QA4ODFL1/Structure/Financing

A key aspect of Open Schooling in particular and distance education in general is funding. For the system to be comparable to conventional schooling and to yield the desired results, it has to be adequately funded and the finances have to be well managed. In this course, we are not going to go into the details of how open schools are funded and how the finances should be managed. The chapter only points at essential aspects to these key aspects of distance education provision and direct you to reading resources that deal with these aspects in more comprehensive ways.

Sources of financing
The sources of funding you listed in Activity 3 may be varied, depending on the funding policy in your country. In many countries, although government is the main source, distance education is funded from more than one source. Analysis of funding models across the globe shows four main sources of funding for distance education. These sources are government subsidy, student fees, philanthropic donor funding, and sale of promotional merchandise. Promotional merchandise are products that are often branded with a logo or slogan of an institution, which are distributed and sold in order to raise additional income. How do the four sources compare with what you listed? Apart from attracting additional income, promotional merchandise is also meant to promote the corporate identity of an institution, thereby making it more visible on the market. Common items included in promotional merchandise are pens, drink bottles, bags, coffee cups/mugs, t-shirts and apparel, caps and hats, notepads and notebooks.

As highlighted above, government is usually the main funder of distance education and there are various public funding models that are used. Murangi, (2020) gives these models as the normal budget negotiations, use of budgetary framework documents, using a defined funding formula, and service level agreements.

Budget negotiations
These are intense negotiations that are undertaken between the distance education provider or relevant branch of the Ministry of Education and government treasury. The distance education provider has to present a convincing argument for a certain budget and if it wins, promises are made to avail the funds over the year. The negotiations always happen under conditions where government is faced with competing demands and priorities – mainstream versus open education, education versus health, recurrent expenditure versus capital investment. Due to these competing demands, it so happens sometimes that promised funds may not be available during the course of the funding period. The budget may require revisiting during the year, which makes it difficult for the institution to plan. Obviously, this has profound implications on the quality of educational delivery by the institution.

Budgetary framework document
In this model, the amount an institution needs is arrived at through activity-based budgeting, and submissions are made to the government on this basis. One of the main shortcomings with this approach is that it may be difficult to predict the future since changes happen so quickly in education and in the economy. This approach is most unreliable in particularly unstable economies. Like in the budget negotiation model, government may not be able to meet the requested funds due to competing demands.

Using a funding formula
In this approach, the distance education institution is funded on the basis of a nationally agreed funding formula. In some instances, the formula may be input-based – X dollars per student head count. This can be further differentiated between distance and full-time students – X dollars per full-time student and X/2 dollars per distance education student. You can see how this funding model is likely to motivate a provider to enrol more students. The funding formula can also be output-based, where a certain amount of money is paid to the institution for every student who successfully completes their studies within minimum time. This motivates institutions to push within -time graduation rates up so they can get more funding. Output based funding can also be based on research publications that are produced by an institution.

Watch the video on Finance & open schooling for a summary of Chapter 6 of Mays & Singh, 2020. Addressing the learning needs of children and out-of-school youths through the expansion of open schooling.

Using Service level agreements
This approach is often used on a short-term basis and involves agreeing on expected outcomes the provider should meet within a stipulated period of time. The provider is then paid for the service. The approach is performance based and therefore has potential to lead to greater efficiency and effectiveness. To gain deeper insights on the above-discussed models of public funding, we encourage you to read Mays & Singh (2020) Chapter 6 again in more detail.