OCW signalling values
* (equity + reserves) / total liabilities
** current assets / current liabilities
*** ratio in accordance with MIP
**** equity / total income
**** operating result / total income
Explanation for signalling values
With the exception of the liquidity ratio and the profitability ratio, all the signalling values set by the Inspectorate of Education are being met in the long term.
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. Radboud University’s existing financial policies are demonstrably appropriate, consistent and reliable. The budget is based on an amount of liquid assets of at least €20 million. The government’s payment schedule follows the expenditure pattern in terms of volume. Ample pre-financing of research projects (€69.3 million at the end of 2021) is also a regular source of funding, which contributes to liquidity.
Radboud University therefore opts to continue its current policy and applies the old signalling limit of 0.50. In so doing, the university has decided not to take measures to raise the ratio to the new threshold of 0.75, such as increasing the result or securing additional bank financing. One reason for this decision is that such measures would come at the expense of funds available for the primary process. In addition, higher equity is neither economically nor socially desirable and is not in line with the policy of the Ministry of Education, Culture and Science regarding the development of equity at universities. If the campus plan is implemented, long-term funding will have to be raised from 2023 onwards. Preparations for this have begun.
The Inspectorate of Education has not explained the reason for the increase in the liquidity ratio. In connection to the Universities of the Netherlands (UNL) and based on the same substantive reasoning used by Radboud University, it has been suggested that the Inspectorate create a ‘very large’ category that would include all UNL universities and in which the liquidity ratio would be reduced to 0.5. The Inspectorate is considering that suggestion.
In line with the wishes of the Ministry of Education, Culture and Science, 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 signalling 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 operational management. 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 2021, this leads to a maximum permitted (public) equity of €503 million for Radboud University. The actual amount of these funds at the end of 2021 was €228 million, which is well within the norm. For the entire period from 2020 up to and including 2026, the university also meets the signalling value.
bedragen x € 1.000
Public equity capital
Normative equity capital
Acquisition value for buildings *0.5*1.27
5% of the income
Book value of other tangible assets
The liquidity will be below the 0.75 signalling value from 2022 onwards. This is because, for a number of years, the university has been aiming towards reducing the balance of liquid assets by financing investments in buildings with its own money, as much as possible. Financing with short-term borrowed capital will be arranged in 2022 so payment obligations can always be met. If the campus plan is implemented, long-term financing will have to be taken into account from 2023. The preparations for this have begun.