Public University System of Financial Risk Causes and Control Measures

[Abstract] China's public universities face debt risk, Investment risk and financial management risks, how to control and prevent the Financial Risk is the current public universities urgently need to address the problem. The current university system is imperfect, is public college Financial Risk to form the root of effective control Public Universities Financial Risk, need to transform government functions and strengthen the university responsibility; establish a scientific decision-making mechanism, promote sustainable development; the implementation of Economic responsibility, hardening budget constraints; strict internal control system, improve the supervision mechanism.

[Keywords:] colleges and universities; Financial Risk; system causes; Control Measures

I. Introduction

The rapid development of Higher Education, so that in a relatively short time of Higher Education from elite Education to mass Education changes, the political, Economic and social development played a positive role in promoting. University fiscal, financial, credit , donations and other means, multi-channel financing of construction and development funds, total funds have increased more than before enrollment. However, public universities in large construction, development, due to lack of government Investment, bank loans mainly from the construction funds, resulting in debt risk arises. Meanwhile, the public universities of the Investment risk and financial management of risk can not be ignored. how to control and prevent the Financial Risk is the current public universities urgently need to address the problem. The current university system is imperfect, is public college financial risk to form the source, therefore, Public Universities to control financial risk, need to proceed from the reform of the current university system.


Second, the public universities of the main types of financial risk

(A) of debt risk
To meet the enrollment needs of colleges and universities in more than a large-scale construction of school premises, rapid growth of demand for construction expenses. In Higher Education has expanded rapidly and in the context of insufficient government funding, universities mass huge amounts of money needed for the building mainly from bank loans. As Absence of government regulation and the repayment responsibility blurred, many universities to expand the size of loans the blind, the loan amount far beyond its Economic capacity. Higher revenue funding to maintain daily operations can only be basic, with the power of university itself unable to repay huge loans and interest. the face of maturing loans, colleges and universities generally adopted the practice of "borrowing new loans, but also the old loan", the lack of repayment responsibility. to the practice of credit loan to avoid the university funds can only be a temporary strand breaks, once the banks refused to lend colleges and universities will be plunged into financial crisis, to a "blind Loan - financial crisis - bad loans - the financial burden" of the old state-owned enterprises.

(B) Investment risk
Higher Investment risk including the risk run industries and other Investment risks. Run enterprises and social services, social donations and other income was seen as having college potential revenue stream, but a long time, the existence of property rights by University Enterprises is not clear, regardless of what prices, the ability to respond to market changes and poor range of issues, University of the long-run enterprises can not be return on Investment. As public universities run industry, investors and management system can lead to bear civil liability independently run enterprise, The financial risk is actually borne by the university, once the school-run enterprises incurred losses or bankruptcy, colleges and universities will be involved in the financial form a college of financial risk. In addition, some college Education in order to pass the Government's assessment, in order to meet the higher level needs of blind Investment in the development process of hardware facilities such as laboratories, teaching equipment, buildings, etc., but the lack of Investment projects scientific, rational argument, do not pay attention to efficiency in the use of funds, so easily lead to repeat purchase or idle assets, resulting in great waste of money. In addition, colleges and universities rely mainly on these Investments in bank loans, and these investments did not achieve the desired benefits, so that the formation of new bad debt college, increasing the debt burden, lead to investment risk.

(C) Financial risk management
College Financial risk management mainly refers to the school of financial management irregularities, absence or omissions, mistakes caused by investment in schools, management control, public funds to embezzle, embezzlement and corruption possible or actual loss and the formation of risk. While many colleges and universities face the pressure of debt service, but the Educational resources have not been effectively integrated and used, asset repeat purchase, material and financial resources wasted, the loss of assets have occurred from time. In addition, in recent years, university infrastructure was corruption and corruption case multiple trends, has aroused extensive attention. University leadership power is too concentrated, the internal control mechanism is not perfect, is the absence of regulation universities phenomenon of corruption incentives for financial risk potential problems. In addition, the daily financial management of universities , due to large amounts of cash inflows, outflows and business income and expenses unequal relationship between the university may be shortages of liquidity risk.


Third, the public universities in the system causes of the financial risk

System determines behavior. University highlights the financial risk is in the College of the University system is imperfect reflection of the specific financial area. Higher debt originated in the large enrollment, University College Investment anomie is the result of the lack of scientific decision-making system, due to loss of assets financial management system is fLawed. But this is only the surface of the deep-seated reason is that the current university system is inherently fLawed.

(A) lack of university status of legal entity
<<People's Republic of Higher Education Law "> states:" Universities should be for the community, according to the Law schools on their own, democratic management, "" institution of higher learning to obtain the approval date of establishment of legal personality. The president of Higher Education Institutions of Higher Learning legal representative. Higher civil activities in accordance with Law in the civil rights and bear civil liability. "government from the law provides for the legal status of public universities, and through a series of initiatives to expand the autonomy of university Education. However, the corporate public universities status has not been effectively protected, public universities are not as self-management, self-restraint of the legal entity. public universities and government relations is still the national administrative system within the lower and higher levels of the relationship between public universities as the government-affiliated body position did not do change. as a subsidiary body of the public universities there is no independent property, can not bear civil liability independently, and thus a lack of awareness of self-restraint, free to expand the size of loans, blind investment, heavy investment in light performance, weight management, procurement of light are quite serious, ignore these behaviors financial risk posed.

(B) of the University of soft budget constraint
"Soft budget constraint" concept was first proposed by Ke Erna in his book <<a shortage of Economics>> raised. Many scholars believe that the existence of soft budget constraint of public universities is the source of large-scale loans, is public college finance risk of important reasons. Lin Yifu, who believe that state-owned enterprises, "the policy burden" is the root cause of the soft budget constraint. For public universities, the expansion of enrollment is its "policy burdens," which has become a Public University The best reason for a large-scale borrowing. Public University and College loans are attendant large-scale enrollment, college enrollment decisions balance the development of both the Government of the derivatives, or acquiescence of the Government is strongly promoting the results. Therefore, the government is lending the Public University Invisible guarantor, the government-run university hopes to repay the loan, thus expanding the size of loans, arbitrary choice of use of the loans, regardless of the resulting risk. because of information asymmetry, the government is difficult to clarify the government itself, universities, banks in large universities responsibilities loans. The Government can not determine the public universities in the number of large loans to meet the enrollment needs for essential expenses incurred, can not determine the decision-making mistakes in college leadership, mismanagement, led to blind investment, loss of assets and to what extent increased the amount of running costs. Therefore, when the public universities face financial difficulties, the Government will almost automatically give assistance. which led to public universities lack of self-restraint of power, lack of risk awareness and responsibility.

(C) of the University of supervision and restriction mechanism failure
Large enrollment university in 1999 after the commencement of the government's encouragement, the university apply for a loan to the bank almost no obstacles, many universities borrowing school. Higher loan to build inadequate government investment eased the shortage of funds caused difficulties for a short period of higher rapid expansion of education provided funding support. However, there is no lack of Loan extravagance and waste during construction of the phenomenon of super-luxury school, large squares and the campus is a typical representative of the ultra-standard construction. In the scale of the rapid expansion of college debt, loans, non-standard use of funds prevailing circumstances, the absence of government regulation, neither the scale of effective control of college loans, nor does it strictly limited the use of loan funds and review purposes. In addition, although the government for the university financial, has issued a revenue and expenditure management, treasury centralized payment and other policies, but did not repeat the purchase of equipment to effectively prevent universities, public funds, set up illegal "small treasuries", the case of infrastructure projects, corruption and the generation frequency of such phenomena. Obviously, the Government has failed to effectively supervise the financial conduct and restraint University The Government's monitoring mechanism and restraint mechanism failure, lack of responsibilities, rights and interests distinct institutional constraints and accountability mechanisms.

(D) university decision-making and financial management system is imperfect
Public University is party to implement the responsibility system under the leadership of colleges and universities strong sense of internal administration, the lack of checks and balances of power. In the current system, college administrators tend to cater to the needs of the government, a choice for self-development decision-making, the pursuit of performance engineering, to seek political capital, rather than the actual needs of the school development or long-term development as a starting point for decision-making. Higher loan amount and purpose, investment decision-making related to financial behavior, often reflected the "the will", the lack of scientific proof and democracy decision-making process. Faculty Congress to exercise democratic management is an important organizational form, but it does not stop school administrators to make long-term development is not conducive to making the school can not effectively monitor the power of school administrators. bad investment decisions, the size of loans out of control , misappropriation of public funds, fixed assets, such as the loss caused by a series of serious financial risk, suggesting that the lack of public universities within the scientific and democratic decision-making mechanism, the lack of sound financial management system, the lack of tight internal control system. reposted elsewhere in the Research Papers Download http: / / www.hi138.com four Public Universities Financial Risk Control Measures

Of Higher investment and financing decisions key factor is the system. Public Universities huge debt formation and investment behavior of anomie, asset loss, etc., in the final analysis reflects our current university system is imperfect. Therefore, control of the Public University of debt risk, investment risk , financial management risks, the key is to reform the university system, a true sense of the modern university system. University of reform should be clearly defined responsibilities College principal financial risks, and strengthen financial management at risk awareness, responsibility and cost-conscious, improve the Economic activities of the restraint mechanism College, the Constitution of the sustainable development of university financial institutions, universities from the source to control financial risk.

(A) the transformation of government functions, and strengthen the responsibility of University
To promote the university establish a risk awareness and sense of responsibility, the Government must protect the university's independent legal status. No independent legal status, public universities can not become truly self-development, self-restraint of the legal entity, and therefore can not independently assume financial responsibility . At present, the management of public universities embodies the strong color of the Chief of the Government, through the various documents and administrative directives to achieve the University's direct control and intervention. to strengthen the public universities and their managers in the financial behavior and financial activities sense of responsibility, the direct control of government functions should be converted to macro-management and intervention and services. The Government should improve the laws and regulations through a series of financial behavior in universities; through the university's performance appraisal, the implementation of performance budgeting and performance funding, and guide the university equity and reasonable competition; through the establishment of smooth channels of information for the college to provide information services to enable colleges and universities of professional settings, personnel training mode to adapt to new market demands. through the transformation of government functions, a clear public universities in the legal status and legal responsibility to promote public universities for the community to law schools on their own, independent financial responsibility to promote prevention and control of its build awareness of financial risks, the scientific school development planning initiative to prevent financial risks.

(B) establish a scientific decision-making mechanism, promote sustainable development
Scientific financial decision-making mechanism is prevention and control of universities based on financial risk. University decision-makers must establish the concept of sustainable development and the concept of financial risk, considering the actual development needs of the school, taking into account the long-term development of the school. First, to achieve financial decision-making democratization. university leaders in making financing and investment decisions, should listen to staff, students, alumni and other stakeholder views, reflecting the democratic decision-making and multi-agent decision-making, the formation of checks and balances of power, out of financial decisions, "the will of "constraints. Second, the strict proof to scientific decision-making. any financial decisions must be based on a scientific basis. investment decision to comply with the actual situation of the school and overall strategic planning, involving a large amount of investment projects adequate internal and external experts should be organized to demonstrate the feasibility of the project and proposed improvement measures to ensure the scientific nature of decision-making to prevent investment risks.

(C) implementing the Economic responsibility, hardening budget constraints
Establish a sound system of financial responsibility of financial management in universities, improve the awareness of college financial risk prevention and effective way. Universities should be based on "Who is in charge, who is responsible for the" principle, the establishment of various departments of the economic responsibility system, clear leadership and accountants at all levels work in the financial rights and responsibilities, the implementation of accountability system, improve the penalty system. the economic responsibility system should be run through the various financial activities and college work, including basic construction projects, funding and use of school-run industries and foreign investment state-owned asset management, the establishment of a full range of economic responsibility system to ensure the integrity and security of state assets to raise funds to use efficiency to achieve financial sustainability.

Public Universities soft budget constraint is blind loans, do not attach importance to efficiency in the use of funds and assets secure the main reasons. First, the Government should fully respect the autonomy of universities, a policy to minimize the burden of college. Our situation is assumed over public universities number of policy burdens, leading to the production of soft budget constraint. Higher education has a unique orbit of law and, if given too much outside interference and control, the decision will directly affect the university is not conducive to play college functions. The second to change the assessment criteria of college and university leaders on the assessment indicators. the government pay more attention to the assessment of university examining hardware conditions, routine assessment is often a mere formality, and spend a lot of manpower, material resources; the Government's assessment of university leaders often not the term of the school leadership and financial position of financial responsibility into the assessment indicators. Therefore, the Government should reduce the scale of construction materials on the university's concern, strict monitoring of the university's key financial indicators, the status of financial operations and asset management for assessing university an important indicator of the leader, prompting College Leaders establish cost control awareness, and consciously safeguard college financial sustainable development.

(D) strict internal control system, improve the supervision mechanism
Establish a sound internal control system is to prevent loss of assets, efficient use of resources an important measure. First, establish a strict licensing approval system functions to schools dealing with economic business scope, authority and strict control procedures. Infrastructural projects, bulk procurement funds to pay for other important business, for approval by the school leadership, to prevent excessive concentration of power of individual leadership, and improve transparency in the use of funds, the establishment of an accountability system. Secondly, to strengthen the use of assets management. should be clear responsibility for asset management division of labor, enhanced inventory system, fixed assets on a regular basis, so that loss accounts, accounts are, to prevent the loss of state assets. Third, the scientific establishment budget. university budget should always adhere to the "live within our means, balance of payments," the general principle, it is necessary to consider the actual needs of school development, but also to measure affordability, the university level and adjustment of the budget process for the preparation of scientific planning, to ensure that the seriousness of the budget, reduce its arbitrariness. Fourth, the financial risk early warning mechanism to the core Financial risk management system. by solvency, operating performance, profitability, growth potential and other early warning indicators of financial risk analysis, evaluation of the potential of university financial development, measured by the size of university financial risk, a risk identification, assessment and resolve the organic combination of financial risk management system.

Government College Financial risk control and supervision, other than through administrative means, the assessment by social intermediary institutions, the introduction of external oversight mechanisms, effective monitoring of college financial behavior. University evaluation agencies, including government staff members, experts and scholars, the community , teachers, educational administrators, etc., it is the status of an independent entity, free from government administrative intervention, according to laws, regulations and policy autonomy, independent of university teaching, Research, financial condition and operating efficiency assessment, and regularly to the community release the findings. to exert their oversight functions, strengthen the college financial risk monitoring, surveillance of major investment projects, use of the funds to ensure the sustainable development of the financial health of universities.

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