Dr. D. Mukhopadhyay
Higher education system in India is the third largest education delivery system in the world after China and the United States of America. Government of India expects that the aspirants of higher education in India shall be able to access to University level education by 2020. In order to have result oriented education system it essentially needs a continuous and uninterrupted flow of finance and that is possible only when there is a robust financial management system in place. But it is observed that financial management mechanism in the institutions of higher learning is very weak and finance is managed in most unprofessional manner. There is a post of Finance Officer in most of the Universities but in most of the cases that post is filled in on the basis of deputation and not a whole time regular employee of the University concerned . Finance is a specialized discipline and it is not the cup of tea of everybody. Acquisition and effective utilization of financial resources in judicious manner is the nucleus of financial management. Financial resources are required for meeting both the recurring and non-recurring expenditures incurred for payment of salaries and allowances to the teaching and non teaching stuff, provision for pensions, maintenance expenses and providing for fellowship and scholarship expenditures and development of infrastructure, procurement of equipments for better installation of laboratories, books and journals, furniture and fixtures , electrical installations respectively. On the other hand , the expected sources of revenue includes academic receipts in the form of registration fee , admission fee, tuition fee, examination fee, library fee, income from investments of the corpus, interest earned, consultancy, sponsored research and continuing education, license fee, rents and service charges , donations and sponsorship of alumni and philanthropists besides recurring and non recurring grants from the governments and various funding agencies.
Higher education is expense prone and the Universities and institutions of higher learning are required to identify the potential sources of financing and frame effective and efficient policies for generation of resources. Resources are generated from two sources and they are internal sources and external sources. Registration fee, admission fee , tuition fee, examination fee, income from investments, interest earned from deposits, earnings from corporate consultancy etc are part and parcel of internal sources of finance. On the other hand, grants received from various funding agencies including University Grants Commission, Department of Science and technology, Government of India, External endowments and donations received from the philanthropists form the part of external sources. Internal resources are the components of principal flow of financial resources under the command and control of the concerned University. It is an imperative to have proper planning, organizing, budgeting and controlling the utilization of the resources in appropriate manner based on the well laid down policies framed by the Board of Governors of the University. The concerned institution should have a clear cut policy for allocation of the internally generated resources for meeting the operational and maintenance work and creation of certain corpus funds, and say 70 percent of the resources shall be utilized to meet the operational expenses and 30% of the internally generated resources shall be earmarked for creation of corpus fund for certain purposes. For instance, scholarship fund, research and development fund, staff welfare fund, faculty benevolent funds, pension funds, depreciation funds, building development funds etc are to be created depending upon the requirements and availability of resources. These funds shall be generating incomes in the form of interests and the same can be used for meeting a particular purpose. All the expenses are to be segregated into revenue expenses and capital expenditure and receipts are to be classified into revenue receipts and capital receipts . Capital receipts shall be utilized for creation of assets and revenue receipts shall be used for meeting the revenue expenses. Revenue expenses are essentially recurring in nature and the same is the nature of revenue receipts. Capital receipts are of non recurring nature and the same is the nature of capital expenditure by and large. Components of recurring expenses include teaching and non teaching staff salaries and allowances, office overheads, repairs and maintenance, electricity and utilities, research and development expenses, scholarships and students concessions etc.
The professional approach in financial management can make the Universities and institutions of higher learning financially self reliant and self sufficient. Creation of various corpus funds is the long term investment plans that are able to generate revenue out of which specified recurring expenses can be met. Only professional approach in financial management can provide better solution to weak financial management system in the institutions of higher learning mainly in publicly funded institutions.
The Universities, in order to sustain and make a mark for international level ranking, need to generate sufficient financial resources and Indian Universities are found to be quite deficient in having capability for generating internal resources but in most of the times they depend on the external grants and receipts for meeting the operating expenses. It is observed research and development is back seated. Out of the grants received, major portion say 70 percent to 80 percent is spent for payment of salaries and allowances of the teaching and non-teaching employees of the Universities. Repairs and maintenance and infrastructural development works and projects cannot be undertaken because of paucity of financial resources. The most of public institutions of higher learning classify the expenditures on the basis of volume of expenditure and not the purpose of making such expenditure. Whether an expenditure shall have to be capitalized or not depends on the purpose for which it is spent and not the volume of such expenses. The financial management policies should be adopted keeping in view the requirements of a particular institution and not at random the same policy for every institutions should followed and adopted. The professional approach to financial management can make the publicly funded Universities self sufficient. The Finance Department of a University should be manned with professionally qualified personnel and finance function should not be made a a part general administration of the Universities. The finance wing of the a University should be headed either by CA or CMA and not by a generalist. The financial management of a University involves making judicious decision with respect of combination, mobilization , allocation and utilization of resources with the help of principles of propriety and prudence. A specialized finance manager is trained with the traits as to how to earn and spend and not how to receive and spend. The Universities should be capable of earning before spending and should not depend on the grants from government. Days are not far off when Government shall drastically cut the budgetary allocation to the Universities and directives shall be issued on the maxim of survival for the fittest.
Therefore, time has come to ponder seriously over the issues concerning installations of professional financial management practices in the publicly funded Universities and Institutions of higher learning in the line of financial management practices of private Universities. The Universities and educational institutions in developed countries managed by the professionals and professionally trained people in most of the cases and they give utmost importance and treat finance function as one of the management functions and is kept beyond the ambit of bureaucratic governance or administration. India should change her outlook also and treat University financial management at par that of financial management practices in corporate sector.
(The author is Professor of Management, School of Business and Dean-Faculty of Management, Shri Mata Vaishno Devi University, Katra, Jammu & Kashmir.)
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