Strategy Sixteen (August 2012 update)
Refine and apply the new University Economic Model to ensure greater transparency in resource and cost allocation and support strategic decision-making
We will achieve this through a new economic model, mutual accountability for faculties at the divisional level in the development of budget strategies, better financial reporting and regular budgetary review processes.
The University Economic Model, now in its second year of operation, is becoming a real driver of cultural change. Based on the principles of transparency and mutual accountability, it is enabling faculties and central portfolios to have a clearer understanding of the University’s true financial position, and a better appreciation of the effect of decision-making on its complex web of interrelated entities and activities.
16(a) Introduce the new University Economic Model for the allocation of budgets to academic units and central portfolios.
A new University Economic Model (UEM) was introduced in 2011 to ensure transparency of faculties’ revenue streams and cost drivers. The model is designed to improve decision-making by providing better information, and to help faculties understand the full impact of alternative strategies. This has already provided the appropriate financial incentives to support the introduction of two profitable new courses, the Juris Doctor and the Bachelor of Nursing (Advanced Studies), enabling their respective faculties to improve their financial position and move to a sustainable business model.
The UEM also supports a more aligned approach to government-funding methodologies, which are increasingly relying on activity-based costings. Faculties understand how much central services cost; and the multiple cross-subsidies of the past are being phased out, to be replaced with a transparent cross-subsidy from ‘profit-making’ to ‘loss-making’ faculties.
The UEM has been constantly refined during 2011 and 2012, and the model has now been placed in a functioning production system, providing confidence in the calculations behind the model and greater access to data to support decision-making. A governance group has been established to manage consultation regarding changes to the model, and further work is now underway to document the model and to provide information that will help non-finance staff to understand it.
16(b) Align the budget allocation models with the new divisional structure and charge each divisional board with accountability to SEG for budget allocations to faculties in the division.
Modelling has now advanced to the point that forward forecasts have been developed for each division, which has revealed that five of the seven divisions are either in surplus or projected to move into surplus over the next three years. The 2013 budgets, currently in preparation, will include a three-year plan for the years 2013, 2014 and 2015, and a more concentrated focus on those divisions where additional strategies need to be agreed and implemented.
16(c) Introduce a transitional process in the five-year planning cycle to ease the adjustment of academic units to the implications of the University Economic Model.
A transitional process has been in place since 2011 and will be renegotiated as part of the 2013 budget cycle. Transitional funding will be phased out by 2016.
16(d) Review the financial circumstances of those academic units where revenue does not meet costs under the economic model, and determine appropriate strategies for moving those units into budget surplus or ensuring their continuation through cross-subsidy.
Currently, six faculties have a surplus, while 10 faculties are in deficit. Out of the 10 faculties in deficit, five have business plans which will correct this situation and negotiations continue with the remaining five. The 2013 budget process will either finalise their strategies or establish a timetable for the remaining planning and strategy development that needs to be completed.