School Financial Management

Daniel FlahertyDirector Financial Services

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What Would You Like To Know?

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Topics

1. How the University Earns Revenue

2. How that Revenue is Shared

3. Managing a School Budget

4. Day to Day Financial Management Issues

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1. How the University Earns Revenue

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Australian Govt Grants51%

HECS-HELP Aust. Govt

15%

HECS-HELP Students2%

State & Local Govt4%

Investments3%

Fees13%

Consultancy & contracts

3%

Other10%

2010 Revenue: $374m

University Budget - Defined

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Recurrent Budget• Student revenue – Commonwealth & Students• DEEWR/DIISR Research revenue• Investments• Other

Total Budget• Research grants• Consulting/Commercial• Other Grants• Other

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CGS Student Funding38%

HECS 23%

Student Fees17%

DEEWR/DIISR Research

10%

Other DEEWR/DIISR Funding (inc Schol-

arships) 2%

Investment & Other 10%

2011 Recurrent Budget Funding

1. How the University Earns Revenue

• DEEWR/DIISR Funding

– Commonwealth Grants Scheme

– Research Block Grants

– Indexation

• Student Fees

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Commonwealth Grants Scheme (CGS)

• 8 clusters with fixed $$ rates for each cluster• Varying Commonwealth funding for each cluster• Funding profile to be agreed with DEEWR• Full Funding for up to 110% of agreed profile• Can over enrol past 110% of agreed profile

– but only receive HECS payments• Lose funding if below profile

– retain CGS for load between 99% and 100% – cap at 95%

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Course Contribution Schedule 2011

ClusterHECS Band

Funding GroupCGS $

per EFTSL

HECS $ per

EFTSL

CGS transitional $ per EFTSL

Gross

1 2Accounting, Administration, Economics, Commerce (Pre-2008) $1,793 $7,756 $1,146 $10,695

1 3Law, Accounting, Administration, Economics, Commerce $1,793 $9,080 $10,873

2 1 Humanities $4,979 $5,442 $10,421

3 1 Behavioural Science, Social Studies $8,808 $5,442 $14,250

3 2Mathematics (Pre 2009), Statistics (Pre 2009), Computing, Built Environment, Other Health $8,808 $7,756 $16,564

3 NP Mathematics, statistics $8,808 $4,355 $3,371 $16,534

4 1 Education $9,164 $5,442 $14,606

4 NP Education $9,164 $4,355 $13,519

5 1Clinical Psychology, Foreign Languages, Visual and Performing Arts $10,832 $5,442 $16,274

5 2 Allied Health $10,832 $7,756 $18,588

6 1 Nursing $12,093 $5,442 $17,535

6 NP Nursing $12,093 $4,355 $16,448

7 2 Engineering, Science (Pre 2009), Surveying $15,398 $7,756 $23,154

7 NP Science $15,398 $4,355 $3,371 $23,124

8 2 Agriculture $19,542 $7,756 $27,298

8 3 Dentistry, Medicine, Veterinary Science $19,542 $9,080 $28,622

DIISR Funding

Research Block Grant Funding

• Research Training Scheme

• Joint Research Engagement

• Research Infrastructure Block Grant

• Sustainable Research Excellence

All subject to rules in how the funds can be used.

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DIISR Funding

Research Block Funding

• All performance based averaged over last two years

• Fixed funding pool

• Various indicators with differing weights

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Scheme HDR LoadHDR Completions

Research Income Publications

Category 1 Research Income

RTS 50% 40% 10%JRE 30% 60% 10%RIBG 100%

DIISR Funding

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Sustainable Research Excellence

• 20% - Category 1 Research Income

• If ERA compliant and Transparent Costing

undertaken

• 13% - Category 1 Research Income up to $2.5m

• 67% - Category 1 Research Income >$2.5m,

moderated by staff FTE, weighted publications &

SRE survey outcomes

DEEWR/DIISR Funding• Indexation

– applies to all DEEWR/DIISR funding

– assumes that costs are split:

75% salaries 25% non salaries

– non salary indexed by CPI

– salary indexed by• 2011 Safety Net Adjustment (SNA) + teaching by

PSTS index

• 2012 PSTS wage index

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Student Fees

• ISP Onshore• Offshore Students• Fee Paying Postgraduate Student Fees

Total approx. 15% of University revenue

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How Funds Are Earned

Any questions???

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How the Revenue is Shared

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Daniel (with Council OK)

Major Cost Centre Head

Why the Revenue is Shared–Teaching & Research–Buildings development–Building operating costs – power, water etc–Library–ICT–Student Services–Academic Support–Marketing–Research Administration–General Admin eg payroll

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Capital Infrastructure

6%

Faculties54%

Portfolios23%

Uniwide9%

Research4%

Strategic Fund1%

Reserves2%

2011 Recurrent Budget Allocations

Allocation Models

General

Allocation shares have been developed over time and reflect:

– A Performance basis – student load and research– Cost control– Historical influences

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Distribution of Student Revenue

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CGS& HECS ISP Onshore ISP FD

ISP Offshore FPPG FPPG FD

Faculties 54%Average

57% 79% 85% 69% 74%Capital 7% 13.5% 6% 6% 7% 7%Support 39% $5,586 15% 9% 24% 19%

Research Block Grant Distribution

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RIBG RTS SRE JREReserve 5% 4% 10% 4%Research Budget 33% 9% 56% 48%Faculties 48% 53% 21% 30%Capital 0% 3% 0% 0%Support 14% 31% 14% 18%

Running a School BudgetThe University Dilemma•The revenue earned per student is fixed by the Commonwealth •Commonwealth indexation has averaged around 2% to 2010. From 2012 indexation will increase to 3% to 3.3% pa.•Costs increase by up to 5% pa•So either student load has to grow / prices for student fees increased / costs are reduced

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Running a School BudgetCost Increases• Salaries increase by around 4% pa due to Enterprise Bargaining pay rises•Salaries further increase by around 1% pa due to promotions, increments, reclassifications•Non salary expenses expected to grow 2% - 3% pa•Overall cost growth in a school is around 4.75% pa.•Therefore revenue needs to grow by at least 4.75% plus the cost of servicing increased load, just to “stand still”

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Running a School Budget

Revenue Generation Options•Indexation - around 3% to 3.3% pa.•Increased Commonwealth Student load•Increased International Student load/price•Improved Research performance

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Running a School BudgetCost Management Options - Not many!•Staff reductions

–Typically 80% to 90% of costs•Non salary cost reductions

Overall can help for a time but you can’t reduce costs every year

So need to grow revenue and manage costs

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Running a School BudgetTraditional University Cost Saving Options•Reduction in topics•Increased student staff ratios•Workforce Planning

–Transition to retirement options–Replacement of retiring staff with lower level staff

•Increased use of casual staff•Review of non salary expenditure

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Running a School BudgetPractical Tools•Development of 5 year financial projections•Talent 2 HR system - for salary information

–Salary projections by person by year• Finance system for tracking financial transactions and budget position

–Monthly emailed project manager reports• Regular Review and Forecasting27

Operational Issues• University Policies – you are the front

line• Authorisations• Insurance• Independent contractors• Purchasing and Credit cards• Travel & Taxes• Leave management

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Operational MattersAuthorisations• To approve expenditure

– Comply with Uni policies & grant conditions

– Must be for bona fide University purposes

– Can’t approve own expenses– BasWare (electronic invoices system)

will ensure delegation limits are adhered to

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Operational MattersInsurance• Disclosure• Travel• Deductibles/excess - $5k• Risks

– Remote sites + valuable equipment– Theft– Contracts - indemnities

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Operational MattersIndependent Contractor• Government laws extend the definition of

employee to capture contracts with individuals where the labour component is >= 50%

• If a contract with an individual is planned – need to comply with the University policy http://www.flinders.edu.au/ppmanual/staff/IndependentContractors.html

• Must have a contract in place• Risk for University/school – liability for payroll tax,

super guarantee charge, workers compensation if we get this wrong

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Operational MattersPurchasing• Purchasing policy

– Value for money and fair trading principles– Tender required > $100k– Compliance with quotation requirements– Plan to mandate Purchase Orders for

expenditure > $20k• Preferred suppliers• Procurement web site

https://www.flinders.edu.au/finance/procurement/• Contact Procurement Manager for assistance

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Operational Matters

Credit Cards• Benefits• Risks

– Fraud– Use on insecure/dodgy internet sites– Avoid staff sharing

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Operational Matters

Travel

Preferred suppliers– Phil Hoffmann Travel– STA Travel

• On-line booking tool• OHS&W for travellers• Policy on travel, particularly international• DFAT warnings• Credit cards, travel advances, per diems

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Operational MattersTaxes• GST

– Normally charged on contracts– All contracts should have a GST clause– Normally not a cost to business /government

• Fringe Benefits Tax (FBT)– Adds approx 100% to benefit cost– Private & business travel– Travel diaries– Entertainment– Other staff benefits

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Operational MattersManagement of Annual Leave

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30/6/06 31/12/06 30/6/07 31/12/07 30/6/08 31/12/08 30/6/09 31/12/09 30/6/10 31/12/10

Academic 0 0.95 2.6 3.15 4.15 4.43 5.17670273088045

5.24384040324366

5.72237800067841

5.94688186266422

General 3.05 3.09 3.25 3.36 3.57 3.62 3.99051724320999

3.92727890467538

4.1800330870893

4.41320705905927

$1M

$2M

$3M

$4M

$5M

$6M

$7M

Annual Leave Liability - Academic & General Staff

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Operational MattersManagement of Annual Leave· Need to plan usage· Increases with each pay rise· Can cause sudden budget problems

on staff cessation· New EB agreement reinstates a form

of deeming

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Operational Matters

Management of LSL· Emerging cost – not provided for at

the time it is earned.· Need to plan usage / set funds aside· Increases with each pay rise· Can cause sudden budget problems

when staff leave unexpectedly and are paid out LSL in lieu

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EHL HS Portfolios SBS SE$0M

$1M

$2M

$3M

$4M

$5M

$6M

LSL Liability (incl Payroll Tax)for staff with eligible service)

31/12/2009 30/06/2010 31/12/2010

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Useful Web Sites

Financial policies and procedures http://www.flinders.edu.au/ppmanual/finance.html

Financial Services Division Homepagehttp://www.flinders.edu.au/finance/

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