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Universities are under financial pressure - here's how they can survive

A Grant Thornton survey looks at their finances and suggests how they can survive the pressure.

Image: Jennifer Boyer via Flickr/Creative Commons

THIRD LEVEL INSTITUTIONS in Ireland are under financial pressure – so how can they survive?

A new report from Grant Thornton says that change is needed if they want to come out of this period, and that colleges and universities are already making some changes.

The independent analysis of the financial health of Ireland’s Universities and Institutes of Technology, A Changing Landscape, compiles five years of accounts for 21 higher education institutions (HEIs).

Elaine Daly, report author and Head of Higher Education for Grant Thornton, noted that last month for the fourth year in a row not one Irish university made the Times Higher Education top 100 list of the world’s most prestigious institutions.

“Whilst this is a cause for concern it highlights the urgent need for decisions to be taken in Ireland to get a better result in coming years,” she said.

Money, money, money

The report found that student numbers have increased by 26 per cent to 193,187, from 153,606 in 20071, while core staff numbers have fallen 8.5 per cent to 16,943 from 18,512 in 2007.

  • Core grant funding has also declined. State grants to third level colleges are down 25 per cent to €719m in 2011 from €956m in 2007.
  • State grants used to be the main source of HEI income in 2007 (at 39 per cent of the total). They dropped to 28 per cent in 2011.
  • Tuition fees are the biggest income contributor, at 31 per cent in 2011 totalling €817m, which is up 35 per cent in the past five years.
  • Almost half (46 per cent) of tuition fees were funded by the state in 2011, with state funding of tuition fees up 25 per cent between 2007 and 2011.
  • Total public funding to third level colleges is down nine per cent to €1,251 billion in 2011 from €1,382 billion in 2007.
  • While universities have experienced an 8 per cent decline, IoTs have seen a decrease in public funding of 12 per cent.

In addition, the annual operating surplus in the sector has fluctuated significantly during the period, meaning universities and IoTs have an “increasingly limited financial cushion for strategic development and to withstand potential future funding shocks”.

The report suggest that colleges need to take a more commercial approach to ensure financial sustainability.

Making money

There were a number of revenue options highlighted in the report, with Grant Thornton saying that institutes are already taking or actively considering many of them.

They include:

  • Increasing international student income
  • Higher alumni contributions
  • Winning a bigger share of the international research funding pie.

On the cost side, options being considered include consolidation, regional clusters, the use better procurement processes and outsourcing to drive down operating costs.

Daly said:”It is clear that these initiatives can only go so far and additional exchequer funding or increased tuition fees may therefore also need to be considered as part of the package of measures to bridge the funding gap.”

If resources are not found, standards may fall, and make the aspirations of the government’s National Strategy for Higher Education to 2030 unreachable.

Untapped opportunities

There could be some untapped opportunities, said the report, such as growing revenue from international students.

At the moment, less than 1 per cent of total income is currently raised from this source in the IoT sector in 2011.

However, the report says that Irish institutions will need to perform better in international league tables and internationalise curricula if they want to attract students from overseas.

Outsourcing activities to specialist third parties is another area colleges should consider, with savings of 20-30 per cent considered achievable, said the report.

The full report is available for download here.

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