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NUS

Report on the Seminar on

External funding and University Autonomy

Organised by The Nordic University Association (NUS),

The Nordic Association of University Administrators (NUAS), and The OECD Programme on Institutional Management in Higher Education

(IMHE)

Monday 16 and Tuesday 17 June 2003

by Nigel J French Principal Consultant, N & S Consulting Services, UK

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Introduction

“Universities have seldom been more miserable. They are short of money. Government micro-management is intrusive and contradictory. And competition forces them to do things they dislike.” (Economist reporting, 2003b)

Universities and other higher education institutions in most countries are increasingly relying on diversified funding to fulfil their missions. Nowadays, their resources emanate from a variety of sources - public and private, national and international. Not only are the sources of finance changing, but also new structures and practices affect the ways in which money can be used. Directed or earmarked grants are growing in importance. Often such grants are given for a mix of research and teaching, and even infrastructure purposes. Such funding is sometimes perceived as depending more on closed competition and lobbying than on open, peer-reviewed competition via applications to research councils and other funding agencies. Institutions and individuals are, meanwhile, increasingly obliged to devote considerable efforts to bidding for relatively small sums. And frequently the resultant grants do not cover full costs. Against this background, a number of questions arise:

• What is the nature, scale and scope of external funding? • How can/should HEIs best use such resources in fulfilling their core

tasks of teaching, research and service to society? • What is the effect of such external funding on the integrity of the higher

education enterprise? • What are the practical implications of increased reliance on external

funding, including in particular grants which do not cover the full costs of the activities or projects for which they are intended?

These were among the issues discussed recently at a two-day seminar in Oslo, Norway by some 140 university representatives and higher education policy-makers from more than 30 different countries and regions. Although the majority of the participants naturally came from the Nordic countries and Europe (in the widest sense), others came from as far afield as Australia, Hong Kong (China), Japan and South Africa. This paper draws on the presentations and discussions at this seminar, which was, both by design and in fact, very international in outlook.

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Programme Following introductory remarks by representatives of the three sponsoring bodies, day one opened with a keynote presentation by Dr Frank Newman, Director of the Futures Project, Brown University, USA. There followed two plenary sessions and four concurrent workshop sessions. The first plenary was introduced by speakers offering a German perspective on university autonomy, a view from industry and a student view. The second plenary comprised two overviews of funding principles and institutional independence, with responses from practitioners. The four workshops addressed issues related to the four questions mentioned above, viz: risk management, research funding and overhead policies, external funding and university behaviour, and decision-making and priorities. Day two consisted of two further plenary sessions, both divided into two parts. In the first plenary, two presentations were made on funding policies and university responses, one from a German perspective and the other from a Swedish perspective. These were followed by summaries of the four workshops. In the second plenary session, a view from the European Commission was presented, with a response from a European academic viewpoint. The plenary session concluded with some preliminary comments from the rapporteur and the usual courtesies. A very full working programme was supplemented by a visit to the Munch Museum and buffet dinner on the evening of the first day. Documentation Prior to the seminar the IMHE programme secretariat circulated some background material and references (see Appendix). Papers presented at the seminar were mostly made available to participants during the seminar.

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Keynote Presentation Speaking from his considerable experience as former President of the Education Commission of the States (http://www.ecs.org/) and more recently as Director of the Futures Project (http://www.futuresproject.org/), Dr Frank Newman described the broad trends affecting higher education worldwide and their implications for institutional autonomy. He noted that higher education institutions everywhere are faced with the same pressures, including :

• Increased competition among institutions • The use of market or quasi-market mechanisms to structure higher

education • The appearance on the scene of for-profit organisations competing very

effectively for the more lucrative areas of higher education • The impact of information and communications technologies, including

the Internet • The growth of transnational education and the impact of globalisation • A change in the approach to students, from treating them as recipients of

academic wisdom to purchasers of educational services • The demand for greater transparency and accountability for efficiency

and cost-effectiveness as well as quality assurance He further noted that there appeared to be a lasting policy trend, which he described – quoting Gibbons (1994) – as a “rightward shift”, towards more institutional autonomy coupled with requirements for greater accountability for less, or at least for a smaller share of, public funding. Drawing mainly on US experience in responding to these trends, Dr Newman pointed to the development of multi-campus systems as a means of managing diversity and competition, and marketisation as a means of coping with reductions in public funding. Dr Newman explained that, in the US context, the funding reductions were more perceived than real because state appropriations to higher education had actually increased over the last two decades, even on an after inflation and a per-student basis. Moreover, in the past decade alone (1993 to 2003), the amount spent on higher education by state governments had increased on average by 60.2 percent. On the other hand, Dr Newman also noted that, even as state funding was expanding, colleges and universities were aggressively expanding other sources of revenue (tuition, sponsored research, corporate contracting, fundraising). As a result, public funding was declining as a proportion of institutions’ budgets in a number of major US state universities so that, for example, it currently represented only 10% of the budget at the University of Michigan, 13% at the University of Virginia, 22% at the University of Texas and 25% at the University of Wisconsin. This has significant implications in terms of both institutional autonomy and accountability.

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These developments, according to Dr Newman, have led or are leading to changes in the relationships between higher education institutions and the state and other stakeholders, including:

• Deregulation • Decentralisation • Performance-based funding • Public corporations • Contract funding • Charter status • Vouchers or educational savings accounts • For-profit institutions or subsidiaries

Balancing increased autonomy, arising from marketisation and a reduced reliance on public funding, with accountability in response to increased demands from state and national governments for public assurances of cost effectiveness and quality has, according to Dr Newman, been the main challenge. He added that the resultant changes were profound and irreversible, and as a result he saw a need for an internal (ie within the academy) shift from an inward-looking to an outward-looking attitude to these matters and an engagement in debate about the risks involved. These risks include:

• Reduced access for less advantaged students • Loss of research integrity • Increased tuition • Decline in engagement with local communities • Mission creep/drift

Going forward, Dr Newman suggested that a full and open debate was required on the aims and purposes of higher education in the globalized world of the 21st century, on how to achieve and maintain social mobility, how to ensure on-going support for trustworthy and high quality research, and how to make the best use of new technologies to support high quality teaching and learning. Dr Newman characterised the role of the Futures Project in this area as a facilitator seeking to:

• Stimulate an informed debate about the role of higher education in our new global society, and the opportunities and dangers presented by a global market for higher education

• Develop policies that ensure a skilled use of market forces to maximize the opportunities while minimizing the dangers

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The Project also has an advocacy role, as indicated by the following extract from its web-site 1 :

“The Futures Project envisions a diverse system of educational institutions that work together to achieve a well-educated and engaged citizenry. Today, more than ever, policymakers are increasingly looking to higher education to help increase the prosperity for the state and all its citizens. “To do this effectively requires a higher education system that is responsive, visionary, and operates as a partner with the state and its citizens in the pursuit of knowledge, excellence, innovation, and inclusion. A system created in this vision of higher education would work with and support all elements of the community including but not limited to: elementary and secondary schools, industry, and government. At the same time, however, any one institution cannot be all things to all people-institutions must stay focused when executing their mission.”

Dr Newman’s presentation, as noted earlier, drew mainly from US experience, on the basis that US higher education systems have probably been dealing with them for longer. However, as he also noted, many different countries and systems are facing and tackling these issues and much can be learned from sharing experiences in international fora like the present seminar. In discussion following Dr Newman’s keynote presentation, the following points were made:

• The US experience, while interesting, may not be wholly applicable or relevant elsewhere eg in Europe. (Picking up on this point later in the seminar, Prof Bo Sundkvist emphasised the need to be sensitive to different social and historical contexts in considering the best way to respond to the changing circumstances facing higher education.)

• Higher education institutions are increasingly affected by trends from outside the education sector eg environmental issues. At the same time, universities are becoming active players in their societies in new and important ways.

• On the question of accountability and quality assurance, particularly in relation to teaching and learning, the debate between quality assessment and quality audit was raised. It was averred that generally higher education institutions had been slow in developing publicly defensible measures of student learning and value added. In response, Dr Newman agreed, but referred to the experience of the British Open University and the University of Phoenix, both of which assess the learning of every student, for every course. They also use these

1 http://www.futuresproject.org/vision/vision.html

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assessments to evaluate each instructor in terms of how well students are learning—not based on the instructor’s grading, but on the independent assessment.

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First Plenary Session Prof Dr E Jürgen Zöllner (Minister of Science, Further Education, Research and Culture, Rheinland-Pfalz, Germany) presented a German view of institutional autonomy. Given the importance of science for the continued benefit of mankind and society, universities need to function as centres for advanced scholarship and research in a globalised society. To this end, universities need to be structured as adaptive organisational units acting under their own responsibility. Institutional autonomy is thus a sine qua non and Prof Dr Zöllner described how enhanced deregulation is being achieved both generally in Germany and particularly in his own state (Rheinland-Pfalz). The measures include administrative and legislative changes, and “the coupling of resource allocations to particular performance and burden criteria of the universities.” On the subject of higher education financing more generally, Prof Dr Zöllner argued that the principle should be “whoever has the main benefit should be required to pay correspondingly.” In the German context, this would mean that basic education, up to and including undergraduate courses, and pure research should be supported at the national level. In the case of applied research and further education, the ultimate beneficiaries should be expected to contribute. Other sources of funding should also be explored, including fund-raising, but Prof Dr Zöllner did not believe that it would be possible in the German context to achieve a significant contribution by this means in the foreseeable future. Overall, Prof Dr Zöllner stressed that “the price paid for freedom is responsibility” and to this end universities should be open – to questions, to the whole of society, and to international competition. Presenting a view from research-based industry, Prof Dr Lene Lange (Director, Novozymes, Denmark) described the key responsibilities of universities as

• Research-based education – inspiring teaching and supervision attracting young talents to fields of relevance to R&D based industry;

• Research with long-term perspective – high quality and visionary research; and

• Access and transfer of research results from abroad – achieving credibility and enabling access to the best knowledge.

Prof Dr Lange also stressed that modern R&D based industries would not wish to encourage universities to focus on applied research and product development. Nor would they wish governments to push universities in such directions with funding or policy incentives. Rather industry would like governments to provide long-term and consistent (not “zig-zag”) policy

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directions and appropriate funding incentives for collaboration between universities and industry. In conclusion, Prof Dr Lange argued that universities should first and foremost fulfil their prime role in society : education and research. Collaborators (including both industry and government agencies) should respect and appreciate the rules and values of open academic research. Against this background, care should be taken in drawing up the terms of collaborations between industry and universities to find the right model for the particular circumstances and new models are needed for innovation and incubator activities at universities. Responding to Prof Dr Lange’s presentation, many present welcomed such enlightened views on the responsibilities of universities and their relationships with industry and governments, but felt that they were not commonly held by industrialists, even in the high-tech or R&D based business sectors, or by politicians and other government leaders. Finally in this session, Stefan Bienefeld (Chairperson 2003, National Unions of Students in Europe ESIB) presented a student perspective on the prerequisites of external funding. He stressed the need for inclusive governance arrangements and transparent legal frameworks for research collaborations with industry and cautioned about the socially exclusive effects of tuition fees in any form and at any level. Subsequent discussion focussed mainly on different aspects of the tuition fees debate. Some argued that fees, where implemented with due safeguards in respect of the socially and economically disadvantaged, could provide a valuable source of additional income. Others felt that charging tuition fees at all was unreasonable because it involved today’s generations contributing for a service provided free to their predecessors.

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Second Plenary Session Prof Ken Edwards (Chairman, Magna Charta Observatory) introduced the work of the Magna Charta Observatory which monitors, expresses opinions on and interprets fundamental rights of universities. The fundamental principles which guide the work of the Observatory include the following:

“The university is an autonomous institution at the heart of societies differently organised because of geography and historical heritage; it produces, examines, appraises and hands down culture by means of research and teaching. “To meet the needs of the world around it, its research and teaching must be morally and intellectually independent of all political and economic power. “Teaching and research in universities must be inseparable if their tuition is not to lag behind changing needs, the demands of society and advances in scientific knowledge.”

Prof Edwards added that autonomy and academic freedom in these terms are fundamental principles underlying the special place and role of the university in society. Moreover, the university’s core values of respect for truth, disinterested search for truth, rigorous analysis, honest debate and free communication risk being suborned by pressures from governments, from private enterprises and from within – the last in the form of what he termed “academic avarice”, which may lead to a constrained range of research, less rigorous investigation and acceptance of limits on the communication of results. To counteract these pressures, Prof Edwards urged that action should be taken in both the public policy field and within universities. In the domain of public policy, the case for basic research should be accepted and high quality research should be supported with adequate public funding. This, he argued, also represented enlightened self-interest on the part of external funders. Within universities, emphasis should be placed on good institutional management of research with a commitment to academic standards and awareness of the potential risks. In subsequent discussion, the point was made that the stance of the Magna Charta Observatory, as described in Prof Edwards’ presentation, appeared to be based on a very traditional, Humboldtian research university perspective. It was suggested that the Observatory might also address the issues of academic freedom and institutional autonomy in other higher education institutions including further education colleges, institutes of technology, for-profit institutions, on-line and virtual institutions and so on. It was further

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suggested that this might have implications for what constitutes academic freedom and institutional autonomy, and also give rise to questions about one of the Observatory’s basic assumption, namely that “teaching and research in universities must be inseparable”. In the second presentation in this session, M Elie Cohen (Conseiller, Ministère de l’éducation nationale, France) first proposed definitions of external funding and university autonomy. The former, he suggested, effectively included funding from all sources, other than income generated solely by a university’s own efforts from resources not subject to any form of external constraint – for practical purposes, therefore, in most cases nil, since the days of unconstrained public funding of universities in the form of block grants were over. University autonomy he defined in terms of “the institution’s ability to define a ‘projet’ (a French term that is much richer than the English equivalent : plan) for the institution that is consistent with its values, culture and resources and its ability to implement the necessary policies in interaction with its stakeholders.” Against this background, M Cohen described the dilemma of French higher education, where institutions are still heavily dependent (c 90%) on public funds and are therefore affected by increasing budgetary constraints in the public sector as a whole, while demographic circumstances are producing increased demand for student places. This has led to efforts by institutions to try to diversify their sources of funding, including engaging in market-oriented activities, and to diversify their missions. However, the overall macro-economic situation meant that institutions were effectively chasing a fixed or reducing amount of resources and there were inevitably both winners and losers in the process.

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Third Plenary Session The first half of this session was devoted to two presentations on funding policies and university response. Prof Hanns Seidler (Kanzler, Technische Universität Darmstadt, Germany) described the reduction in his university’s dependence on state financing (currently < 75% overall) through the attraction of “third party funds” as contributing to academic independence. He did not consider that , in competing for third party funding, much of which he said came from public budgets, universities were “selling their souls”, because the bulk of their funding still came from public sources. In any case, he felt that other developments in the financing of German universities were more important in sustaining and enhancing institutional autonomy. In this connection he said that the previous funding regime involving line-item budgetary control, with limited flexibility and strong state/parliamentary influence, was being replaced by lump sum allocations will all funds available for all university purposes. He noted that, although this increased freedom carried with it increased responsibility and accountability through performance-based budgeting and contract management, it also enabled the universities to enhance their productivity. In passing, Prof Seidler commented that German universities still had much to learn about maximising their new financial freedom. As an example he cited the fact that few German universities charge overhead on third party funding. He suggested that this source of funding could usefully be tapped to defray general (administrative) expenses and to subsidise those disciplines for which third party funding is not available. In conclusion, Prof Seidler warned that universities are not market-places, but some reduction in dependence on public funding can be salutory if the need for increased accountability and productivity (“more science for the money”) is recognised. Prof Bo Sundqvist (Rector, Uppsala University, Sweden) presented a survey of developments in Sweden over the last twenty years regarding allocations to higher education and research. His analysis showed a considerable attrition in resources on a per unit basis (funding per faculty, funding per student, research funding per student, faculty grants per student, etc). As a result, he said, “the quality of activities is under severe threat.” He urged that funding for research should be realigned with growth in student numbers. With respect to external research funding, Prof Sundqvist urged that universities should apply the principle of full cost coverage for external research projects. In particular he argued that it was imperative that the

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principle of full cost coverage for financing of research at universities be discussed within the framework of the future European research space. Whether or not this is achieved, Prof Sundqvist argued that, particularly in the case of Sweden, increased public financing of higher education and university research is the only answer. He concluded :

“Sweden needs to forge a strategy for innovation involving considerably amplified resources targeted directly for universities and university colleges. These resources must moreover be distributed in such a way as to bolster Sweden’s international competitiveness. In a strategy for innovation in Sweden, resources must be allocated among universities and university colleges on the basis of a carefully devised division of labour between different players.”

In subsequent discussion, it was noted that many countries and regions were struggling with the desire to tie the distribution of public/ government resources to “a carefully devised division of labour”, or to some form of agreed differentiation of role and mission between institutions. However, these efforts often foundered on institutionalised reward systems, within academe and at the system level, and on the difficulty of achieving parity of esteem among the different strands of higher and higher vocational education, and basic and applied research. In the second half of this session, the chairs of the workshop sessions provided feedback on the discussions in their sessions. Workshop #1 – Risks management Chair: Prof Robin Sibson (Higher Education Statistics Agency, UK) The workshop began with a presentation by Steve Egan (HEFCE, UK) on risk management as a corporate strategic planning and management tool already in use in the commercial and business sectors and its application to higher education institutions. The workshop concluded that the techniques and terminology of risk management to some extent simply codified existing good practice and alternative terminology might be employed. Nonetheless, the codification was useful and, if properly and sensitively used, it could be of real value as a management tool in higher education and could help to provide a context in which university autonomy can be protected. It was further noted that the successful implementation of risk management would require a firm lead from institutional top management, and the full benefits would only be achieved by moving from a reactive/defensive approach to a proactive/aggressive one. More generally, it was felt to be important to recognise that ‘real’ autonomy’ can exist in a variety of different structures and systems, and is not the same as ‘paper’ autonomy. ‘Real’ autonomy needs to be used for institutional

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development if it is to be maintained, and good risk management can facilitate this.

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Workshop #2 – Research Funding and Overhead Policies Chair: Gerd Köhler (Gewerkschaft Erziehung und Wissenschaft, Frankfurt, Germany) The workshop began with introductory remarks by Leif Lindfors (University Director, Stockholm University, Sweden) and Elisabeth Bylund (Swedish National Audit Office). Points arising from the introduction and subsequent discussions included:

• Terminology � “real costs” preferable to “overheads” � the meaning of “cost covering overheads” needs clarification

• Different disciplines should be treated separately • Different rules should apply to public funding and commercial funding • Practice varies in different countries eg overhead is deregulated in

Norway; in Sweden it is re-regulated (at an agreed rate of 35%) • Agreement on standard practice among European countries would be

helpful – in the absence of such agreement, EU research grants are not financially attractive for institutions in some countries

• Careful thought needs to be given to the implications of charging overhead for intellectual property rights and patent ownership

• Should there be a predetermined ratio between (public) basic funding and external funding?

• How should be the individual/institutional share of research results be determined?

Workshop #3 – External funding and university behaviour Chair: Prof Motohisa Kaneko (University of Tokyo, Japan) The workshop began with introductory remarks by Prof Ken Edwards (Chairman, Magna Charta Observatory). Points arising from the introduction and subsequent discussions included:

• There was perhaps less universal commonality of experience in respect of the focus of the present seminar than had been implied by some earlier speakers, particularly in countries and regions with emerging economies and rapidly changing political circumstances; for example, in areas where the availability of external funding was too recent a phenomenon to have had an impact as yet.

• External funding can have a significant impact on the internal dynamics and relationships within institutions, providing an additional and often significant source of friction and jealousy between colleagues and departments.

• Success in the sourcing of external funding can be counterproductive where governments simply reduce the level of state support in direct proportion to the amount of external funding raised.

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• Some participants felt it to be preferable for governments to oversee the distribution of funding based on objective criteria, rather than rely on market forces in what they saw as an imperfect market situation; others saw the benefits of greater freedom of action for universities arising from their reduced dependence on public funds.

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Workshop #4 – Decision-making and priorities Chair: Prof John Malpas (University of Hong Kong) The workshop began with introductory remarks by Roger Broo (Director, Aabo Academi University, Finland). Points arising from the introduction and subsequent discussions included:

• Priorities are set and decisions made on the basis of an institution’s mission. However, this still requires a diversified funding base.

• Strategic priorities need to be identified and adhered to. Strategies decided jointly after discussion between the institution and government planners (as in the German model) stand a better chance of success.

• Ideally funding bodies should not be too restrictive in designating the use of the funds they provide. However, the freedom of an institution to decide on the use of funds is, in any case, somewhat illusory. External funders (including governments) increasingly expect to be “closer” to the institution they fund and are not content to be simply providers of money.

• Working with external partners should involve more than just raising funds. There are potential benefits to both sides eg exchange of intellectual property in both directions.

• It is becoming clear in most countries and regions that no university can hope to do everything (either in research or in teaching). Priorities have to be set, strengths identified, etc.

• Some international coordination may be required in maintaining scholastic activity in certain cases (eg transiently unpopular or minority disciplines). Diversification is necessary with complimentary roles.

• Performance-based funding enhances results, but should not be simply formula-driven. Stability in funding is essential and a “zig-zag” approach is to be avoided.

In sum, the key concepts arising from the workshop discussion were: partnership, role diversification, dialogue, performance, alternative funding, institutional mission.

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Fourth Plenary Session The first half of this session was devoted to a presentation by Ms Megan Richards (Directorate-General for Research, European Commission) on the European Union perspective, and a response by Prof Ole Prehn (Aalborg University, Denmark). Ms Richards outlined the objectives, main components, thematic priorities and operational arrangements for the EU’s Sixth Framework Programme (FP6). FP6 aims to contribute to the creation of a true “European Research Area” (ERA). The aim of the ERA is to “foster scientific excellence, competitiveness and innovation through the promotion of better co-operation and coordination between relevant actors at all levels.” The ERA is seen as a collaborative mechanism for promoting economic growth, since many of the present and foreseeable challenges for industry and society can no longer be solved at national level alone. The thematic priorities for FP6 are:

• Life sciences, genomics and biotechnology for health • Information society technologies • Nanotechnologies, multifunctional materials and new production

processes • Aeronautics and space • Food quality and safety • Sustainable development, global change and ecosystems (including

energy and transport research) • Citizens and governance in a knowledge-based society

The above priorities were proposed by the European Commission and adopted by the EU Council of Ministers and the European Parliament following a co-decision procedure. Full information about FP6 and the procedures for application for and approval of grants can be found at the European Commission’s web-site: http://europa.eu.int/comm/research/fp6/index_en.html. (Further clarification regarding the treatment of overheads in the costing of research proposals has been given by Ms Richards recently (see Davis, 2003).) Responding to Ms Richards’ presentation, Prof Prehn expressed concern about the EU’s approach to research funding. In particular, he considered that the Framework Programmes over-emphasised science and technology research at the expense of the humanities and social sciences. He felt that this was typical of external funders more generally and there was a danger of the “university heartland” being sacrificed on the altar of marketisation and short-term perceptions of the relevance of research. He stressed the

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importance of a “people context” in all research and urged that more funding should be provided for cross-disciplinary research involving humanists and social scientists as well as natural scientists and engineers. In response, Ms Richards pointed out that the EU treaties refer specifically to promoting the competitiveness of European industry and, in the context of the ERA, the promotion of partnering and collaboration is a central commitment of the Commission. She added that greater emphasis was placed on the inclusion of socio-economic aspects under FP6 projects and their financing than previously.

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Discussion This section draws on the presentations and discussions in the plenary and workshop sessions, as well as the material and references circulated to all participants before the seminar by the IMHE programme secretariat and other sources. The theme chosen for the Oslo seminar, “External Funding and University Autonomy”, arose from one of four possible areas for further discussion identified during a previous IMHE/NUS/NUAS-sponsored seminar on “Financing of Higher Education” held in Helsinki, Finland in August 2001 (French, 2001). The reference to “external funding” in the title of the present seminar in particular needs to be understood in that context. As noted earlier there is, in practice, hardly any such thing as “internal” funding in the resourcing of universities and other higher education institutions, and hence the concept of external funding is, in one sense, virtually meaningless. However, in the context of the earlier seminar, “external” meant “non-government”, and more specifically referred to the trend, observable in both developed and developing countries and regions, of reducing allocations of public/government funding for higher education – at least on a per student basis, but often also in absolute terms – and increasing reliance on tuition fees, research grants and contracts, commercial activities, etc. This trend places pressures on higher education institutions to “do more with less”, improve efficiency and reduce dependence on public funding, while maintaining standards in the face of declining units of resource. It also presents the challenge of finding or devising more alternatives to public/government funding to meet expanding demand and need for higher education and research. As a result, universities and other higher education institutions in most countries are increasingly relying on diversified funding to fulfil their missions. Their resources emanate from a variety of sources – public and private, national and international – and institutions therefore have more, and more varied, stakeholders. This increased reliance on “external funding” can and usually does impose limits on the freedom of action – though hopefully not the freedom of thought – of those involved in academe. It thus gives rise to concerns about institutional autonomy (as distinct from academic freedom). Incidentally, it should perhaps be noted that underlying these concerns, at least in part, there appears to be a hankering back to a period when, in many European countries and elsewhere, government funding was provided for higher education quite lavishly and with relatively few or even no strings attached. If there ever was such a golden age , it did not last long and

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nowadays government funding for higher education rarely comes without a price in terms of reduced autonomy, usually expressed in the language of accountability, cost-effectiveness and quality assurance. Nevertheless, much government funding for public universities and other higher education institutions in most OECD countries, and indeed more generally, is still provided on the basis of input criteria (numbers of students enrolled, resources used) rather than output criteria (graduate numbers, assessed performance in teaching or research) and allocated as block grants (see for example Jongbloed and Vossensteyn, 2001). So the perception – still widely in evidence in the Oslo seminar – that public/government funding offers higher education institutions greater prospects of autonomy than funding from other sources is understandable. Indeed, in the Nordic context, this view was even more strongly held on this occasion than in Helsinki in 2001, when the possibility of tuition fees being introduced, although very controversial, was clearly on the table (French, 2001). This is apparently no longer the case – at least for the time being. However, it was interesting to see, in a survey of the Nordic region published in the Economist just before the Oslo seminar (Economist reporting, 2003a), that even here “(t)he remarkably successful welfare-state system that developed after the second world war is getting squeezed.” The implications of this for the funding of higher education in the Nordic countries were present as an undercurrent in the Oslo seminar. As to what constitutes institutional autonomy, the definition presented by Elie Cohen at the seminar (see above) was generally accepted :

“the ability to define a ‘projet’ (strategy or plan) for the institution that is consistent with its values, culture and resources and its ability to implement the necessary policies in interaction with its stakeholders.”

University autonomy, together with academic freedom, are seen as prior conditions for the optimal fulfilment of the responsibilities which society confers upon the university (Neave, 1998). The essential point about university autonomy is that higher education institutions should be legally entitled to freedom of action in managing their affairs within the restraints of the law. The main areas of institutional autonomy are: selection of staff, selection of students, control of curricula and academic standards, acceptance of research programmes and internal allocation of resources. This claim for autonomy does not rest upon any assumption of special privileges, but upon the argument, based on long experience (cf Robbins, 1963), that the institutions can properly undertake the work expected of them by the society which supports them only if they have freedom of choice and of action. This does not exempt them from public interest and criticism, nor

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does it mean that their policies should not be under review by themselves, and by others. A crucial factor, however, is the element of financial dependence enjoyed by the institutions. The fact of financial dependence circumscribes the institutions’ freedom of action. The extent of financial independence defines the limits of that freedom. Relevant here also is the distinction made by Dill (2001) between “procedural deregulation” and “substantive deregulation” in the regulation of public research universities – the former associated with lump-sum appropriations, freedom in purchasing and contracting, tuition and fees, personnel classification and benefits, facilities and construction; the latter with segmental consolidation, programme approval, governance. The former would generally be matters of institutional autonomy; the latter much less so. Dr Newman stated in his keynote presentation that there is a lasting policy trend towards more institutional autonomy coupled with requirements for greater accountability for less, or at least for a smaller share of, public funding. It was agreed during the seminar that, although this “rightward shift” might manifest itself to different degrees and in different ways in different systems, the trend is certainly evident and widespread. A distinction needs to be drawn here regarding the nature and impact of external funding in relation to the three main functions of higher education institutions – teaching, research and service. In respect of teaching, external funding may take the form of tuition fees (where these are charged, and particularly where they are genuinely paid by students themselves – or their families or employers – rather than used as an alternative channel for public/government funding) or private scholarship or endowment funds. Increased funding from these sources mainly affects the relationship between the institution and the student as stakeholder or ‘consumer’. In the case of research and service, external funding may take a wider range of forms, including state-sponsored research grants, international funding schemes, commercial grants and contracts, patents and licensing of intellectual property, university-owned commercial enterprises, etc. The implications of these developments were the main focus of most presentations and discussions in the seminar. The increased importance of state-sponsored and commercial research income for universities and the resultant changes in the patterns of academic work, driven by the so-called “academic ratchet” (Massy and Zemsky, 1990; Massy and Zemsky, 1994) which encourages more and more research at the expense of teaching, were commented on by several speakers. Moreover, the emphasis on market-related research – called “academic capitalism” by Slaughter and Leslie (1997) – was felt by some to be

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endangering the future of basic research generally, and research in the humanities and social sciences in particular (what Prof Ole Prehn described as the “university heartland” in the fourth plenary session). On the other hand, the development of more “entrepreneurial universities” (Clark, 1998) and “enterprising universities” (Williams et al., 2003) was seen by some as an inevitable, and indeed positive, direction of change. As an example of such views see Prof Seidler’s remarks and comments made during the workshops reported above. Nevertheless, as Prof Seidler also recognised, there are dangers inherent in an increased market orientation. On a humorous note, he referred to the development by his university of its own label wine (“Campus Schampus”). Raising funds through commercial ventures can, however, go too far. For example, when the mainland Chinese national and state governments cut subsidies to their public universities drastically in the early 1990s, the universities were expected to make good the reductions in their operating budgets by charging fees and developing commercial enterprises. In some cases, universities were over-enthusiastic in “jumping into the business sea” and ended up “drowning” (HKUGC (University Grants Committee of Hong Kong), 1995). As noted by Clark (2003), “entrepreneurial universities have to worry about the leap too far. However ambiguous and porous, new boundaries have to be thrashed out, with academic criteria serving as guideposts” (emphasis added).

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Conclusion Faced with the increasing demands placed upon them by present-day society, higher education institutions need to take control of their destinies by being clear about their role and strategic direction, and by reducing their dependence on any one source of funds. Specifically with regard to funding, awareness has grown around the world that dependence on a single mainline source of funding (usually public/government funding) is a flawed way to develop a modern, proactive university (Clark, 2003). However, as Prof Dr Zöllner said, “the price paid for freedom is responsibility”. Or as Neave (1998) put it:

“it is incumbent on the university to develop techniques of management, administration and self-verification which balance university autonomy with the obligation to be accountable to society, to demonstrate efficiency in fulfilling its mission and transparency in its manner of achieving it.”

Only by these means can the relationship of mutual trust which has in the past characterised the relationship between higher education and its main funders, particularly governments, be maintained (or restored). And only thereby can higher education institutions continue to enjoy the autonomy that is essential to the fulfilment of their various roles and missions. As the writer of the Economist article quoted at the beginning of this report rather crudely put it:

“There will be no return to the halcyon days when (universities) were given taxpayers’ money and left to get on with it.” (Economist reporting, 2003b)

However, the challenges presented by developing and utilizing divers funding sources do not necessarily need to leave universities feeling miserable nor should they necessarily force institutions to do things they dislike. This paper draws on the presentations and discussions at a seminar on External Funding and University Autonomy held in the Campus Blindern, Helga Eng’s Building, University of Oslo, Norway on 16-17 June 2003. The seminar was organised by the OECD Programme on Institutional Management in Higher Education (IMHE) in collaboration with the Nordic University Association (NUS) and the Nordic Association of University Administrators (NUAS). The seminar followed on, indirectly, from previous OECD/IMHE sponsored seminars on aspects of

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financing of higher education – in Tokyo, Japan in March 1994 and in Vilnius, Lithuania in May 1995 (as reported in Wagner, 1996)), and in Helsinki, Finland (as reported in French, 2001)).

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Appendix Background material and references provided by IMHE Secretariat #OECD Survey on patenting and licensing at public research organisations. Excerpt from “Turning Science into Business” (May 2003) #Blumenstyk, G. (2003) “Greening the world or ‘greenwashing’ a reputation” – Article from The Chronicle of Higher Education (January 2003) #Summary of new funding formula for higher education in South Africa, by Dr Prakash Naidoo, Vice Rector, Vaal Triangle Technikon Chevaillier, T and Eicher, J-C (2002), "Higher Education Funding: A Decade of Changes" Higher Education in Europe, 27, 89-99. Dill, David D (2001) "The regulation of public research universities: changes in academic competition and implications for university autonomy and accountability" Higher Education Policy. Vol. 14, no. 1: Mar 2001, p 21-35 Hirsch, W Z (1999) "Financing Universities through Nontraditional Revenue Sources - Opportunities and Threats" - Chapter in Hirsch, W V, and Weber, L E "Challenges facing Higher Education at the Millenium" Pergamon 1999 Johnson, R (2002) "Resources in the Management of Change in Higher Education" - Chapter in Trowler, P R (Ed) "Higher Education Policy and Institutional Change - Intentions and Outcomes in Turbulent Environments" SRHE/Open University 2002 Koelman, J and De Vries, P (1999) "Marketisation, hybrid organisations and accounting in higher education" - Chapter in Jongbloed, B et al (eds) "From the Eye of the Storm - Higher Education's Changing Institution" Kluwer 1999 Massy, W F (2003) "Universities as Economic Enterprises" - Chapter in Massy, W F "Honoring the Trust - Quality and Cost Containment in Higher Education" Anker 2003 Oili-Helena Ylijoki (2003) “Entangled in academic capitalism? A case-study on changing ideals and practices of university research” Higher Education Vol. 45, no. 3: April 2003 p 307-335 Slaughter, S. and Leslie, L. (1997) Academic Capitalism The John Hopkins University Press Weiler, H N (2003) "States, markets and university funding: new paradigms for the reform of higher education in Europe" Compare. Vol. 30, no. 3: Oct 2000, p 333-339 (# included in seminar pack)

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