We can handle the pressure on the university’s finances

Aarhus University will keep up the pace of its strategic initiatives within teaching and research. But making ends meet will become more challenging. The university’s budget for the period 2022-2025 has just been approved by the university’s board. The board has approved a budget shortfall in 2023 and 2023; the spending plan calls for a balanced budget in 2024 and 2025.

“The budget we’ve been presented with shows both progress and challenges. We’ve also been presented with proposals for solutions on which the university now intends concentrate its efforts. The board trust that this will happen, so I see no reason for Aarhus University to relax its ambitions,” says Connie Hedegaard, chair of AU’s board.

Rector Brian Bech Nielsen emphasises that the university faces developments in its financial situation that will present challenges. External funding will continue to grow, while funding from government appropriations to higher education will begin to stagnate, according to AU’s projections.

“It’s a financial paradox. Our researchers meet the high demands society places on them to the fullest. Their performance in national and international competition is excellent, and they attract more and more funding. But because funding from government appropriations isn’t increasing, it is becoming more and more difficult to secure the necessary co-funding of overhead costs associated with external grants,” the rector explains.

Part of the solution is taking steps to ensure that funders are apprised of the overhead costs associated with research projects.

“Until recently, most foundations were reluctant to allocate funding for electricity, heat, bricks and mortar, as well as technical and administrative support. But we have to acknowledge that there’s so much strain on the account that currently finances this kind of thing that it isn’t sustainable in the long term. So we need to do a much better job of incorporating overhead costs into the budgets when we apply for external funding,” Rector Bech Nielsen explains.

Funding from government appropriations is expected to decrease over the next four years, among other reasons as a consequence of the continuation of the annual two-per cent cutbacks on the university programmes that deliver science advice to government. In addition, enrolments in some degree programmes were lower in 2021, because unusually high numbers of applicants declined an offer of admission.

IT systems: a drain on AU’s coffers

Another challenge facing the university is financing the national Kopernikus project - the development of a new system that will replace STADS, the studies administrative system currently used by Danish universities.

“It’s difficult for us to budget for this not knowing the final investment sum. All we know is that it will be significantly more expensive. We expect that this will cost Aarhus University in the hundreds of millions of kroner. But it’s a necessary expense, because STADS has to be replaced,” explains University Director Arnold Boon.

Densification will continue

It will also be necessary to press on with the densification of AU’s campuses that AU has been planning over the past few years.

“We have to do a better job of making efficient use of our space. In the senior management team, we believe this is the right way to prioritise our financial resources -and we have the board’s support. That said, our hope is that the effects won’t be that noticeable. We’ve become much more conscious of how we can ensure a good use of space – not least thanks to the experience we’ve gained through the development of the University City,” Boon says.

He adds that he and the deputy directors will be sharply focused on keeping costs down in the central administration in the years ahead.

We will press on with strategic initiatives

The faculties are also fully aware that they’ll need to focus on careful financial management in coming years. The university can draw on its financial reserves – up to a point. AU is operating with a total budget deficit of DK 47 million in 2022 and with a planned deficit of an additional DKK 17 million in 2023. In this way, the university plans to meet the target of financial reserves equivalent to ten per cent of revenue set by the board by the end of the four-year period. This is a sensible target, according to the rector:

“It goes without saying that we need an adequate financial buffer, but wherever we can, we intend to invest our funds actively in order to realise our scientific and scholarly ambitions. For this reason, we will press on with the strategic initiatives we have already approved. All faculties are keenly aware of the importance of prioritising their spending, so that we can realise our ambitions together and continue to strengthen our contribution to society.”

In connection with the discussion of AU’s finances at the board meeting, it was also decided that Aarhus University’s investment policy will place an even higher emphasis on sustainability going forward.