European Universities
Diversifying Income Streams
Thomas Estermann
Head of Unit
Governance, Autonomy & Funding
4th Connecting Civil Societies of Asia and Europe:
Changing Challenges, New Ideas
An official side-event of the ASEM8 Summit
2-3 October 2010, Brussels
Brief Profile of EUA
Established in 2001
Non-governmental membership organisation
850 individual university members
35 National Rectors’ Conferences Members
46 countries
Independent voice for the university sector
Focus on EHA and ERA
Pillars of financial sustainability
1
•Identification of costs of activities and projects
• Diversified income structure
• Sufficient & sustainable public funding
Financial sustainability
EUDIS: diversifying income streams
State of play of income diversification in European universities
Role of public authorities:
• Regulatory framework
• Funding modalities
• Incentives
Proactive universities:
• Strategic drivers for income diversification
• Challenges and obstacles
• Success factors
EUDIS data collection
• Online questionnaire (Summer 2009)
• 3 seminars (2009-2010)
• Site visits & case studies (2009-2010)
• Additional questionnaires (2010)
…5…
Monitoring of the economic
downturn
Income diversification
Generation of additional income (through new or existing funding sources) that contributes to balancing the income structure of the institution.
Public sources
Private sources Block grant/ line-item
Project/ targeted funding
Increase of existing
funding
Increase in core
public funding Diversification Diversification
Creation of new funding
stream Diversification of public funding Diversification
State of Play
Average income structure
72.78%
9.05%
6.48%
3.04%
4.50% 4.14% Public funding (national andregional)
Student contributions
Funding coming from contractswith business sector
International public funding
Philanthropic funding
Service-related income
Income structure – direct public funding
Block grants
• Most countries deliver core funding through block grants
• Funding formulae tend to be mostly based on input criteria – however, increased use of output criteria => influences university’s strategic choices (RAE exercise in the UK)
Competitive funding
• Increasingly relevant for universities in context of stagnating budgets – success rate may even be criterion for funding formula
• Requires universities to invest in their research support capacities
Targeted funding
• With economic dowturn: some authorities tend to cut in block grants and re-introduce targeted funding geared towards the achievement of specific objectives => restricts auonomy
Alternative income streams
Alternative income streams
Contracts with the private sector: 5-7% on average
but wide range (up to 25%)
Philanthropic funding: 3-4% - importance of
competitive funding from foundations
Income-generating services: 4% - UK leader –
facilities & catering; consultancy highest sources
Financial activities
International public funding (mostly EU)
Alternative income streams
International public funding: mostly made up of EU funds
Increasingly complex financial management
Expectations on income streams evolution
…14…
74.07% 67.31% 65.00% 62.82% 61.25%
56.92%
0%
10%
20%
30%
40%
50%
60%
70%
80%
European Unionfunding
Philanthropicincome from
alumni
Contracts withbusiness sector
Contributions(fees) from
Internationalstudents
Income generatedby lifelong
learning activities
Philanthropicincome fromfoundations /
charities(including
competitivegrants)
The sources that are most widely expected to increase are:
Expectations on income streams evolution
…15…
Public funding in its different forms is the source that is most widely expected to decrease:
43.04%
30.77% 28.57%
26.53%
18.18% 16.36%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Teaching:national public
funding
Infrastructures /facilities: national
public funding
Research:national public
funding
Teaching: regionalpublic funding
Infrastructures /facilities: regional
public funding
Research:regional public
funding
Crisis Monitoring
Data collected is often partial, not considering:
Increase in costs of activities and changes in inflation
Trends represent 6 categories:
MAJOR CUTS: Latvia, Italy, Greece
CUTS 5-10%: UK, Estonia, Ireland, Lithuania, Romania
CUTS 0-5%: Czech Rep., Poland, Croatia, Serbia, FYROM
NO DIRECT CUTS YET: Norway, Sweden, Finland, Denmark, Netherlands, Switzerland
GOVT. COMMITMENT DISCARDED: Hungary, Austria, Belgium (NL+FR com.)
GOVT. COMMITMENT UPHELD: France, Germany (some Länder) ,Portugal
…16…
The role of public authorities
Autonomy as a pre-requisite
Correlation between level of financial autonomy and degree of diversification (share of alternative income)
Financial autonomy is key to allow university to develop partnerships, borrow from banks, create satellite entities
In turn, a diversified funding base enhances autonomy (reduced dependency towards the funder)
Authorities see autonomy reform as a key driver for income diversification
BUT not enough: needs to go with appropriate support for skills and structure development
Funding modalities
Impact income diversification:
Funding formulae
Competitive project funding
Excellence schemes
Targeted funds
BUT no sustainable income diversification if:
Excessive complexity and administrative burden
Extreme complexity of European funding schemes
CO-FUNDING requirements
Co-funding
Requires the university to self-finance part of the activity – in effect does not drive diversification as universities will take from the core resources
Typically applies to competitive funding, notably at EU level
But increasingly used by main public authorities
Universities with diversified income structures are more confronted to co-funding: this is not sustainable.
28.38%
39.19%
16.22%
1.35% 14.86%
Only for funding coming from Europeanschemes / other international sources
For a minority of the funding comingfrom public sources
For most of the funding coming frompublic sources
For the funding coming from privatesources
Both for public and private funding, thisis common practice
Co-funding
Measures taken by public authorities
31.1%
45.2%
45.5%
48.5%
55.9%
8.2%
12.9%
4.5%
7.4%
23.5%
60.7%
41.9%
50.0%
44.1%
20.6%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Matched funding schemes
Favourable regulations on intellectualproperty rights
Tax exemptions
Specific funding for lifelong learningactivities
Reforms increasing the degree ofautonomy of HEIs
existing or under implementation under consideration no
Recommended measures
Matched funding schemes: instrument with much potential, under-used in Europe
Improved funding modalities:
Simplification of funding schemes
Funding on a full cost basis
Support to development of full costing in universities
Improved framework conditions – autonomy and governance reforms
Support to leadership development and professionalisation of management
Universities
What drives institutions to diversify?
General economic context
Risk management and dependency on state funding
Mission expansion
Additional funds to exisiting activities
Funding new activities for which there is no external support
Need for flexibility and “unconstrained” money
Enhancing competitiveness
Academic prestige of certain competitive schemes
Internal obstacles
51.25%
59.52%
60.53%
61.45%
66.67%
67.07%
67.86%
72.84%
80%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Conflict with academic ethics
Negative attitudes towards relations with business
Uneven distribution of possibilities in the institution
Limitations set by law
Negative attitudes towards diversification
Lack of managerial expertise/competence
Internal structure/Lack of specific structure
Divert academics from core mission/activities
Lack of information/awareness among academics
Measures taken by universities to support
income diversification
28.57%
29.63%
34.15%
49.41%
55.81%
58.02%
64.29%
65.48%
70.24%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Market new activities
Internal reward mechanisms at faculty level
Internal reward mechanisms at individual staff level
Creation of foundation
Creation of development office/equivalent structure
Training/information campaigns for staff
Internal funding allocation mechanisms
Orientation towards lifelong learning activities
Creation of spin-off companies & science parks
Integrating income diversification in the
university’s strategy
1. Identify the strengths & specificities of the university to develop a branding strategy – strategic approach
2. Analyse perspectives for income generation of your activities
3. Invest in people, leadership and management
Professional HR & staff recruitment – bringing experts in, including from outside higher education
Investment in new positions at all levels (from research administrative support to fundraising director and vice-rector for enterprise)
Define leadership roles, both academic and professional
4. Communicate Internal (creating the case for change and raising awareness)
External (projecting the brand)
Integrating income diversification in the
university’s strategy
5. Change structures and organisation Creation of specific units (Advancement/fundraising offices)
Reorganisation of governance structure or specific competences for groups within governing bodies
Investment in information tools to guide the process
Good data and reporting/monitoring systems
6. Provide internal incentives Individual rewards and incentives – eg. promotions, remuneration
Faculty/departmental rewards –eg. commercialisation revenue apportionment
Seed money for new initiatives
Making things easy for academics through better support
In a nutshell:
Integrate income diversification in your strategy in line with missions
and identity
Invest in people: training of academic and administrative staff,
establish strong & stable leadership and management
Incentivise your faculties & staff to take an active part in income
diversification
Interact smartly:
set up professional stakeholder management and communication
strategy
"in" strategy
All actors need to work together!
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