EUROPE: Meltdown forces new look at university financing

The global credit crunch has focused attention on the financing of universities, especially in Europe where there is less public investment in higher education than in many other places around the world. At the same time, more and more is demanded of the universities in teaching and in research. As the European University Association says: "The financial sustainability of their missions will certainly be the primary issue of concern for universities in the 21st century."

Following a detailed study of the financial challenges across Europe, the EUA says the first step for the universities is "to identify the full costs of their activities for both internal and external purposes". Moving to full costing "is essential to reinforce their financial sustainability," the association says in a new report.

National governments are called on to recognise the importance of granting autonomy to universities and to assist in the implementation of full costing. The paper also recommends that European funding schemes "further simplify and develop their funding rules to meet universities' needs".

But what is meant by full costing and why is it necessary? It basically means the calculation of all the direct and indirect costs of a university's activities, including projects, so as to leave room for diversity in approaches.

"National legislative differences across Europe affect costing and accounting practices and terminology. Different forms of depreciation, different terms in financial statements, different rules for property insurance in the public sector and the use of similar terms with different meanings make it extremely difficult to develop any standard terminology or comparability," says the EUA.

But full costing will be worth the effort and is vital to ensure better budget allocation and accountability. The association says it helps improve trust between government, funding agencies and universities, and smoothes out the transition towards autonomy. But it will not be easily achieved.

The development of full costing is hindered in Europe because higher education institutions lack support from national governments, whether in terms of direct financial contributions or through additional advisory support, or training of human resources and development. Thus external support is a key factor.

Competitive funding schemes "play an ambiguous role," the report states, adding that "external competitive research funding generally only covers a fraction of incurred costs, putting universities' financial sustainability at risk".

Such funding schemes do not take sufficient account of the considerable diversity of Europe's higher education, both in terms of institutions' profiles and their ability to identify full costs. The EUA concludes that without strong incentives and support at European and national levels, the majority of European universities - in particular those in the new EU member states - will not be able to identify the full costs of their activities and projects in the next few years.

It calls on the European institutions to launch an open discussion with all stakeholders prior to the 2010 mid-term review of the seventh framework programme "and for national governments to provide universities with the means and the autonomy necessary to face tomorrow's new challenges".

The full report and executive summary is available on the EUA website: www.eua.be

alan.osborn@uw-news.com