towards full costing in european universities · 1. terminology lack of a commonly understood...

Towards Full Costing

in European Universities

Thomas Estermann

Senior Programme Manager

European University Association

30.3.2009

Prague

Overview

EUA profile and Project basics

Selected key findings � Terminology

� Diversity

� Development of full costing

� Drivers

� Benefits

� Obstacles

� The role of external support

� The role of funding schemes

� Complexity

Recommendations to universities, national governments and European institutions

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Brief Profile of EUA

Established in 2001

Non-governmental membership organisation

800 individual university members

35 National Rectors’ Conferences Members

46 countries

Independent voice for the university sector

Focus on EHA and ERA

European Universities and the Challenges of funding

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The project’s aims

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

� 1st step: Identification of costs of activities and projects

� 2nd step: Diversified funding structure

Analyse universities’ progress towards full costing

Provide examples of good practice

Raise awareness among funders & universities

Towards Full Costing in European Universities

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1. 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

Suggestion to use the term “full costing”


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2. Diversity

Legal status

Size

Profile

Ownership of property

Governance structure

Funding structure

Costing structure

Level of autonomy

� Impact on the development, design and implementation of full costing

� Analysis of these elements helps benchmarking and finding similar universities for exchange


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3. Development of full costing

Huge diversity in development both in countries and universities:� No implementation of full costing (PL, Estonia, SL)

� Development/implementation process started (SE, IE, FI, Austria)

� Full costing implemented (UK, NL)

=> All 3 stages comprise a broad spectrum

Partly conditional on � quality of different databases

� information systems

� types of costing models already existing

National coordinated initiatives & financial support from government = faster development


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4. Drivers


HEIs

� Improved strategic decision-making� Systematic approach to activity analysis and costing� Enhanced ability to negotiate and price activities => higher cost recovery

� More efficient internal resource allocation system� Benchmarking possibilities

National level

� Better accountability => mutual trust => helps transition towards enhanced autonomy

European level

� Stronger/more competitive universities = Stronger ERA & EHEA

� Enhanced accountability + trust with European Commission = simpler/less costly procedures

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5. Benefits


Institutional obstacles

Resistance towards change

Resistance towards managerial approach

Concerns over time accounting

Lack of leadership commitment

External obstacles

Lack of autonomy and other legal barriers

Lack of trust between stakeholders

Strain on financial, technical and human resources

Risk of complexity

Low cost culture/restricted markets and pricing

Competitive funding is not covering full costs

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6. Obstacles to implementation of full costing


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7. The role of external support

At different stages� Development

� Implementation

� Funding on a full cost basis

From different sources� Organisations representing universities (Rectors’ Conferences)

� National agencies responsible for the funding and/or organisation of universities

� International organisations and other external funding bodies

In different forms� Financial support

� Human resources

� Advisory/consulting activities


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7. The role of external support


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8. The role of funding schemes

Drivers but also potential obstacles to implementation of full costing

FP7: Forms for cost recovery and application of rules need to allow for wider scope of different methods and diversity

External funding only partly covers costs = endangers financial sustainability => potential reduced participation

Most universities not ready to identify all their costs = if reduced flat rate from 2010 => potential harm to EU’s R&D competitiveness


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9. Complexity

Multiple drivers add to the risk of making costing systems too complex

Diverse requirements of funders in competitive funding schemes

Risk that complex systems are imposed on other countries’ institutions

Risk of unduly complex reporting under “accountability” requirements

Existing systems need to be carefully evaluated


Universities

� Use costing system as an integrated strategic tool for planning and decision-making

� Understand complexity and multiple purposes of costing systems and take account of these factors in the design

National� Provide financial, technical, advisory and Human Resource support in implementing costing systems

� Grant universities the necessary autonomy

Europe

� Recognise the diversity of development of full costing� Simplify the rules for both FP7 and future European funding schemes and apply simplified rules

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Recommendations


Europe and national

� Work towards coherent conditions for external funding requirements

� Move towards funding on a full cost basis

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Discussion with European players to provide universities’ view

Take up activities to enhance development of full costing

Foster exchange of best practice

EUDIS – Diversifying income

streams

Next steps


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Thank you for your attention

For further information :

[email protected]

towards full costing in european universities · 1. terminology lack of a commonly understood...

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