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A new budget plan will address the cutbacks in the Finance Act

In the course of the next six months, the university will develop a financial plan to offset the Finance Act’s consequences for AU in the period towards 2020.

2016.02.04 | Universitetsdirektør Arnold Boon

Arnold Boon, University director at Aarhus University. Photo: Lars Kruse, AU.

It is now common knowledge that the 2016 Finance Act has established a restrictive framework for the universities’ finances in the coming years. This also applies to Aarhus University, which will experience a significant decline in revenues.

The decline is due to the government’s introduction of a so-called ‘reallocation contribution’ of 2 per cent per annum on educational funding, as well as the resizing of the degree programmes. In addition, government research funding will be reduced by DKK 1.4 billion: money which the university already must compete intensely with other research institutions to attract. On this background, we estimate that the total reduction in revenues for the university will be at least DKK 300 million in the period 2016-2019.

In addition, the study progress reform represents a significant – and quite unpredictable – piece in the financial puzzle. If we do not succeed in reducing the students’ time to degree, the university will loose part of its completion bonus. In other words: We risk having to pay a study progress penalty, which in the worst case can results in an additional loss of revenues of DKK 175 million in 2019.

Finally, although it is not yet clear how the announced amendment of the taximeter system will affect AU’s finances, the effects – positive or negative – will not be felt until after 2018.

Careful financial management will continue

In recent years, the faculties have worked intensively with their budgets, not least in connection with the restoration of the university’s financial health in 2014. In continuation of that process, the senior management team decided that administrative costs must be reduced by DKK 100 million in the period 2015-2019. These administrative savings are already being implemented.

This financial forethought, in combination with our employees’ hard work, means that the university as a whole came out of 2015 in the black. This is why the university is able to offset the Finance Act’s cutbacks in 2016 and maintain a balanced budget. Although the four faculties are facing different challenges, we now have time to consider how best to tackle the challenges of 2017 and beyond in the best possible way, through continual adjustment and careful financial management. But without a doubt – we have a major task in front of us.

The university’s finances will be kept on a very short leash, and many units in the organisation are already in the process of investigating possible increases in efficiency and savings. The implementation of the decline in revenues as a consequence of the most recent Finance Act will now be part of this process.

The budget plan must ensure future balance

In the course of the spring, the faculties and the administration must prepare a plan to ensure that we can balance the budget despite a reduction in revenues. This can take place either through finding new sources of revenue or by reducing costs.

The faculties must preserve their revenue base by meeting the targets in the study progress reform and by continuing to focus on attracting external funding. Both of these areas are receiving considerable attention. But we must ensure that we translate this awareness into concrete actions at the departments and faculties.

In addition, the faculties and the administration must work to reduce their costs to ensure balance in their budgets. A working group will also explore the possibility of savings in relation to shared services, for example rent, facilities operations and maintenance and purchasing.

The cutbacks will affect the four faculties and the administration in different ways, which means that the process of developing a financial plan towards 2020 will be locally anchored, with the possibility to focus specifically on the concrete challenges facing individual units.

Employees will be involved locally

At the end of February, the senior management team, the heads of the administrative centres and the deputy directors will gain an overview of the revenue base and potential cost reductions at the four faculties and in the administration.

The senior management team will also regularly discuss the financial situation with the Main Liaison Committee, as well as at a seminar with all of the academic councils in early March. We also expect that management and employees at the departments and faculties as well as in the administration will be regularly discussing the financial situation in the liaison committees and other forums. We encourage all of your to contribute input actively and constructively, so that together we can identify the initiatives that will serve the university best.

The proposals from local discussions will be included in a general financial plan in the course of April and May, and the plan will be presented to the board in mid-June.

We must continue to invest in the future

The financial plan must ensure that we have a balanced budget in coming years. But the plan must also ensure that the university has the necessary financial leeway to enable forward-looking investments. This is how we can ensure that the university will continue to maintain its strong position as a research-intensive university with high-quality degree programmes that are valued by society.

See also

Policy and strategy, Technical / administrative staff, All AU units, Aarhus University, Policy and strategy, Academic staff, PhD students