The budget surplus in the 2016 financial statements will not result in a change of course for the administration
When the 200 million kroner budget surplus in AU’s 2016 financial statement was announced earlier this month, many of you probably wondered why we have been asked to make cost reductions in the administration and elsewhere at the university in recent years? In this month’s blog, I would like to provide a more detailed interpretation of the results of the figures in the accounts, and explain why we in the administration still need to maintain the course we set last summer.
The 2016 budget surplus is primarily the result of a number of external circumstances. For example, the implementation of the study progress reform, which resulted in significantly greater taximeter funding and completion bonuses than forecast last year. At the same time, we also succeeded in reducing time to degree in 2016, another requirement under the reform, thus avoiding having to pay a study progress penalty for which funds had been budgeted.
In other words, the budget surplus in the financial statements is largely attributable to a series of one-time items. And we are already certain that the annual two per cent reductions in education subsidies will result in a decline in revenue which will be greater than the revenue increases dues to higher rates of degree completion.
In Aarhus University’s administration , we had a small budget surplus of DKK 27 million for 2016. Among other reasons, because we received more salary refunds than forecast, and had more vacant positions. In light of the cost reductions anticipated in coming years, we have been extremely cautious about refilling vacant positions. This is a natural consequence of our strategy of finding as many of the necessary cost reductions as possible through natural wastage in coming years. And I would like to acknowledge all the incredibly hard work which our administrative employees have put into continuing to perform our tasks while keeping our costs under control.
In addition, there are always certain variables which are impossible to anticipate when creating the budget for an organisation as large as AU which will affect the financial statements. For example, in 2016, we received significant revenues from reimbursements for energy taxes for which we had not budgeted. We also had significantly higher revenues from AU’s liquidity in 2016. We have to take such variables into account when creating our budget. And in an organisation like ours, we must always be ‘cautious’ and exercise restraint.
So even though we are slightly ahead of the game in relation to the cost reductions after the 2016 financial statements, they aren’t going away. And because the different variables by their very nature are subject to change from year to year, the positive financial statements do not give us a reason to question the course the senior management team set in the summer of 2016. This means that the administration will continue to implement annual cost reductions of two per cent as planned. We will also continue to work on optimising and digitising our internal processes and workflows, in order to free up time to improve the efficiency of the services we offer to the academic units. The key concepts will continue to be efficiency, quality and coherence in the administration. I will be following up on concrete projects and aspects of this work in some of my upcoming posts.
I hope that I have managed to give you a better understanding of some of the arguments for maintaining our course in the administration - despite the positive 2016 financial statements. If you have any questions about the accounts or the contents of the blog in general, please include them in the comments field below.
Finally, I would like to emphasise that for the first time in many years, AU received an unqualified auditor's report on the financial statements. So let me conclude this month’s blog with a big thank you to our colleagues who work with AU’s financial systems and processes.
FACTS:
- In 2016, Aarhus University had a budget surplus of approx. DKK 200 million.
- Taken together with existing savings, the 2016 financial result will give the university the opportunity to invest DKK 131 million in strategic initiatives at the faculties and add DKK 76 million to the university’s strategic fund (USM), which is used to fund research and education initiatives.
- After these strategic initiatives have been implemented, the university's equity capital will be reduced to 10 per cent of revenue, which is the university's equity target.
