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.