An evaluation of the contribution of income generating units in financing public universities: a case of Egerton University and former constituent colleges

Abstract

Income generating Units have been in operation in the public Universities since their inception in 1990s. Their establishment was meant to cushion the Universities from the effects of the reduction of Government capitation to finance their recurrent and capital expenditure. The Government of Kenya was the sole financier of higher education until 1991 when it became unable to fully finance this education. To find a way out of this fiscal distress, Public Universities were called upon to implement new ways of generating extra income to supplement the ever decreasing capitation from the Government. As a wakeup call, Public Universities initiated various income generating activities which include Module II Programme, Research & Consultancy services, Commercial ventures like hotels, hospitals, fuel stations and general production units, among others. However, most Public Universities are still suffering from financial distress despite the creation of these IGUs. The study sought to evaluate the contribution of the IGUs in financing Public Universities. The study was conducted in Egerton University and its former constituent colleges by December, 2012 and the results were inferred to represent all Public Universities as they are managed by same legal and financing structures. The study population consisted of 22 deans, 2 directors of institute 14 IGU managers and 4 Finance Officers in Egerton University and its Constituent Colleges. A census was conducted on all the 42 members of staff as the group was small and manageable hence there was no need of further sampling. Data was collected using self-administered questionnaires and documentary records. Data analysis was done using descriptive statistical analysis where frequency, means and percentages were used. Financial ratio analysis were employed to analyze the financial performance of the IGUs over a period of ten years from 2003-2012. Data presentation was in form of tables and pie-charts. A correlation statistical analysis was performed to establish the relationship of IGUs and University expenditure. The findings indicated that the IGUs are contributing very little to financing public Universities expenditure. To improve the financial performance of the IGUs in Public Universities, there is need to have a radical change in planning and execution of IGUs and also establishment of investment companies to manage the IGUs. Public Universities should also set clear guidelines on utilization of the internally generated funds. For further research it was suggested that a similar study can be conducted in other Public Universities and also a study on factors affecting financial performance of IGUs in Public Universities.