2.2 Framework for Research
2.2.3 Multimodality and Multiliteracies
All funds from national, state or local government expressly allocated for educational purposes are public funds. These can be for capital and recurrent purposes. Borrowing which is used extensively in the United States for financing capital installations for education does not seem to have great prospect because of-the underdeveloped capital market and financial institutions. Consequently, too much dependence has been on public funds to finance capital projects.
The persistent rise in the volume of public funds has presently led to the popular budget squeeze in most developing countries. Furthermore, there is usually the problem of low funding capacities at the local government level because an insignificant taxation power is permitted at the lower levels of government in developing countries. Consequently, education is usually centrally financed with little or no effort to explore decentralized methods of financing education.
(b) Household Funds
All funds derived from households and spent directly as educational expenses for tuition, room and board, transportation, books, feeding and so on for members of household are referred to as household funds. These funds constitute an important source of direct revenue for education apart from taxes which also come from households. Tuition forms the most important item of household funds.
(c) Private and Voluntary Funds
All funds contributed by Philanthropic organization, foundations, trusts, religious organizations, business firms and individual citizens for financing educational programmes are called private or voluntary funds. In the past, that is before 1972, religious organisations appeared to be an important source of voluntary funds in Nigeria. These religious organizations might contribute both cash and kind.
(d) Economic Enterprises Funds
All funds spent by economic enterprises on training and skill development are called economic enterprises funds. These exclude the philanthropic contribution to education by business firms. They are mainly the contribution of such enterprises to staff development in order to meet their own manpower needs. An example is when an economic enterprise sets up its own training centre or sends members of staff on overseas training.
(2) Sources of Educational Funds at Institutional Level
There are basically four principal ways by which an educational institution can be financed.
These are through:
(b) Private funds;
(c) Internally generated income; and (d) Deficit financing or borrowing.
(a) Public Funds
These are mainly through government grants/loans. Grants form the bulk of revenue receivable by educational institutions all over the world. In Nigeria, for example, public educational institutions are heavily grant aided. The amount receivable from government in this respect contributes nothing less than 90 per cent of the total revenue of the Nigerian Federal Universities.
Consequently, too much dependence has been on public funds lo finance capital projects in education in developing countries. The persistent rise in the volume of public funds has presently led to the popular budget squeeze in most developing countries.
Furthermore, there is usually the problem of low funding capacities at the local government level because an insignificant taxation power is permitted at this level of government in developing countries. To this extent, education is usually centrally financed with little or no effort to explore decentralized methods of financing.
(b) Private Funds.
These are mainly through money received from private donations, endowments, etc. Just as an educational programme of the government can be financed by philanthropic and religious organizations, foundations, trusts, business firms and individual citizens, in the same way these private individuals and groups can provide the funds to finance educational institutions cither partially or wholly.
Private support to them may come either in cash or kind. It may come from outside the country. External funds are connected with money, men or materials received as aids, gifts, endowments, donations and subscriptions (You can revise your note on external donors in order to have a better understanding of private funds).
In respect of gifts, endowments, donations and subscription from private sector of the economy, little or nothing comes from these sources in Nigeria. There is a weak link between the educational institution and the private sector. At primary and secondary levels of education, much of the private funds come from the Parents/Teachers Association (PTA). At the third level, little comes in form of financial assistance from the private individuals.
Unlike in Nigeria, in the Soviet Society considerable amount are spent on higher education by factories, organizations, collective farms, co-operatives public organizations.
Similarly, in the United States, private ownership contributions of educational institutions are encouraged because of the decentralized method of controlling and operating education in America. The privately financed approach to the educational enterprise in the United States has made it easy for the private individuals and groups to own higher institutions of learning.
Thus, the third level education is both privately and locally financed in the United States. This financial arrangement is capable of attracting private funds particularly, in form of endowments. In fact, most of the institutions of learning in America arc heavily endowed,
(c) Internally Generated Income.
This is mainly through the activities of the educational institution. Money m generated through investments in agricultural, industrial, commercial, and so oriented ventures. The agricultural ventures may include farming, poultry, fishing etc. In general, investment income comprises profits, rents, interests, divide etc. Furthermore, local revenue includes fees in form of tuitions and charges' room and boarding facilities as well as service charges.
Tuition fees cannot contribute significantly to educational revenue in a centrally and publicly financed system for three main reasons. First, educational institutions in centrally financed system are not given free hand to charge fees. That is, some internally generated incomes are subject to administrative control by the government. In Nigeria, for instance, tees charged in the universities are pegged. For example, the accommodation fee for the undergraduate students was pegged at N90.00 in all Federal Universities and they are not free to charge tuition fee.
Second, the political cost of allowing public schools to charge lees may he more than the financial benefits receivable. Third, access to education will be limited if public schools are not controlled in respect of charging lees. Higher fees means lower private returns to education and lower returns implies reduced enrolment demands particularly, among the children of the poor. It education becomes less attractive, many teachers will exist to handle less students and this means higher cost.
Apart from fees and investment incomes, an educational institution may raise revenue through community or consultancy services. This source is particularly important in institutions of higher learning where research and community services are two of their functions.
(f) Deficit Financing or Borrowing.
Under cost classification, we have observed that institutional costs of education can be classified into capital and recurrent cost on the basis of the duration within which an item of expenditure can produce satisfaction. Items which can be enjoyed for long period are classified as capital while those which cannot be enjoyed more than a year are called current or recurrent.
Deficit financing can be direct or indirect. It is direct when it is in form of direct borrowing or loan. It is indirect when it comes in form of deferred payments. Bank borrowing can be sought for financing both capital and recurrent expenditures of an educational institution. Long-term borrowing is usually sought for finance capital projects while short-term borrowing (in form of overdraft facilities) is commonly sought to finance current expenditure.
In fact, on no occasion should a long-term loan be used to finance an expenditure which is recurrent in nature.
Developing countries have not been utilizing bank loans as a source of financing capital projects because of the underdeveloped nature of their banking and financial system. What is common in these countries is the use of the overdraft facility to finance special items of current expenditures such as salaries. However, in recent years, Nigerian government has explored the possibility of a World Bank loan for the purpose of financing capital projects (such as installation of laboratory equipments) in its universities.
Deficit financing involves delay of payments and buying on credit. An institution of
other pressing things which may generate internal income. Rents, rates as well as bills from customers can be used to finance investment projects or fixed in a bank in anticipation of future gains. As soon as such invested money has yielded enough returns, payments which have been deferred can now be made. Credit purchasing may be explored if the institution is credit worthy.
(3) Sources of Educational Funds at Household Level
There are four main sources by which students can finance their education. These are:
1. Personal foods - savings, employment, etc, 2. Parental funds - savings, etc;
3. Public funds - scholarship, grants, loans, etc; and 4. Private funds - bank loan, borrowing, gifts, etc.
(a) Personal Funds
Students can personally finance their education through savings and/or employment earnings.
In Nigeria, finance from personal savings and other producing activities is not very common.
Many students are below the working age. are of age but are not allowed to combine studying with working.
Nevertheless, few students, especially in higher institutions who have worked for some years before gaining admission to a college or university may have saved enough to sponsor themselves. Students can secure vacation jobs (self-employed or paid jobs) and use the income to finance part of the costs of their education.
(b) Parental Funds
Parents are duty bound to provide funds for the education of their children^ Consequently, the bulk of the education cost of a student is directly or indirect!^ financed by parents. The direct financing takes the form of providing the needed money and materials during the process of children education. On the other hand, parents can contribute indirectly through taxes, levies and rates. Relatives may be involved if parents are financially handicapped.
(c) Public Funds
There can be public support, through various governments for students, particularly, if there are enough reasons for such a support. This can come in form of subsidies, grants and loans.
Free education is a subsidized education. Government may decide to take the responsibility of paying fully the cost of education and in few cases this may include provision of books. This not withstanding, there are some expenditures that may not be covered by the free education package like cost of uniforms, personal equipments and feeding. However, the government may decide to subsidize students' feeding and accommodation.
Free education differs from awards of scholarships and bursaries in the sense that while the former concerns subsidization of institutions of learning so that all children will enjoy subsidized education, the latter are merely subsidies to selected students in selected type and level of education. For example, bursaries may be given to the education students while engineering students are not considered. Scholarships may be awarded to brilliant students
while the average ones are not considered. Poor students may be subsidized while children of rich people are excluded.
Free education is usually universal. It is not common to leave some people out. When the institution is subsidized, the service is rendered to all students without discrimination but when it is the student that is subsidized, the tendency is for the financial system to be selective.
Apart from grants (scholarships and bursaries) to students, the public can employ a loan system to finance the education of its citizens. A lot of differences abound between grant-financed and loan-grant-financed education systems. Under the latter system, there may be discrimination against students who are less likely to have the parental backing for repayment.
This is because it is not easy to ensure that students from poor economic background will pay back a loan received for his education. In other words, default risk is higher with poor students than with rich ones. This system may be beneficial if such loan can he guaranteed.
Given loans to students may make students to develop a high sense of responsibility since they will be conscious of the fact that borrowed money should be judiciously used.
Moreover, loan-financed system of education is capable of making students appreciate the value of education as long as each loan recipient would work for every kobo received. Loan schemes enable students to mobilize future earnings to pay for education today.
(d) Private Funds
Companies, voluntary agencies, philanthropists and communities can offer scholarship awards to students in pursuance of their education. This source involves a small number of students.
Occasionally, students fund their education by borrowing from local money lenders and if possible from commercial banks. In a few situation, co-operatives or community associations may introduce educational loans schemes and if this is done, children of members can benefit and in this case interest rates are quite bearable.
The best lending option available to Nigerian students at the tertiary level is the loans granted by the Nigerian Students Loan Board (NSLB). Private individuals or groups may decide to give awards to brilliant or best behaved students on annual basis. All these are ways which the private sector can contribute to student finance.
Summary
1. The four sources of educational funds at governmental (macro) level are:
(i) Public funds or taxes;
(ii) (ii) Household funds;
(iii) (iii) Private and voluntary funds; and (iv) (iv) Economic enterprises funds.
2. Sources of Educational Funds at Institutional Level
(i) Public Funds. These are mainly through government grants/loans. Grants form the bulk of revenue receivable by educational institutions all over the: world. In Nigeria, for example,
contributes nothing less than 90 per, cent of the total revenue of Nigerian Federal Universities.
Education Ii can also be taken from banks through the assistance of the government to finance capital projects. '
(ii) Private Funds. These are mainly through money received from private donations, endowments philanthropic and religious organizations, foundations, trusts, business firms and individual citizens. All these groups can provide funds to finance educational institutions either partially or wholly.
(iii) Internally Generated Income. This is mainly through the activities of the educational institution. Money may be generated through investments in agricultural, industrial, commercial, and service oriented ventures. Tuition fees and revenue generated through community consultancy services are also good sources.
(iv) Deficit Financing or Borrowing. This can be direct or indirect. It is direct when it is in form of direct borrowing or loan and indirect when it comes in form of deferred payments. Bank borrowing can be sought for financing both capital and recurrent expenditures of an educational institution. Long-term borrowing is usually sought to finance capital projects while short-term borrowing (in form of overdraft facilities) is commonly sought to finance recurrent expenditure.
3. The four sources of educational funds at household level are:
(i) personal funds;
(ii) parental funds;
(iii) private funds; and (iv) public funds.
1. The bulk of the education of a student is directly or indirectly financed by parents. The direct financing takes the form of providing the needed money and materials during the process of children education, while they contribute indirectly through taxes, levies and rates to finance education.
Post-Test
1. Which of the following sources of educational funds is macro?
(a) Parental funds (b) Personal funds (c) Tuition fees (d) Public funds
2. Tuition fees cannot contribute significantly to educational revenue in a centrally and publicly financed education system because
(a) Access to education may be limited if public schools are not controlled in respect of charging fees
(b) Educational institutions in centrally financed system are heavily grant aided
(c) Subscription from private sector of the economy constitutes a substantial 3 part of the revenue available for financing public education
(d) The political cost of allowing public schools to charge fees may be it than the financial benefits receivable
3. The type of financing adopted by an institution of learning when il delays t| payment of its workers' salaries in order to use that money for other pressi things which may generate income is known as:
(a) Internal financing (b) External financing (c) Private financing (d) Deficit financing References
Eicher, J. Educational Costing and Financing in Developing Countries: Focus on Sub-Saharan Africa, World Bank Publication, 1984. Paper 655.
Hultin, M. and Jallade, J.Costing and Financing Education in LDCs: Current Issues, World Bank Publication, 1975. Paper 216.
LECTURE THIRTEEN Budgetary Analysis Introduction
An educational budget is a document outlining the systematic scheme for raising and allocating educational resources for a given future period in numerical and monetary terms. It must be based on educational plans in which the objectives of the institution will be stated.
Once the plans have been carefully studied, the next stage in budget preparation is the estimation of the expenditures (current and capital) that will be made to achieve the desired objectives of the plans.
Lastly, the revenue budget is prepared in order to estimate the amount of resources that can be generated from various sources to finance the predicted expenditure. Thus, we often talk of the triangle of educational budget consisting of:
(1) the educational plan at the base;
(2) expenditure budget; and (3) revenue budget.
Fig. 1.Triangle of educational budget.
The master budget of an educational institution may consist of as many as four individual budgets namely:
(1) Revenue budget;
(2) Expenditure budget;
(3) Capital budget; and (4) Cash budget.
For the purpose of budgetary analysis, we shall not concern ourselves with cash budget which is irrelevant in cost analysis.
Objectives
At the end of this lecture, you should be able to analyze recurrent budget.
Pre-Test
1. The master budget of an educational institution may consist of the following except:
(a) Credit budget (b) Cash budget (c) Capital budget (d) Revenue budget
2. One of the following makes it possible to document the efficiency of resource use in schools, the profitability of investing in education and the equity of public spending on education (a) Structural analysis
(b) Unit cost analysis
(c) Determinants of variation in unit costs of education (d) The educational technologies used
3. Assume N30,000 has been estimated as the total cost of producing 100 graduates in a primary school. If 20 of the intakes dropped out, then the cost per graduate will be
(a) N300.00 (b) N4333.33 (c) N4375.00 (d) N75.00
4. The implication of underutilization of educational resources on unit cost of education is that (a) Unit cost of education will remain constant
(b) Unit cost of education will fall
(c) Unit cost of education will be overutilized
(d)Unit cost of education will shoot up Course Content Analysis of Recurrent Expenditure Budget
There are three stages in the analysis of recurrent expenditure. Firstly, the structure of the recurrent expenditure is analyzed in order to ascertain historical costs by function and purpose. Education accounts are usually broken down into expenditure classifications that are not very meaningful for certain important cost analysis purposes.
In most cases, they show expenditures by object and not subject of (function). They may tell us the amount spent on salaries of personnel, expenditures on supplies, amount spent on utilities and expenditure on equipments. It may not be shown in the budget how much was spent on teaching of English language, Mathematics, History, etc. Consequently, there may be a need 10 supplement the budget with other data from other sources.
Structural Analysis
The main preoccupation of an analyst for carrying out a structural analysis is to identify structural problem which may include misplacement of priority. For an effective analysis, it is essential to have the educational plan of the institution as a supporting document. This will reveal the priority areas. The priority may he on teaching; if that be the case, the hulk of the expenditure must he on pedagogical objective. Otherwise, there will be a misplacement of priority.
Unit Cost Analysis
At the second stage of analysis, attention is on the unit recurrent costs of education. Usually, emphasis is on costs per student, per teacher, per graduate, etc. This makes it possible to document the efficiency of resource use in schools, the profitability of investing in education and the equity of public spending on education.
At the macro level, the desired unit costs arc obtained by aggregating the amounts spent on education by all the contributors and then dividing the result by the number of students. At the micro level, the goods and services for the students are decomposed into items that can be costed independently, such as welfare, teachers, time and pedagogical materials.