The Financing System of the Universitas Terbuka
Aria Djalil, Ibrahim Musa, Ratna Kesuma and Nadia Sri Damajanti^*

Context:
This selection from a longer article contains a description of the financing system of the Indonesian open learning university, Universitas Terbuka. Readers may be able to use this information about resource allocation and funding to guide their own work.

Source:
Djalil, Aria, Ibrahim Musa, Ratna Kesuma, and Nadia Sri Damajanti. 1994. "The Financing System of the Universitas Terbuka." In Ian Mugridge, ed., The Funding of Open Universities. Vancouver: Commonwealth of Learning, pp. 21–28.

Copyright:
Reproduced with permission.

Introduction

Universitas Terbuka (UT), the Indonesian Open Learning University, is a distance teaching institution created by the government of the Republic of Indonesia to meet an increasing social demand for higher education in the country. The main premise of the system is economy of scale in its operation as a result of the openness of admission and teaching/learning process. UT is open to students of any age who have a high school diploma, and delivers courses through various media such as printed materials, TV, audio cassettes and radio programmes. This educational paradigm which forms the cost structure of UT has a different pattern from the campus universities. However, since UT is a public university, the method of subsidy provided by the government follows the same rule as for other state universities.

This study examines the financing system for UT as compared with the campus universities. It covers issues regarding (1) source of budget, (2) allocation of budget within the university functional units, (3) absorbing capacity of the university and (4) the over time effects of budget allocation on some "output" indicators such as student enrollments, number of graduates, composition of faculty members, number of courses and programmes offered, and research products. Data on the university's revenue and expenditures were collected through interviews with the UT finance authorities and a study of the UT documents. In order to allow a comparative analysis, similar data were also collected from three campus universities; the Institut Pertanian Bogor (IPB), Institut Keguruan dan Ilmu Pendidikan (IKIP) Bandung, and the Universitas Gajah Mada (UGM). These universities, to some extent, reflect the different types of higher education institutions in Indonesia. IPB offers basic science and technology, mainly in agri culture, while IKIP concentrates on teaching and education sciences, and UGM represents universities offering liberal arts, social sciences, and physical sciences.

Source and Budget Allocation for UT

Source of Funds

There are three principal sources of funding for UT: (1) government, (2) student fees and the sale of UT's products, and (3) donations, including foreign aid. The funds from the government are a direct subsidy to UT, allocated through the Directorate General of Higher Education (DGHE) as routine and development budget allocations. The routine budget covers personnel salaries and maintenance, while the development budget is for capital investment (buildings and equipment) and operational maintenance and facilities (OMF). The total revenue for UT for the last three fiscal years 1991/1992–1993/1994 is summarized in Table I.¹

As shown in Table I, the average revenue received from the government is around 44%, and from UT itself, is around 56%. At the initial stage of its development, revenue received from the government for capital investment was larger than that contributed by UT. However, such cost were greatly reduced once investment in such items was sufficient. On the other hand, the increase in enrolments brought an increase in student fees received and also increased the demand for UT's products such as learning materials. It is expected that UT will become a self-sufficient university in the near future.

Methods of Budget Allocation

Funds Received from the Government

These are based on procedures determined by DGHE, through the Planning, Programming, and Budgeting System (SP4). The flow of SP4 is summarized in Appendix A. This allocation procedure is applied to all state universities and higher education institutions. In June of each year, DGHE releases government policies on education expenditures; written in a Co-ordination Program Memorandum (CPM) containing the development budget allocations for all public universities. UT, based on this CPM, submits its yearly expenditure proposal, based on its long, medium and short-term plans, to the DGHE. The proposal has been comprehensively reviewed by the Senate, and approved by the Rector of UT. Proposals from all state universities and higher education institutions are compiled by DGHE and submitted to the Planning Bureau of the Ministry of Education and Culture (MOEQ), and become part of the entire expenditure plan of MOEC. The Planning Bureau submits the proposals to the National Planning Board for review and so that the y can be integrated into the Yearly National Development Budget. In November, DGHE releases the Financial Memorandum (FM) on the basis of which UT's proposal has to be revised and written in the form of a Work Sheet Plan (WSP). The WSP includes: 1) an activity plan; 2) target(s); and 3) costs, and, when completed, is then reviewed by DGHE, DG of Financial Expenditure (Ministry of Finance), and the National Planning Board. This long procedural cycle results in the release of yearly expenditures in the form of an Activities Filled-in List (AFL) for the routine budget, and a Project Filled-in List (PFL) for the development budget. In February, UT and other universities submit their AFL and PFL supplemented by their Operational Guides (OG), including the nomination of project managers for development projects (as well as for the routine budget) to be reviewed (usually formally and politically) and approved by the Minister of MOEC. In late March, the government releases the approved development and routine budget allocations to all government offices for implementation.

Basically, the number of students, curriculum and programmes of study, number of previous graduates, and number of academic and administrative staff are used as the criteria for estimating proposed budgets. Since UT does not require physical facilities such as land, office and classroom buildings to the extent of campus universities, the formulae of cost items stated in the SP4 is not fully applicable for UT.

Funds Received from Students

These originate from tuition fees plus, if any, laboratory fees, and the sale of UT's learning material (mostly printed). The rate of student fees is based on an agreement between the Minister of MOEC and the Minister of Finance. The number of academic credits taken by a student per semester determines the total amount of student fees to be paid.

Table II indicates seven categories of tuition fees (excluding laboratory fees and the cost of learning materials) for a student at UT per semester. On average, the tuition fee is Rp 5000.00 per credit per semester. Students may therefore enrol in the category best suited to their current financial circumstances. The use of funds received from student fees and the sale of UT's products is controlled by policies issued by the Ministry of Finance. UT completes a List of Activities Plan, indicating the predicted receipts and expenditure plan. The plan is reviewed by the DG of Financial Expenditure (Ministry of Finance), then approved by the Ministry of Finance, and finally confirmed by the State Treasury Office. Compared with revenue from the development budget, however, UT has more autonomy in designating the use of student fees.

Funds Received from Other Sources

These depend very much on UT's reputation and its ability to establish affiliation and co-operation with other agencies; private and public, in the country and out of it. Some funds are directly provided to UT and some others are provided through MOEC, i.e., DGHE. To date the significant revenue from foreign aid comes from the Canadian International Development Agency (CIDA). The largest part of the CIDA contribution is allocated for staff development, with fellowships for UT's staff to study in Canada. There is also an allocation for technical assistance and research. Some agencies in the country provide research grants, and pay for UT services such as instructional design and the development of materials, examinations, or training.

Following is a brief description of how funds received from the sources mentioned above are allocated to units and faculties in UT, both at Central Office and at Regional Centres. Soon after UT receives its annual expenditure plan from MOEC, each unit and school submit their proposals to the Rector, through the UT Planning Committee, for review. Then the Rector issues a decree to respective units. In general, the criteria used for allocating funds to the units and schools include the number of staff, number of students, and number and scope of their programmes. Funds allocated to Central Office are managed by Assistant Rector II, assisted by the Head of the General Administrative Bureau and the Planning Committee; whereas funds allocated to Regional Centres (RCs) are managed by each respective RC. There are three categories of allocation; 1) activities, 2) expenditure categories, and 3) functional units or users.

The allocation pattern for UT is similar to that of the campus universities. Therefore, difficulties arise in fitting the pattern to that generally applied by distance education institutions, ie. for (1) administrative systems (including admission and registration); (2) the production system; (3) the instruction system (including delivery); and (4) the evaluation system. (Srisa-an, 1986).

Table III illustrates the allocation of the UT budget in terms of activities. It indicates that the largest allocation, more than 70 percent, of UT expenditure is devoted to operating activities, including capital and recurrent costs for buildings and other physical facilities, equipment, vehicles, maintenance and overhead, salaries and honoraria. The costs for administering admission and registration and the distribution of learning materials to students are also part of this category.

The second largest allocation (21 to 27 percent) is for educational programmes (teaching related activities) such as programme design, development and the writing of instructional and examination materials, audio cassettes, radios and TV programmes, tutorials and other academic services.

Less than 2 percent of the UT budget is allocated for research, community services and student support services. 'Student Affairs' covers expenses for extra curricular items such as social activities, study groups, group discussions, seminars, scientific paper writing competitions, etc. Research and community services, which primarily focus on institutional research programmes and research training for UT's academic staff, have received significant allocations over the years.

As indicated in Table IV, the salaries of staff and honoraria for module writers, exam item constructors, tutors, consultants, and examination supervisors represents the highest portion of expenditure. UT operations are labour rather than capital intensive. The second largest expense category is for buying equipment, stationery, computers and their peripherals, and for transportation. Expenses for maintenance and travel are 7 to 10 percent of the total, with the smallest portion allocated for travel. The final category, "Other," is large because it covers expenses for administration and land. Until the fiscal year 1991/1992, funds were divided only between the UT Central Office and Regional Centres. Beginning in 1993/1994, the allocation will be made according to the needs of each unit.

Table V provides information on the allocation of funds in terms of functional units or users.

Table V indicates that the largest portion of funds is allocated to the UT Central Office (Head-Quarters). The rest is allocated for Regional Centres, to support their activities which are mainly limited to registration and tutorial services. This indicates the centralized planning and operating management system at UT.

Absorptive Capacity

'Absorptive capacity' refers to the extent that funds allocated are actually spent. The capacity varies depending on the fund sources, the procedural complexity, and the magnitude and characteristics of programmes and activities. The data suggest that routine budgets show the highest absorptive capacity, since most of the budgets are fixed and used for salaries. The spending procedures are simple, the number of staff to be paid is easy to count. This is not always the case, however, for the development budgets. As mentioned earlier, most of the budgets are allocated for building construction and the purchase of physical facilities and equipment for which the procedures are complex. The administrative red-tape is intense, with many formal and informal channels to go through. The complexities are amplified by the annual zero-based budget allocation system. Some factors beyond the control of project managers, such as a sudden increase in price, or change in government monetary policy, may also lead to an inab ility to complete all procurements needed in that fiscal year.

The recruitment of module and test item writers also affects UT's ability to absorb the budget allocation. The availability of module writers and test constructors is not easily controlled by UT deans since most of the writers are faculty members of campus universities. This frequently results in delays in the completion of instructional materials.

Research programmes and activities are also subject to delay. The number of UT students has rapidly and significantly increased, and they are scattered unevenly over thousands of islands. Most of the time and energy of UT faculty and staff is consumed by managerial and administrative tasks to serve UT students. This makes it difficult for faculty members to focus their attention on research. Many research projects assigned to them can not be completed on time.

Effects of Funding

Changes in UT financing should have measurable effects on indicators such as enrolment and graduation rates, number of research works, number of staff or number of courses taken by students, but the financial data do not provide a clear relationship. It is difficult to infer the effects of government funding on the efficiency or effectiveness of UT operations.

A significant increase in enrolment over time promises improved cost recovery which has the potential to compensate for level of government funding. The problems that still exist, and that could become more serious, are related to the capacity of providing quality services. UT still relies heavily on a single instructional medium-the situation has not changed very much since 1990 (Unesco, in print) when printed material accounted for 96% of instructional media. Audio cassettes (2%), television (0.5%), radio (0.5%), face to face tutorial (0.5%) and 'others' (0.5%) accounted for the remainder. Processing student registration records and distributing learning materials on time are problems that cannot be resolved in the short term because of UT's wide geographical coverage, the number of students and number of courses being offered.

Another problem is the saturated enrolment level in social and political science programmes. This problem may result from one of the 'myths' of distance education (Suparman, 1992) and may lead to limiting UT to offer only programmes of study which do not need technical-practical elements. This will restrict UT in balancing its programmes and serving a greater variety of community needs in education and personal development.

Considering the wide coverage of UT, "decentralization," broadly and more operationally defined, is badly needed in order to offer quality academic as well as administrative services to students. At the same time decentralization could improve UT's capability of providing higher education services in terms of access and equity. Such an option is likely to strengthen Regional Centres. However, the existing concepts and the beliefs have not yet supported this option. Providing Regional Centres with more decentralization could increase management costs, as the implementation of the option will require more staff, equipment and appropriate organizational and personnel structures. In addition, some think that decentralization will create many universities within a university, which in turn will lead to an inability to centrally control the regional centres.

Some Statistics

The following table presents UT statistics which indicate the number of students and graduates, number of academic and administrative staff, and both research and text titles completed during the last three years. It is logical to assume that there should be a correlation between ways, methods, and the amount of funds allocated by the government and UT itself on its operations and, in turn, on its output. Limitations in time series data cause difficulties in applying appropriate and stringent statistical methods, and hence make it less possible to answer questions on such relationships.

Table VI provides some useful UT statistics for the last three years.

Some Remarks

As pointed out by Tsang (1987), the information basis for educational costing remains in a primitive state, especially in developing countries. Wide gaps often exist between what data are needed and what data are available. Data from central levels (government or central office) are usually accurate for planned expenditures, but are often not true for actual education expenditures. For UT, the difficulties in cost analysis, as already pointed out, are far more complex. The classifications of educational expenditures and costs are not in categories that are relevant for distance education, and hence create analytical difficulties. Adding to the difficulty is the need to keep all records clean, complete and up to date as well as retrievable, a situation to be developed and emphasized more than it has been to date.

NOTES