Control Financial Risks. University System Reform Perspective

The surge in demand for higher education funds is caused by the rapid expansion of higher education scale. Universities face serious capital difficulties. Under this background, bank loans become important fund sources of colleges. With loan expand continuously, financial risks in universities is increasingly revealed. The stable of college financial directly affects the development of various school undertakings. As a result, how to dissolve huge debt, precaution the investment risk and avoid the loss of assets is the problem which must be solved to realize sustainable development. Colleges and universities are public institutions whose main functions are academic teaching, scientific research and social service. Financial appropriation is their main source of income. Therefore the financial risk of colleges and universities is different from that of enterprise. It is a sort of institutional risk and representation of institutional defect of finance in colleges and universities. The key to control and prevent financial risk of colleges and universities are to reform the present university system, to perfect their internal management structure, and to establish lasting effect mechanism.The financial risk of colleges and universities consists of debt risk, investment risk, and financial management risk. In this paper, the inherent relations between the reform of university system and the financial risk of colleges and universities were analyzed. It has been presented that the present imperfect university system is the deep cause of the financial risk of colleges and universities. Reform of the present university system is the basic way to control the financial risk of colleges and universities. Based on defects of the current university system, the source of forming financial risk of colleges is discussed. Detailed solution is proposed to prevent and control financial risk of colleges and universities from the view of reform of university system.To promote macro management system of the government and to perfect internal management system is the two main parts to control financial risk of colleges and universities. Only if the macro management system of the government and the internal management system go hand in hand, can the financial risk of colleges and universities, which is institution risk, be controlled effectively.