Education Finance Essay

1. 1Background to the Study The importance of education particularly in the 21st century to the total development of an individual is increasingly being over emphasized. This is due to the fact that an uneducated individual has little or nothing to offer the society; in terms of acquired wisdom. It is therefore not surprising that most parents are now developing keen interest about the education of their children, a situation that leads them to want to know more as well as partake in what goes on within the school system. In all countries of the world, education is recognized as the cornerstone of any structure for sustainable development of any nation. It is a fulcrum around which the quick development of economic, political, sociological and human country revolves. In Nigeria, the demand for popular education is so high because education is not only an investment in human capital, but also pre-requisite as well as correlated for economic development (Adeyemo 2000). The belief that education is an engine of growth rests on the quantity and quality of education in any country. In fact, the National Policy on Education (1981:6) states that education is the greatest investment that the nation can make for the quick development of its economic, political, sociological and human resources. It further adds that education shall continue to be highly rated in the national development plans because education is the most important instrument of change and that any fundamental change in the intellectual and social outlook of any society has to be preceded by educational revolution. Education, from the pragmatics perspective could be seen as the organization of experience into a holistic social intelligence for dealing with future experiences. The idealists see education as the cultivation of the desirable state of mind. Sociologically, it is seen as the dissemination of culture to the young generation. In other words, education is the â€Å"process by which the individual acquires the many physical and social capabilities demanded of him by the group into which he is born and within which he must function†,(Ohikhokhai, 2002 :154). A Similar definition by Fafanwa states: It is the aggregate of all the processes by which a child or adult develops the abilities, attitudes and other forms of behaviour which are of positive value to the society in which he lives, that is to say it is a process of disseminating knowledge either to ensure social control or to guarantee rational direction of the society or both. (Fafanwa, 1972: 8) There is no gainsaying the fact that Nigeria’s educational system at every level (Primary, Secondary and tertiary) has been experiencing a down turn in the last few years. One of such reasons could be attributed to the under financing of the educational sector. The success of a child in education depends largely on what the child is taught in primary school. In other words, primary school education is a foundation upon which all other levels of education are built. Many researches have revealed that good teaching particularly at the primary level, lay a solid foundation for higher studies and can make a lot of difference in pupils learning and ability to cope with other life challenges (Adepoju 2001). In order words, since the rest of the education system is built upon primary education, the primary level is the key to the success or failure of the whole system. Apart from home as the first agent of socialization, primary school is the first place that introduces formal education or literacy to the children. The National Policy on Education [2004] defines Primary Education as the â€Å"education given in institutions for children aged 6 to 11 plus† for a duration of six years. This definition is also supported by the International Standard Classification of Education (ISCED) which states that, â€Å"Primary Education (ISCED level 1) also known as elementary education, refer to the education programmes that are normally designed on a unit or project basis to give pupils a sound basic education in reading, writing and mathematics, along with an elementary understanding of other sources such as history, geography, natural science, social science, art and music† The goals of primary education as stated in the National Policy on Education [NPE, Section 3(16) is to: i. Inculcate permanent literacy and numeracy, and the ability to communicate effectively; ii. Lay a sound basis for scientific and reflective thinking; iii. Give citizenship education as a basis for effective participation in and contribution to the life of the society; iv. Mound the character and develop sound attitude and morals in the child; v. Develop in the child the ability to adapt to his/her changing environment; vi. Give the child opportunities for developing manipulative skills that will enable him to function effectively in the society within the limits of his/her capacity vii. Provide the child with basic tools for further educational advancement including preparation for trades and crafts of the locality Inspite of government’s commitment to the provision of basic education for all, dwindling financial resources coupled with sectoral competition for resources may hinder its progress. According to Hallak (1990), successive waves of economic and educational crises affected the efforts of government and social demand for education so that education both the general tensions in the development of education and the imbalances that had emerged in the previous two decades were aggravated. Nevertheless, inspite of the huge financial commitment and the high priority given to education, experts and scholars still doubts the adequacy of the fund in meeting with the growing students’ enrolment. In view of the foregoing, the government alone may not be able to meet the social demand for quality basic education. Therefore, private sector participation in the ownership and control of schools is inevitable thereby complementing the efforts of government. The decade from 1990 witnessed an upsurge in the number of private institutions of learning in Africa in general and Nigeria in particular. Before this decade, most African Countries committed much of their expenditures on public education, which served as an instrument for building the nation, following independence. Today, there is pressure on African governments to shift from subsidization to privatization of their educational systems. Friedman’s (1955) theories on the privatization of education were and continue to be supported by researches who contended that public educational institutions lack incentives to improve educational systems. Among others, Chubb and Moe (1990) and Coleman (1997) argued that allowing school choice, mainly through the promotion of private schools, would improve educational markets. Many important educational decisions are related to costs of schooling. Information on costs is necessary to monitor resource allocation over time, to diagnose the function status of the education system, and to evaluate the efficiency in resource utilization (Tsang 2002). Specifically, cost of education refers to the resources used in the production of education services. They include not only public expenditure on education, but also private resources invested in education (Tsang & Kidchanapanish, 1992) Costs in this study are used to signify private cost of education incurred by the individual pupils and their families, and institutional costs of education incurred by the institution of learning. Tsang (1995), refers to private cost of education as those resources provided by household, individuals, and the community to support the production of educational services, which could be in form of Direct Private costs [Tuition Fees] which is only included in this study, Private Contribution [donations in the form of cash/gifts] and indirect costs [economic value of forgone opportunities of school] Babalola [1995] defines institutional costs of education as costs borne by the institution of learning. They consist of recurrent and capital cost. The recurrent costs are mainly what we are concerned with in this study. An ideal costing system relative to the input-output will enhance quality decision and planning programme for schools. The accurate knowledge of costing pattern will aid decision makers in the schools on the best alternative that may be considered in the management of the schools system. An ideal costing system will also enable parents, families etc to determine the cost effectiveness of enroling their children into private primary schools. 1. 2Statement of the Problem. The problem of rising cost [tuition fees] in educating pupils in private primary schools in Akinyele Local Government which has become an issue of concern to parents, families, wards and stakeholders alike. There is the need for private primary school administrators to pay serious attention to the causes and consequences of these rising costs [which could sometimes be as a result of high recurrent costs], with a view to controlling them while keeping pace with quality and productivity in the private primary school system. In view of the above therefore, this study endeavours to provide answers to the following research questions: 1. 3Research Questions 1. What is the total enrolment of each of the five [5] selected private primary schools in Akinyele Local Government Area from 2006-2010? 2. How much is the amount incurred by the schools in the five (5) years period on recurrent cost? 3. How much is the amount borne by families, parents or wards with five (5) years period on direct private cost per pupil [tuition fees]? 4. What is the correlation between direct private cost per pupil [tuition fees] and recurrent cost per pupil? 5. What are the sources of revenue available to the schools in sourcing for funds for the smooth running of the school? 1. 4Purpose of the Study The main aim of this study is to attempt to provide an analysis of the total direct private cost [tuition fees], total recurrent cost and sources of finance of private primary school system in Nigeria over the period of 5 years (2006-2010 academic years) with private primary schools in Akinyele Local Government as the case study. The study also attempt to highlight on the following: a. To determine the total enrolment of the five (5) selected private primary schools in Akinyele Local Government Area from 2006-2010 b. To determine the recurrent cost per pupil incurred by the school for five (5) years. c. To determine the direct private cost [tuition fees] per pupil borne by pupils, parents families etc for five (5) years d. To determine the Correlation between direct private cost per pupil and recurrent cost per pupil incurred will be determined for the five years (2006-2010) e. To determine sources of revenue available to the schools from 2006-2010 1. 5Significance of the Study This study will be significant in the following ways Firstly, it would serve as a source of statistical data information to primary school administrators and stakeholders alike for effective and efficient planning and cost control in private primary schools. Secondly, the study will provide the basic x-ray of cost pattern in Nigerian private primary schools from which future judgement with respect to plans, policies and programmes can be made. To this end, primary school administrators will be able to guide against any future deviation from expected goals Thirdly, the study could also provide private primary school administrators knowledge on the best decision to make with regards to the issues of pupils enrolment, staff employment, maintenance and so on. Also, the study will disclose the amount of money expended by the five (5) schools within the five (5) years period in recurrent costs. Furthermore, the study will disclose the direct private cost borne by pupils, families etc in the schools within the five years period. Lastly, the study will find the relationship between private direct cost per pupil and recurrent cost per pupil in the five (5) selected schools 1. 6Scope and Limitation of the Study This study focuses on the historical analysis of recurrent costs, private direct costs [tuition fees] and revenue sources using private primary schools in Akinyele Local Government as a case study. The study is, however limited to 5 out of the 24 registered private primary schools in Akinyele Local Government Area of Oyo state as at 2006-2010. Owning to the fact that the recurrent education expenditure increasingly accounts for greater percentage of the total capital and recurrent expenditures in Africa, this study concerns only the recurrent expenditure incurred by the schools, direct private costs borne by the pupils, families etc and sources of finance. This is in line with Coombs and Hallak (1987:55) and Mingat and Tan (1988:26) who rightly observed that most analysis of unit costs focus on recurrent spending because capital costs typically are only small part (in Africa, less than 20 percent) of the cost of education. According to Mingat and Tan, unless the objective is to access the cost of building additional school places (which is not the case in this study), the analysis of unit costs is usually directed at recurrent spending. Federal government primary schools and public primary schools are not included in this study because the study deals with only selected private primary schools 1. 7Operational Definition of Terms In order to enhance better understanding of this research project, certain operational terms that were used are clearly defined to reflect the specific situation with which they are used. Cost: This refers to the actual or notional expenditure incurred on or attributes to, a specific thing or activity. It refers to what is given up in order to educate an individual or group of individual. Although, total cost in education is a function of capital and recurrent cost, the cost referred to in this research work is specifically recurrent expenditure which constitutes about 80% of the total expenditure in the primary schools. Cost is used interchangeably with expenditure in this research Institutional Cost: This refers to what the institutions of learning (primary schools) have to give up in order to provide education or train the pupils. They are both capital and recurrent costs. However, institutional cost in this project excludes capital costs. Private Cost: These are borne by the individual pupils and their families. They relate to both direct and indirect costs of education which are borne through tuition fees, earning forgone, additional living costs, books uniform and transport. However, private cost in this project includes only tuition fees [direct private cost] Recurrent Cost: These are those costs for goods and services consumed in the course of a budget year, and which must be regularly replaced. Here, it include such expenses incurred on items such as staff salaries and allowances, maintenance, payments of electricity bills, purchases of materials needs etc Recurrent cost is also known as the running cost of education Unit Cost: This is the average cost incurred in providing academic service to the pupils. It is calculated by dividing the total expenditure per session by the number of students enrolled. In its operational term, the unit cost here refers to the actual amount or expenditure incurred per pupil during the course of the teaching-learning process in the primary schools. Its determination here does not however include expenditure on Capital items. Finance: Finance according to the context of this study is the act of raising or sourcing for funds for the running of the school. School: A school according to the context of this study refers to primary schools where formal teaching process takes place. CHAPTER TWO REVIEW OF RELATED LITERATURE In this chapter the literature review is made under the following headings: 1. Concept of Cost 2. Cost of Education 3. Private Cost of Education 4. Direct Private Cost of Education [Tuition Fees] 5. Institutional Cost of Education 6. Recurrent Cost 7. Unit Cost of Education 8. Cost Determinants 9. Cost Control Strategies 10. Sources of Revenue for Education 1. CONCEPT OF COST The definition of cost is very open, as it means a lot to different people. People tend to define or use it to say their purpose. To some cost is the price paid for a commodity or for the consumption of goods and services. In economic term, the concept of cost if perceived as something which is given up in order to have another. In more a precise way, we can monetary say that cost is alternative forgone. It may be the monetary expense on education. In its broad usage cost implies the resources [money, materials and men] used up for the operation of a business enterprise [Lipsey, 1976; Aghenta, 1993] Babalola [1991] also gave credence to this assertion that cost is a measure of what is given up in order to produce or consume a commodity. Adedeji [2002], see cost as a measure of what is given up in order to produce or consume a commodity, Agunbiade [1997] citing Pandit [1979] stated that expenditure is the total financial resources allocated to a specific economic activity for a given period usually a year. Unit cost analysis helps the understanding of the internal efficiency of the use of resources at the institutional level. Cost effectiveness analysis relates cost of inputs used up in the teaching-learning process with the output. This helps decision makers to make rational choices between various alternative courses of action. Unit cost helps planners to know the cost of keeping a student at school, operating a school etc. The unit cost required by a student in a year is referred to as input and educational planners have of recent named it the â€Å"student year†. Unit cost has been the basis for funding education in Nigeria, for example, when the Federal Government launched its Free Education Programme in 1977, it used unit cost in allocating funds to the scheme, that is forty naira per pupil (Daily Times of Nigeria, 4th January 1980, Editorial Comment). Longe (1988) maintained â€Å"cost information is crucial in decision making as it facilitates efforts to make the best but the least costly choice among alternatives†. In the event of embarking on any programme without considering the cost such programme end up being a white elephant project which will only lead to wastage of heard earned resources. 2. COST OF EDUCATION Many scholars have tried to define cost of education over the ages. Akanbgou [1981] defines cost of education as being â€Å"all the real resources used up in the production of human assets†. He agreed with Pandit and Bourgeis who define cost as the real resources used up in the form of educated manpower. Obasi [1983] observed cost of education as â€Å"the sum total of all the resources used up in the production of human capital asset in the form of educated manpower†. Longe [1988] defines cost of education as the value of all the resources in terms of money and sacrifice used to accomplish educational project. That is, to produce and educated person. This definition could imply not concerned with monetary outlay and expenses on education but also the income forgone on opportunity cost which represents the real charges resulting from the operation of the educational system. Babalola [1995] posited that education cost is a measure of what a student, an institution of learning or the public has to give up in order to educate an individual. While Adedeji [1994] quoted by Oladejo [2002] opines that educational cost represent the value of all the resources in term of money and sacrifice used to accomplish a given educational or project. This definition implies that the expenditure in an educational institution is the monetary expenses incurred by the institution to produce an educated person. In the view of Babalola [2000], he sees cost of education as the â€Å"total resources devoted to education, this includes direct money outlays† [tuition fees, expenditures on additional living items, books, uniform and transport]. They also include indirect financial burdens [in form of opportunity cost measured as the loss of income incurred either by the individual or by the society as a result of schooling]. He stressed further by saying cost of education include non monetary cost [which include such things as the burden of study and for some students, pain of being away from home]. The loss of opportunity to earn wages or salaries in the labour market is the true cost of the individual student of his or her decision to enroll in a full-time or part-time course of education. The cost of education to a country consists of total public education expenditure, total direct private cost, total indirect private cost measured in terms of forgone earnings, improperly estimated educational cost on government education expenditures. Expenditure on education overtime has been observed to be on the increase across different levels of education in most countries of the world and in Nigeria in particular. It should be noted however, that the cost of emphasizes is the recurrent cost which constitute a greater percentage share of total expenditure in education and direct private cost [tuition fees] According to Ojo [1986] quoted by Oladejo [2001], education has enjoyed a higher share of national budget over the years due to the increasing level of expansion brought about by a continue increase in education demand. Agunbiade [1997], observed that there was a staggering figure for educational expenditure during the third national development plan. This expenditure has continued to be on the increase over the years in most different institutions which of cause differ from one institution to the other. However, as an institution’s enrolment increases, the tendency is that both the expenditure and revenue should increase equally. But, according to Agunbiade [1997], revenue do not correspond with the increase in enrolment. Psacharopulars and Woodhall [1997] posited that attitude towards educational expenditure began to change as predicted by Jallade [1973] partly due to the huge increases that has occurred during the period. According to them there is increasing evidence of financial constraints in many developing countries as proportion of expenditure has began to decline. However, Zymelman [1982] cited Psacharopoulos and Woodhall [1997] explained that expenditure on education at all level in African nations including Nigeria has remained fairly constraint. Afolabi [2001] in his article asserted that the cost of education in recent times in Nigeria has become astronomical which according to him is attributed to increase in teachers salaries and allowances to meet with the hyper-inflation condition in the country. This statement is posited by Shehan [1973:16] where he explained that real expenditure per pupil has risen in many countries of the world. Real expenditure in this context means money expenditure deflated by appropriate price indices for the various inputs [teachers, books, equipment etc] which are used in the educational system. The higher level of education demand more expensive buildings and equipment and more emphasis on high-cost research activities. Enrolment increases has been greatest at these high cost levels. The increase in enrolment at the high-cost end of the system continue to increase demand for more resources [that is, financial resources which represents the expenditure to be incurred in the production process] Institutions overtimes, have witnessed continue increase in the expenditure pattern. This continues expenditure increase as argued by Shehan [1983] have a weakening effect on institutions considering the overall level of finance available to them, hence the need for a comprehensive system of cost control private primary school system. 3. PRIVATE COST OF EDUCATION. Concepts of cost from the viewpoint of economic analysis; the proper definition of cost (real cost or economic cost) of an input to education is its opportunity cost, which is measured by the value of the input in its best alternative use. Applying this concept to the cost of an education system, the real cost of education includes not only public expenditure on education but also private costs (Bowman, 1966). Private resources to education can be classified into three categories: direct private costs of education, household contributions to school, and indirect private costs of education (Tsang and Kidchanapanish, 1992). Direct private costs of education are expenditures by parents on their children’s schooling, such as expenditures on school fees (tuition and other school fees), textbooks and supplementary study guides, writing supplies, uniform, school bag and transportation. Expenditures on school fees are part of the revenue for a school to be used to finance institutional costs; they may be used to pay teachers in a private school or used to support non-personnel costs in a government school. Non-fee expenditures are additional financial resources to schooling not captured in institutional costs. For primary school pupils in some countries there are also boarding costs. Household contributions to school are contributions, in cash or kind from families to school and/or school personnel (e. g. teachers). Contributions to school can be used in a variety of ways, for example, to purchase reading materials for a library, to purchase sports equipment, or to construct a school building. They are captured in the institutional costs of a school. In some countries, household contributions to teachers are the main source of income for rural primary teachers (Paulsen, 1981; World Bank, 1991). Household contributions can be important in the financing of education in that they augment public resources to education and they can be managed by school personnel. Indirect private costs of education refer to the economic value of the opportunities foregone as a result of schooling. The opportunities foregone can be a child’s labor in family production, in looking after younger siblings, and/or in performing other household chores. Such costs are usually difficult to estimate and assumptions have to be made about the economic value of a child’s labour, nevertheless, they are still important to consider in that parents sometimes withhold their child from school because of the need for the child’s labor, especially for parents in the rural areas (Psacharopoulos and Woodhall, 1985). In a recent study of India, Tilak (1985, p. 22) estimated that the indirect private cost in terms of foregone earnings accounted for about 40% of the real cost to education, based on 1977-78 data. For purposes of improving education quality, there are at least four reasons for considering private resources to education. First, direct private costs and household contributions are direct private resources that augment public resources to education. Some of these direct private resources (such as school fees and household contributions) can be used by the school as intentions to raise quality. Second, how parents allocate their resources to schooling is also relevant. Parents may be encouraged to spend more on items (such as textbooks and other learning materials) directly related to student learning. Third, differences in private resources to education among social groups may exacerbate educational inequalities among social groups. A good understanding of the variations in private resources to education will inform educational policies designed to mitigate educational inequalities. And fourth, the omission of private resources can significantly underestimate the true costs of education and may lead to erroneous estimates of the costs of quality-improvement interventions. To date, there are very few studies of private resources to education in developing countries, and information on private resources to education in these countries is either lacking or fragmentary (Tsang, 1988). However, the available evidence indicates that private resources to education are very substantial (Tilak, 1985; Tan, 1985; Paulsen, 1981); they also vary significantly among countries and type of school (Wolff, 1985; Schiefelbein, 1986). These preliminary findings indicate the potential of private resources to education as a policy option for educational decision makers for influencing educational quality. 4. DIRECT PRIVATE COST OF EDUCATION [TUITION FEES] According to Tsang (1995), Direct private costs are defined as household educational expenditure related to a child’s schooling, including tuition expenditure and non-tuition expenditure (such as spending on other school fees, textbooks and supplementary study guides, uniforms, writing supplies, school bag, transportation, and boarding). Thus, direct private costs are divided into two components, non-tuition costs and tuition costs. Non-tuition costs are put into two groups: instruction-related costs (such as parental expenditures on textbooks, workbooks, and writing supplies) and non-instruction costs (such as parental expenditures on uniform, school bag, transportation, shoes and sportswear, and school fees on sport activities and other school events). However, private direct cost in this project includes only tuition fees. Wolff provided measures of the direct private costs for students in secondary schools in nine eastern African countries (1985, pp. 51-55). The ratio of total direct private cost to total cost per student varies according to the type of secondary schools and country. It ranged from 0% for day schools in Somalia for 1981-82 to 81% for assisted Harambee schools in Kenya for 1981-82. The ratio for boarding schools was consistently higher than that for day schools. On the average, direct private costs accounted for one third of the total cost per pupil. High direct private costs were also reported in Tan’s study of secondary schools in Tanzania (1985b). She found that even though state school students paid no fees, their school-related expenditure added up to US$139 per student in 1981. The direct private costs for students in private schools were even higher (US $439). Bray (1996) surveys educational cost studies in nine East Asian countries. He finds that direct private costs as a percentage of total costs in public primary schools range from less than 10% in Lao PDR to over 70% in Cambodia. Most hover around 20%. Carnoy and Tores (1994) finds that parents assume about 30% of the total cost of public primary education in Costa Rica. Carnoy and McEwan (1997) carry out a similar study in Honduras. Restricting their attention to uniforms, school supplies, and matriculation fees, they find that direct costs account for 43. 5% of total costs; under more conservative assumptions, the figure is still 27. 4%. 5. INSTITUTIONAL COST OF EDUCATION This consists of capital cost and recurrent cost. Capital costs are associated with durable educational inputs particularly land, building, furniture and equipment which are made use of in a single fiscal year. Usually people talk of capital stock versus capital flow. The stock of capital is inventory of buildings equipments and other capital items out sting at a given point in time. It is like reservoirs that can be drained down by depreciation or renovate and enlarge by new inflows. The volume of an educational system capital stock can be measured by depreciating the original cost of each in the inventory at the appropriate rate (adjusted for major repair, additional and replacement made in the items). Educational expenditures are those that contribute directly to teaching, learning and research, for example, teachers’ salaries and allowances, salaries and allowances of administrator, that is, non-teaching staff, expenses on books and stationeries, transport cost other consumable materials like water, electricity, post and telegram etc. and additional buildings. Thus, expenditures on consumable goods such as materials and personnel salaries, rent, interests, grants etc used up within an accounting year are classified as recurrent expenditure (cost). While capital (cost) expenditures include the purchase of durable assets such as buildings or equipment, that are expected to yield benefits over a longer period. To Psacharopoulos and Woodhall (1997), the crucial distinction between recurrent and capital cost lies in the source of finance. To them, recurrent expenditures are financed from current income or revenue, while capital expenditures are financed by loans from international agencies as well as other sources of income. Owning to the fact that the recurrent education expe.