Some universities have, at their peril, utilised debt to fund operating deficits. FILE PHOTO | NMG
The escalating cost of higher education and concerns about financial sustainability and consequent survival or collapse of institutions of higher learning have dominated the news lately. A recent report by the Auditor-General, Edward Ouko, that was tabled in Parliament on financial sustainability of higher learning institutions explains candidly how it is becoming increasingly difficult for universities to meet their financial obligations unless the government and corporate organisations come to their rescue. The report painted a grim picture for universities which are facing financial crisis to the extent that remitting statutory deductions such as Pay As You Earn (PAYE) tax, National Social Security Fund (NSSF), National Hospital Insurance Fund (NHIF), pension and sacco deductions was becoming a problem. With revenue growth so constrained, the operating budget becomes an annual exercise in cost control.
The report revealed how some universities have been forced to rely on government support, creditors and financial lenders to stay afloat and ensure smooth running of daily operational activities. The rule of thumb has generally been to deploy debt on capital expenditures that generate positive cash flow, such as student housing and other related amenities, to allow for use of revenue so generated in servicing of debt. In reality, some universities have, at their peril, utilised debt to fund operating deficits. When such scenarios play out, it becomes clear that the quality of education in the affected institutions will be compromised. As a result we are likely to end up with half-baked graduates flooding the market with no proper skills required for the fast evolving job market. Higher education in Kenya has always been characterised by students’ preference of public universities due to government financial support associated with such an admission and the large number of intakes.
The demand for university education has significantly increased over the years due to high competition for limited job opportunities in the market. The admission continues to swell against a backdrop of decreasing ratio of financial allocation to universities from the government. Since 2000/1 academic year, only about six percent of registered Kenya Certificate of Secondary Education (KCSE) candidates, which is an equivalent of 25 per cent of candidates who meet minimum university entry requirements, got admitted on government sponsorship to public universities.
At a recent meeting of vice-chancellors and other senior officers of private universities it became apparent that there was an urgent need to match expected quality to commensurate funding levels. That there was a need to develop and implement strategies that convey with significant urgency that universities must look past the way they have always operated.
To address the issue of inadequate funding for higher education and over dependence on government support, there is need for the government to develop instruments that encourage public–private partnerships (PPPs) in provision of physical learning facilities and non-discriminatory financial support to students in both public and private universities.
For instance, United States International University Africa (USIU-Africa), just like most global private universities, has traditionally relied upon three primary sources of funding. The first and most significant source has and still is revenue derived from tuition as well as other charges levied on students for access to specialised facilities and or resources. The second source of revenue is derived from the investment performance of endowment and other fixed-, medium- to long -term funds. Fundraising, typically from annual appeals and multi-year campaigns is the third source of revenue for USIU-Africa. The key is to diversify source of funds and work towards not being overly reliant on a single source of funding for survival.
This would enhance efficient and effective resource utilisation for increased productivity without compromising the quality of education and learning. Public-private partnerships have become a common strategy for countries all over the world to meet their development goals by bringing capital and expertise together.
Public-private partnerships in the higher education sector should involve a combination of several actors namely the private sector, academic researchers and government as well as other educational resources, such as science granting councils. The National Council for Science and Technology in Eastern Africa is one such council.
The main challenge in implementing PPPs in our higher education is addressing ways in which universities, private sector entrepreneurs and government can cooperate.
What measures should the government and its agencies begin to take, which they have not been taking? How can our universities effectively contribute to national development through functional innovations and relevant inventions? This is the essence of PPPs in higher learning. A critical aspect that must not be understated is transparency. In shared governance, the most important aspect of strategic finance is transparency.
Armed with the right data, the various governing bodies within an institution of higher learning become well equipped to engage in relevant strategies not only on financial matters but also in institutional strategy.
The writer is Director, Finance, USIU-Africa.
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