Notes and Communications: Financial Policy for Schools and Universities

Summary Educational institutions in the Netherlands have some degree of economic independence. Their management decisions are not guided completely by a budget system, but in part also by a market mechanism. Still, budget management is crucial as survival is not primarily determined by the amount of equity capital, but by the annual funding received from the government. For the evaluation of capital management, a capitalization factor is introduced to measure the amount of capital employed by an educational institute in relation to its annual income. It can signal possible inefficiencies reflected in excessive capital assets. Actual budget and capital management is assessed with the help of four financial indicators. There appears to be scope for improvements in financial policies and some recommendations are offered on how to attain them.