International Experience In Financial Autonomy And Financial Management In Higher Education And Impl...

INTERNATIONAL EXPERIENCE IN FINANCIAL AUTONOMY AND FINANCIAL MANAGEMENT IN HIGHER EDUCATION AND IMPLICATION FOR VIETNAM Nguyen Thi Huong, Nguyen Thi Hue (VNU University of Education) Abstract Education is a part of the social structure and has a significant influence on the development of each country Education investment has definite targets and must achieve specific requests Financial resources exert an important and direct impact on educational development Normally, countries with mechanisms[.]

AND FINANCIAL MANAGEMENT IN HIGHER EDUCATION

AND IMPLICATION FOR VIETNAM

Nguyen Thi Huong, Nguyen Thi Hue

(VNU University of Education)

Abstract: Education is a part of the social structure and has a significant influence on the development of

each country Education investment has definite targets and must achieve specific requests Financial resources exert an important and direct impact on educational development Normally, countries with mechanisms and policies to mobilize a lot of financial resources to invest in education build their own developed education systems and produce educational outputs which are of high quality and able to fulfill more and more demanding requirements of the labor market Coordinating or allocating more financial resources for a particular discipline

or a level of education will help that discipline or level of study develop, which creates synergies to promote the development of the entire education system Studying and applying international lessons in financial management

of higher education in autonomy in Vietnam will help schools improve financial management efficiency to boost their development The article mentions some experience in financial management and financial autonomy of some countries around the world, namely China, Thailand, Japan, and the United States, based on which, lessons learned can be apply to state-owned universities in Vietnam

Keywords: financial management, financial autonomy, higher education finance; experience of financial

management.

1 INTRODUCTION

University autonomy is becoming a popular trend all over the world Autonomy creates motivation for the sustainable and effective development of higher education institutions, contributing to improving education quality University autonomy is implemented on all levels: academic autonomy, human resource autonomy, financial autonomy However, financial autonomy is still a problem that needs to

be researched because of the importance of financial resources in each school Expanding financial autonomy will help schools find, exploit and make more efficient use of resources Furthermore, it supports mobilizing and diversifying revenues, reducing the tuition revenue rate, increasing revenues from training activities, services, scientific research activities, collecting from donors to share budget burdens, and creating competitive motivation among universities

In most countries, the government grants directly the largest source of funding for university operations or indirectly These financial resources are granted for regular expenses, scientific research, campus construction, equipment procurement Besides the budget, universities also have other significant sources of revenue from tuition fees, training service contracts, loans, and other income

Vietnam is also on the path to financial autonomy However, currently, implementing financial autonomy still has many obstacles Therefore, the article studies some countries’ experiences and proposes strategies to implement autonomy in Vietnam better It will contribute to promoting a growing education to meet the requirements of international integration trends

2 RESEARCH OBJECTIVES

By studying the experts’ experiences in financial management and autonomy in higher education, this study proposes some lessons that can be applied to Vietnam The proposal aims to improve the efficiency of financial management in universities to meet their development goals.

3 RESEARCH METHODS

The article uses traditional research methods such as synthesis, interpretation, analysis, and statistics based on secondary sources from some countries’ financial management and autonomy experience Then generalizing and combining with personal perspectives to suggest lessons that can

be applied for Vietnamese universities to bring high efficiency, contributing to improving the education and training quality

4 INTERNATIONAL EXPERIENCE

*/ Experience of China

Universities in China operate under the Education Law, Higher Education Law, Teachers Law, Vocational Education Law and Education Promotion Law

The State bases on the needs, the priority and features of regions to support their development

of higher education The State guarantees the freedom for scientific research activities, literary and artistic composition and other cultural activities in universities under law At schools, scientific research activities and other cultural activities must also comply with the provisions of law

The government budget allocated to universities is based on the number of students Universities receive additional grants for scientific research through a competitive mechanism For scientific activities, the Chinese government invests funds for research universities to create products After the product is completed, the proceeds from the school product sale will be retained by 30%, the rest paid to the research team The state does not recover investment for research activities [8]

The level of government funding for universities is different Universities selected by the government receive more funding than the rest of the school group

The out-of-budget revenue from university tuition fees is legalized under the Higher Education Law of 1998 The university determines tuition rates according to the principle of sharing among the state, the university, and learners The government budget pays tuition fees to students who are subject

to the policy

In China, higher education tuition rates are determined based on a certain percentage of the annual student training costs Different regions, different majors and different school rankings result in different tuition rates The proportion of tuition fees in annual student training expenses is jointly decided by the National Education Commission, the National Planning Commission and the Ministry of Finance

of China Currently, the tuition fees of higher education institutions in China account for no more than 25% of the annual student training costs, the specific percentage can be adjusted based on the economic development and acceptability of the people

The provincial people’s government is the unit that approves the higher education tuition rates The provincial education management agency makes the proposal, then the provincial price management agency and the financial management agency base on the development, teaching conditions and acceptability of people in the area for approval After the proposal of tuition fees is submitted and approved by the provincial people’s government, the official tuition fee rate is put into effect by the education management agency In case tuition fee rate has to be adjusted, it is also done by these three agencies The plan to adjust the tuition fee is based on the price increase and the income of people in the area and is also submitted to the provincial people’s government for approval

For private schools operating under the schools proposal China’s Private Education Promotion Law, types of fees and rates of fees for students of different training levels and then submitted to the relevant management agency for approval and publication In 2002, the National Development and Reform Commission, the Ministry of Finance, and the Ministry of Education promulgated the “Public education fee collection regime” This regime is applied to all kinds of schools of different levels throughout China The education management agency, the price management agency and the financial management agency of the province or city or district must approve the public content on the cost of education services

With the policy mentioned earlier, higher education in China is developing strongly By far, the number of university students in China has increased by 300% and is now outpacing major powers such

as the US, India, Russia and Japan China’s prestigious universities are rising to compete with those of the West

The government of China implements financial autonomy to encourage universities to diversify their sources of income In addition to state funding packages, universities also seek private revenue from alumni, social grants, scientific research and tuition fees to facilitate their activities The reduction

in state budget support allows universities to actively seek revenues and improve the efficiency of spending management

*/Experience of Thailand

Higher education management in Thailand in the early 1970s was highly centralized and bureaucratic Higher education operates under state control The Ministry of Education, as the state management agency for education in general and higher education in particular, has the exclusive right in formulating higher education policies, setting up training programs for higher education institutions, and distributing and managing resources for higher education After 1970, the management of higher education has experienced a significant change Educational management gradually promoted the autonomous role

of higher education institutions and entities really involved in higher education activities This change was due to a change in awareness of the coordination relationship among the State, the market and educational and training institutions

In 1972, a specialized management agency for higher education was established, which is the Ministry of Universities The Ministry of Universities had the function of exercising centralized control over policies, finance and management of higher education It supported and coordinated the relationship among training institutions It appointed principals and deans of state-owned universities In addition, the Ministry was in charge of approving training programs of schools and supervising general enrollment

in higher education institutions It was also responsible for over 80% of the university’s revenue

Thailand started implementing the university autonomy mechanism in the early 1990s with the expectation that universities can improve the quality of education and reduce tuition fees

The government funds higher education directly based on specific policy frameworks The government budget grants students through scholarships and household income-based loan programs The universities themselves set tuition fees Public schools often have much lower tuition fees than private schools

In Thailand, autonomous universities receive the state budget through a package allocation system, and are independent in determining the management mechanism and personnel The schools can decide

on its own the salary rates and human resources They receive funding from the state but operate out

of the government bureaucracy and are under the supervision of the Ministry of Education Autonomy helps schools increase revenue, but it does not help reduce learning costs

Autonomy of a school is reflected in the mobilization and allocation of financial resources or the recruitment/fire of teachers, and the valuation system of autonomy and responsibility of schools and teachers for learning outcomes Thailand allows school principals to manage budgets, but they also have

an evaluation system to ensure schools are accountable

*/Experience of Japan

The higher education system of Japan has changed drastically since 2004 Higher education in Japan comprise 3 levels: bachelor, master and doctorate with a training period of 4 years, 2 years and

5 years Universities are classified into three categories: national universities, state-owned universities and private universities National universities are established in almost all localities as local research centers These institutions operate as corporations or companies with a high degree of autonomy, helping improve the quality of education and research activities The government allows national universities

to become independent, with a high degree of autonomy in deciding on personnel and budget issues State-owned universities are established and managed by local governments These schools operate to provide education opportunities for local people Private universities in Japan account for about 80% of the total number of universities in the country These schools play an important role in the educational development of Japan

The state budget granted for higher education in Japan includes essential expenditures, competitive budgets for faculty research activities, financial support for students

Japan applies a policy of budget allocation based on the competition among universities through funding sources Therefore, universities are required to speed up reforms and develop projects to apply for funding from the government of Japan

The budget allocation to universities is implemented as a one-time grant, which includes salaries of staff The government allocates the budget based on the medium-term plans developed by the schools With the allocation, schools have the initiative in using the funding according to the approved plan

In the process of autonomy, the regular support budget is reduced, forcing universities to cut costs and reduce payrolls Instead, funding packages are geared toward specific goals According to Nguyen Trong Hoai, from 2004 to 2009, the ratio of government funding to total university revenue decreased Revenue from fees accounts for 60 percent of private universities’ revenues, while government funding accounts for only 12 percent [7]

For national universities, tuition fees are considered their own sources of income From 2004, Universities have been allowed to decide on the level of revenue to ensure sufficient budget, but the increase in tuition fees can not exceed 10% compared to the government regulation The government of Japan sets a standard rate of tuition fee

In fact, the tuition rates of universities rarely fluctuate Because once a university increases tuition fees, it means that the regular budget to support operations is reduced Therefore, state-owned universities keep tuition fees at the level set by the government Universities are not autonomous in deciding on salaries for staff, they have to comply with government regulations instead

In implementing autonomy, the regular operating budget is often reduced, forcing universities to cut down on costs and reduce staff In fact, increasing tuition fees autonomously has almost no impact

*/Experience of the US

American education is the federal concern, the responsibility of each state and the function of each locality Management responsibility is attached to the financial autonomy of each state

Outstanding features of the education system in the United States are the decentralization of management, the democracy in implementing educational policies, the diversity of types of schools and training methods, and the extensive application of the advances of modern science and technology in management, teaching and learning activities

The highlight of this country’s education and training development strategy is that they pay great attention to the accreditation of higher and postgraduate education Because of its diversity and flexibility, along with the outstanding development of science and technology, the education system is considered having very high accreditation quality In the US, there is an obvious distinction between accredited universities and degree/diploma mills It is popular belief that being accredited means quality is guaranteed, government funding is accessible (financial aid and research projects), students in accredited institutions can transfer between each other, and build trust among employers Non-accredited schools will not be affiliated with accredited schools and students from non-accredited schools do not have an advantage when looking for work

The United States is one of the leading developed countries in the world both in terms of economy and education Education in the US is associated with the financial mechanism to create high-quality training outputs The budget spent on education in the US is very large, accounting for over 91% Funding for higher education is allocated in three levels: federal government, state government, and local government Federal government funding is spent on student support and scientific research Universities that want to participate in financial aid programs will have to comply with requirements set

by the federal government

The allocation of state funds to schools is based on the number of inputs (students enrolled, number

of faculty, staff) and the performance of the university (completion rate of their course, completion rate

of credit, completion rate of degrees) [5]

However, in the current context, the allocation of budgets based on the number of inputs is said to

be no longer appropriate The shift to activity-based budget allocation is less intensely pressurized and more mixed The states are the public units responsible for allocating funds to American schools, but about a quarter of states have switched to activity-based allocation, which, however, is only a fraction

of the total funding

In the U.S., tuition is determined at the state or local level There is a significant difference in tuition fees between public and private universities and among regional institutes Universities provide student grants based on financial demand and their academic results

With the diversity of education levels associated with quality, there is a diverse correlation among funding sources: suitable for most students’ financial capacity through many different funding methods This includes student loans, grants, school scholarships, paid work-study programs, state grants and, of course, family financial support

5 THE LESSONS FOR VIETNAM

Nowadays, financial autonomy is becoming an inevitable trend of countries Depending on the economy and culture of each country, there are different ways of autonomy Therefore, it is not possible

to copy a financial management model of any country, and we can only select and learn their superiorities

to apply to universities in Vietnam

Based on the experiences of some countries in the world and the region on financial management

in higher education, the author draws on six solutions that can be referenced for Vietnam as follows:

First, it is necessary to continue to maintain budget supported for public universities

In fact, the priority of the State in terms of funding is the hallmark of most public higher education systems of the countries This role of the State is rooted in economic, political and social circumstances

In rapidly increasing social demands, it is vital to change and strengthen the financial base of universities The state budget continues to play a key role in maintaining the foundation for higher education, ensuring strategic development purposes such as constructing infrastructure, training teachers, investing in key schools, and ensuring social equality

Second, the Government needs to create a legal mechanism for universities to expand their revenues.

Along with the state budget, countries pay close attention to exploiting non-state budget financial sources to meet the spending needs of schools Off-budget sources are mobilized in many ways and at different degrees depending on each country’s context; and its proportion in the total financial resources

is different among schools, disciplines and groups of disciplines

All countries have policies to encourage diversification of financial sources for investment

in education and training generally and higher education in particularly Financial diversification is

an important element of the strategy to improve the financial capacities of universities In addition

to encouraging the diversification of financial sources, the State also promote initiative of training institutions in the process of using and allocating financial resources The State is responsible for central and macro management based on promulgated legal documents

Third, the Government needs to renovate the method of funding from government budget sources to universities.

In the context of increasing demands and limited financial resources, to improve quality, the renovation of the budget allocation mechanism is considered very important The method of government funding from the state budget for schools is mostly based on student inputs, or student outputs To become more effective, the funding formula to support the core budget for schools needs to be clearly established, considering standard costs across different disciplines, different curricula and even the sizes

of training that varies among schools

The allocation of the State budget to institutions must be associated with the efficiency of using previous financial resources The government needs to change the budget support for all academic disciplines to only support for priority industries, associated with the needs of using human resources

of the state Funds are provided to the institutions according to the target program to be able to monitor effectively

Fourth, it is necessary to make bidding for training funding from the government budget.

Budget resources will be allocated by the state to training institutions with quality, efficiency, and reasonable costs This will promote healthy competition among training institutions in accessing the state budget

Fifth, it is essential to have appropriate and incentive tax policies to encourage investment.

Almost countries also use different financial instruments such as taxes to encourage investors to contribute to building schools and provide scholarships for students

State-owned higher education institutions seek and expand income sources through training services, technology transfer, scientific research, and policy consultations with companies and enterprises due to available advantages in terms of human resources and facilities Mobilizing resources from organizations, individuals, alumni, and businesses helps support the school’s training activities To develop this resource, one of the important contents is tax incentives for organizations, individuals and businesses when they invest Therefore, it is necessary to have a preferential and appropriate tax regime and regime, creating favorable conditions for businesses and individuals when they invest in training and scientific research activities of the university

Sixth, it is necessary to increase autonomy right in mobilizing and using financial resources to reduce the burden on the government budget.

The assignment of financial autonomy should be associated with academic autonomy and personnel autonomy and synchronization in the implementation of the autonomy mechanisms of state-owned universities

CONCLUSION

In the context of globalization and international integration, state-owned higher education institutions that want to survive and develop are required to have strong financial resources, effective management mechanisms and use of those sources Through research from some countries’ experience,

it has been shown that universities not only rely on state budget support but also have to make full use

of their internal resources to seek and exploit external resources as well as improve the efficiency of financial resources use to develop school activities

Based on the experience of China, Thailand, Japan and the US on financial management of higher education, including the allocation of the state budget, the policies on tuition fees, the policy on seeking external resources, state budget, as well as the use of resources in higher education, the author draws necessary lessons for Vietnam’s state-owned in the ways to achieve the most effective financial management

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