A future-proof financial position

A strong and balanced financial position ensures the continuity of education and research.

In 2022, the university received additional funds pursuant to the Administrative Agreement the universities signed with the Minister of Education, Culture and Science (OCW) in the form of start-up and incentive grants and sector plans to create ‘peace and space’. This will enable the university to address workloads and create space for unaffiliated research. These additional funds were not foreseen in the 2022 budget. Partly at the Minister’s insistence on diligence in spending the funds, the Executive Board distributed the grants to the faculties in 2022. The funds will be released based on a spending plan.

The year 2022 ended with a negative operating result of €13.8 million. The budget for the year projected a negative result of €18.1 million. The university handles public funds prudently and has no investments.

The negative result of €13.8 million realised for 2022 is €4.3 million less negative than budgeted. This difference can be broadly explained as follows:

Liquidity increased by €42.6 million to €118.2 million at the end of 2022. This increase is a result of additional government funds received in advance to be spent in future years, an increase in tuition fees received and stricter monitoring of the application of payment deadlines.

The university has assessed whether the developments in the pandemic after the balance sheet date affected the continuity assumption. We concluded that there is an uncertainty, the extent of which cannot yet be estimated.

Given the expected developments in the liquidity position and the lump sum of government contributions, there is no material uncertainty about the continuity of the university as a whole. As in 2022, the negative pandemic effects in 2023 are mainly reflected in the loss of turnover in the catering and sports facilities. The personnel costs were higher than budgeted but lower than they would have been without the extra funds received. This was caused by not filling vacancies or filling them later.

The main reason for the further decline in the result from 2021 (€5.3 million negative) to 2022 (€13.8 million negative) lies in the deliberate decision to increase expenses by €47.1 million, which is greater than the increase in income (€36.0 million).

Direct government funding increased by €22.7 million in 2022, due mainly to wage and price adjustments (€12.6 million) and reference estimates (€13.9 million). More in detail:

Tuition fee income decreased by €4.7 million due to a temporary halving of statutory tuition fees. Incidentally, the government compensated for this reduction through an increase in direct government funding. The ‘income from third-party work’ increased by €11.2 compared to 2021, mainly due to a catch-up effect of activities delayed or postponed by the pandemic in 2021. The ‘other third-party income’ was €8.4 million higher than in 2021, partly due to higher revenue from catering facilities.

Personnel costs rose by €38.2 million, mainly due to higher staffing levels (as of 31 December 2022, the total workforce was 258 FTEs more than at the end of 2021), a related increase in leave liability, and an increase in collective labour agreement wages. The magnitude of depreciation and accommodation costs is comparable to 2021.

Other costs increased by €11.7 million. That increase was mainly due to:

The operating result for 2022 (€13.8 million negative) is less negative than in the 2022 budget (€18.1 million negative). One reason for this is the increase of €11.8 million in direct government funding and of €4.2 million in third-party income, which is offset by an €18.8 million increase in personnel costs. Apart from the increase in staffing levels, the increase is also caused by higher collective labour agreement wages (€9.4 million).

Income from tuition fees was €4.8 million higher than budgeted due to an overly conservative estimate when drawing up the budget. Depreciation and accommodation costs remain in line with the budget.

The financial income is €2.5 million higher, much of which is related to the fact that the present value of a number of facilities was redetermined due to increased interest rates.

The Bestuursakkoord Nationaal Programma Onderwijs (NPO administrative agreement for education) and the Bestuursakkoord NPO onderzoek ‘Steunprogramma voor herstel en perspectief onderzoeker’ (NPO administrative agreement for research ‘Support programme for recovery and perspective of researchers’) were published and discussed in the House of Representatives on 21 May 2021. On 5 July 2021, the University Joint Assembly (UGV) approved the plan for spending the NPO education and research resources. A lot of hard work went into developing a solid plan that prioritised student well-being. This involved collaboration across the university with various disciplines and with all faculties and institutes. At the request of the UGV, the method of monitoring progress towards the goals set was added to the plans. €11.5 million in total has been allocated to Radboud University from the NPO administrative agreements for education and research. The NPO education resources may be spent in the years 2021–2023. The NPO research resources may be spent in the years 2021–2024.

The progress achieved in 2022 and a future outlook are detailed in Appendix 1 of the annual report.

The tangible fixed assets decreased slightly compared to 2021 (€3.3 million) because investments were lower than the depreciation of existing assets.

The €42.6 million increase in cash and cash equivalents was mainly caused by the increase in current liabilities (€73.5 million). Important elements in this are the €17.1 million increase in the volume of projects in progress (grants received in advance), the stricter enforcement of payment deadlines (€21.0 million) and funds received in advance for sector plans and start-up and incentive grants (€10.1 million).

Equity decreased due to the negative result. The lower provisions are mainly a result of valuing them at present value since 2022 (higher discount rate).

Tangible fixed assets were lower than budgeted due to under-investments totalling €11.2 million less invested than budgeted.

Cash and cash equivalents showed a substantially higher balance than budgeted: €86.9 million. Besides fewer investments (€11.2 million), there was higher working capital (a positive difference of €60.8 million) than budgeted. The reasons have already been mentioned above: increase in funds received in advance (more advances received for R&D projects, passivation of unused funds under the sector plans, and start-up and incentive grants), better enforcement of payment deadlines as well as a higher liability due to increased leave balances.

The cash flow overview for 2022 (realised and budgeted in € million) is as follows:

The university estimates negative operating deficits for the coming years, which is in line with the policy of the Ministry of Education, Culture and Science. In keeping with what has been expressed in this regard in the 2023 budget, the university is aiming to rebalance its operations from 2027.

In the coming years, investments will be made in the quality of education and research by recruiting additional staff, partly to reduce the workload and increase the wellbeing of both staff and students. In addition, investments will be made to strengthen the organisation around privacy and information security. Finally, the university is preparing for a major improvement in its real estate portfolio (the Campus Plan).

The budgeted result for 2023 is €19.8 million negative. In 2023, the university will maintain its investment in the quality of education and research initiated in 2022. The expansion of (academic) staff is intended not only to improve the education and supervision of students but also to reduce the workload. As was the case in the 2022 budget, the 2023 budget also anticipates that the tight job market will mean that not all budgeted vacancies can be filled.

Negative results are also projected for 2024–2027. At the same time, the external environment is no longer as stable as many years before. This is partly why we are facing an increase in the previously projected and accepted multi-year structural deficits, which, with unchanged policies, threaten to continue beyond the current forecast period. Without measures, this is going to put a disproportionate strain on the capital position, and this will impact the plans that have been established and are in preparation to maintain Radboud University over the long term. It is very important to closely monitor the developments of the reference estimate and market share as well as the development of wage and price compensations. There will be more clarity on this in spring 2023. At that time, it will also be possible to take stock and determine whether, and if so what, spending cuts should be initiated. These will then be used as input for the 2024 Policy Letter.

In the table below, the FTE development in the years 2021–2027 is set against the number of students. Student numbers will initially increase slightly and are expected to remain constant from 2025 onwards, in line with the strategy. The university strives primarily for quality rather than quantity. Due to the extra investment in staff in the next few years to continue to offer quality and reduce the workload, we see a favourable development in the ratio of academic staff to the number of students. This will facilitate teaching in smaller groups and intensification of student guidance.

The number of employees increased in 2022 compared to 2021. This is related, among other things, to the extra staffing investments from the additional structural resources (reference estimate 2021) and should lead to a better balance between education and research and a reduction in overall workload.

The projected balance of cash and cash equivalents at the end of 2022 in the 2023 budget was €107.6 million. The realisation at the end of 2022 shows that the final position was €118.2 million, €10.6 million higher than forecast. As a result of investments of €42.7 million, a decrease of €21.4 million was budgeted in the 2023 budget (from €107.6 to €86.2 million).

The development of tangible fixed assets is based on the multi-year investment projection (MIP) of July 2022. The campus plan, adopted and approved in 2022, details the vision for the campus over the next ten years and has been partially included in the 2023 budget and the multi-year estimate. The MIP of July 2022 includes projects that are already being implemented (e.g. Energie HEN++ and modifications to the Huygens building), projects that have already been decided upon (e.g. energy-saving measures) and projects that have yet to be decided upon (e.g. accommodation for the Faculty of Philosophy, Theology and Religious Studies and the Faculty of Arts). 

Of the roughly €297 million investment/maintenance expenditures for the 2023-2027 period, approximately €85 million has been decided definitively. Concrete elaboration and decisions have yet to be made for the remaining €212 million. Pending a final decision on these investment and maintenance expenditures, negative liquidity balances (of €14.2 million) are expected as of 2025, which will necessitate the acquisition of loan capital.

An investment of approximately €43 million was estimated in 2023, of which approximately €31 million is for buildings and approximately €11 million is for equipment and inventory.

In the period from 2021–2027, provisions will decrease by €8.7 million. This mainly relates to the senior staff scheme, which can no longer be used and will be phased out over the next few years (minus €1.4 million), and the demolition and asbestos removal (minus €4.6 million) as a result of carrying out the planned work.

The estimated changes in provisions up to and including 2027 are as follows:

The university meets the signalling values for solvency and resilience. The Inspectorate increased the signalling value for the liquidity ratio from 0.50 to 0.75. This value was not achieved on the balance sheet date, but there is no liquidity deficit. The budget is based on an amount of cash and cash equivalents of at least €25 million. The government’s payment schedule follows the expenditure pattern in terms of volume. Ample pre-financing of research projects (€97.2 million at the end of 2022) is also a regular source of funding, which contributes to liquidity.

In line with the wishes of the Minister of Education, Culture and Science (OCW), the university is temporarily showing a negative budget, which means the signal value for profitability is not being met.

With regard to solvency, the Inspectorate of Education has also determined a value for the maximum size of ‘public’ equity. This gives an indication of the maximum amount of equity the university may reasonably require for healthy operations. The calculation is as follows: the purchase value of the buildings (x 0.5 x 1.27) plus a risk buffer of 5% of the total income minus 75% of the provisions. Based on figures at the end of 2022, this leads to a maximum permitted (public) equity of €506.0 million for Radboud University. The actual amount of these funds at the end of 2022 was €228.2 million, which is well within the norm. For the entire period from 2021 up to and including 2027, the university also meets this norm:

In 2020, Radboud University switched to ‘treasury banking’, whereby surplus public funds are held at the Ministry of Finance. A major advantage of this is that there has been no negative interest. Beginning in the last quarter of 2022, the university will again receive interest on funds held at the ministry.

The treasury charter was updated in 2022. The starting point for the process of controlling, managing, and monitoring current and future cash flows is the creation of strategic plans for education and research and the future property investments based on it. The charter explicitly states which guidelines Radboud University follows in its investment policy, financing policy, participation in legal entities, and loans to legal entities. Furthermore, the charter’s basic principles are in line with the guidelines from the Ministry of Education, Culture and Science. The university is registered as a non-professional investor in its banking relationships.

Detailed, weekly-updated liquidity statements are used to continuously monitor liquidity flows within the university. There are no investments or derivatives.

With regard to financing risks, Radboud University:

Risk management is an integral part of the planning and control cycle. In 2022, the university took further steps to deal consciously and deliberately with risks related to the university’s strategy and objectives. Risk management is part of the discussions in the planning and control cycle. A more detailed account is included in the ‘Our organisation’ chapter of this annual report.

Based on the Helderheid in de bekostiging van het hoger onderwijs (Clarity in the Funding of Higher Education) memorandum dated 29 August 2003 and the supplement of 27 August 2004, the Ministry of Education, Culture and Science asks for clarity regarding the following funding-related matters.

On 14 April 2021, the Ministry of Education, Culture and Science provided further clarification on the conditions under which the university may invest public funds in private activities. With this clarification, theme 2 (investing public funds in private activities) of the clarity memorandum was superseded; this also applies to De Handreiking voor de inrichting van onderwijskundige publiek-private arrangementen (The Guideline for the Organisation of Public-Private Educational Arrangements), published in 2011.

The conditions are:

The Ministry of Education, Culture and Science postponed this last requirement until the 2023 reporting year, which means that theme 2 of the clarity memorandum still applies to reporting on 2022.

The university has an overview of its private activities and has appropriate procedures to manage them.