setting the context: full costing and the financial sustainability of universities country workshop:...

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!

For more information please contact:

Thomas.estermann@eua.beor

Euima-fullcosting@eua.be