Evaluating Financial Sustainability of Higher Education Institutions

Sergei P Sazonov,Irina A Chekhovskaya,Elena A Polyanskaya,Ekaterina E Kharlamova

doi:10.5539/ass.v11n20p34

Abstract

Economic reforms and reforms in the educational sphere have contributed to the increase of the concern towards the efficiency of the activity of educational organizations and higher educational establishments, in particular. This deals with the increased competition in both international and national markets for educational services; the growth of informational openness of higher education establishments and the enhanced role of strategic planning. All these aspects are gradually leading to a new objective that faces higher education establishments, which is a necessity to demonstrate the efficiency of their education services and support it with definite indices. Under conditions of budgetary expenditures, the problem of financial sustainability and efficiency of higher education institutions is becoming urgent, being focused on searching for possibilities to develop education establishments. In this context, the most important issue deals with developing approaches for quantifying financial sustainability and identifying the directions and means of its rise. The article suggests the method for defining the financial sustainability of higher education institutions and discusses both the indices, applied for financial sustainability evaluation, and their threshold values.

Highlights

Financial sustainability will be one of the key challenges for universities in the decade: only those institutions that have sound financial structures and stable income flows will be able to fulfil their multiple missions and respond to the current challenges in an increasingly complex and global environment
All these aspects are gradually leading to a new objective that faces higher education establishments, which is a necessity to demonstrate the efficiency of their education services and support it with definite indices
If one refers to legislation, it is possible to explain the educational activity of a higher educational establishment as activity to the extent concerning conduction of the primary mission of the education establishment; i.e., training and labor market launch of definite high university degree specialists, retraining of specialists, advanced vocational training

Summary

Introduction

Financial sustainability will be one of the key challenges for universities in the decade: only those institutions that have sound financial structures and stable income flows will be able to fulfil their multiple missions and respond to the current challenges in an increasingly complex and global environment. Financial sustainability is not an end in itself; it aims to ensure that university’s goals are reached by guaranteeing that the institution produces sufficient income to enable it to invest in its future academic and research activities. Providing inventory and expenditures by the sources of their forming is the essence of financial sustainability, and solvency is its external manifestation. The ratio between inventories and sources of proprietary and borrowed funds for their forming defines a degree of financial sustainability (Stabislavchik, 2010). N. suggest that financial sustainability provides a company with innovation-based reproduction on an expanded scale, creditability, competitive ability, and investment attractiveness (Benderskaya, 2012)

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