number of funding sources
Increasing number of funding sources
Some universities have more than a 100 funding sources! Tendency for further increase in the future! New funding sources represent a small % of overall budget Different accountability regimes – high costs of compliance!
Funding challenge 3: Increasing co-funding
Increase in competitive funding sources with co-funding requirementsDo not cover the full costs of an activity Widens the FUNDING GAP!!Universities need to fill the gap using other vital sources
Full Costing
To respond to these challenges and improve their financial sustainability...
...universities need to develop the right tools to identify the full costs of all their activities and projects.
Diverse terminology
Lack of a commonly understood terminology in accounting and of financial terms in the HE 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 COSTINGability to identify and calculate all direct and indirect costs of an institution’s activities including projects
FULL COSTINGability to identify and calculate all direct and indirect costs of an institution’s activities including projects
Diversity of approaches to full costing in universities
Drivers of full costing implementation
Key issue 1:Full costing to support strategic
management
Key issue 2:Leadership commitment to
implementation
Key issue 3:Coordinated approach
ADVANTAGES Increases efficiency of the
implementation process Increases cost efficiency Improved transparency and
accountability Improves mutual trust Opportunity for simplification of
funding rules and procedures Coherent approach among
funders Potential for improving the
funding system
The role of external support
The role of external support
State of play in full costing development
No universities
One university
Some universities
All universities individually
Coordinated approach
Implementation started
Implementation underway
Implementation advanced
Implementation completed
Full use in strategic management
Progress in the implementation of full costing
Recommendations
Universities
All stakeholders should work together for a coordinated approach!
THANK YOU!
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