Universities are sitting on a large pot of unspent funds

The Swedish National Audit Office, or NAO, has found that Swedish universities and university colleges have accumulated SEK12 billion (US$1.4 billion) in unspent money over the last years, where SEK5 billion (US$593 million) was for higher education.

In a recent report, Why do Universities Save Money? An investigation of governmental capital at universities and university colleges, the NAO says “higher education government capital”, its term for unspent researcher and higher education allocations to universities, is now higher than ever, totalling SEK12.3 billion (US$1.45 billion).

“This is new information for me,” Minister of Higher Education and Research Helene Hellmark Knutsson told Radio Sweden. “This is very serious because this is money that is supposed to be used. I find it deeply problematic that resources are unspent instead of being used to improve the quality of higher education.”

The NAO investigated whether resources were being spent effectively and if the governmental governance was functioning well, the report said.

“The investigation found that education institutions have difficulties in using the increased budget allocations. Since 2007 the higher education institutions have received SEK20 billion (US$2.4 billion) in increased income, while SEK12 billion (US$1.4 billion) is left unspent as saved resources,” Helena Lindberg of the NAO said. “And this is not an effective use of governmental funds.”

The project leader at NAO, Keili Saluveer, said that universities might feel a need to save so as to create a buffer for unexpected costs and events. “But unused funding of this magnitude indicates that planned activities have not been implemented.”

“Higher education institutions have greater economic flexibility compared to other governmental institutions,” Saluveer said. “We are therefore of the opinion that these measures of capital growth at universities should have led to parliament being informed.”

The NAO has recommended that the ministry set clearer conditions for use of budget allocations and better specify the rules on how unused money may be transferred between budgetary years. It also demanded that “more effective” information is given to parliament.

The grant funding for universities and university colleges is split between ‘free funding’ which the higher education institutions can choose how to spend, and those parts of the budget that are earmarked for specific activities. There is separate reporting for these two budget streams.

Reason for the unspent funds

Charlotta Tjärdahl, chair of the Swedish National Union of Students or SFS, said that the reason for the unspent funding may be that Swedish universities are worried about what governmental allocations they will be given from year to year and hence are saving as a backup.

“The allocation system of today needs to be revised,” Tjärdahl said. “In the present system quality is suffering.”

Head of Planning at Lund University Tim Ekberg believes that reliance on research income for externally funded projects is part of the reason. This uncertain money plays a huge role for researchers. To prepare for risks, research directors save money in case it dries up.

Lund University at the end of 2016 retained approximately SEK1.5 billion (US$178 million) in unspent money, where 24.5% was for higher education and the rest for research. The total unspent money was equal to 18% of the total budget.

“This is an example of a basic illness in the system; the researchers of course want to get as much research out of their resources as possible,” Ekberg said. “But they are frustrated at being in the hands of so many different external funding sources.

“They must in principle secure this money for the salaries for their colleagues [not having a tenured position]. For them it becomes a rational behaviour to save up capital to secure the research group for some longer time. But the governmental capital at Lund University is distributed across 17,000 activities, so there is little we can do at central level [to spend this money],” Ekberg said.