Activity Based Costing Project 2003 - 2005 Executive Summary

1. Activity Based Costing Project 2003 - 2005Executive Summary

2. USQ Student Enrolments 2004

3. The Economic Denominator The Activity Based Costing Project sought to address the question: “What drives USQ’s Economic Engine?” “The Hedgehog Concept” – Collins, 2001. What are you deeply passionate about? What you can be the best in the world at? What drives your economic engine? What is the economic denominator (profit per x or, in the social sector, cash flow per x) which has the single greatest impact on moving the organisation “From Good to Great”?

4. Timetabling System Floorspace / Timetabling Systems Methodology ABC attempts to link the inputs of the University (people, premises, technology and consumables) with the outputs teaching courses and programs and research. A typical cost architecture and model data sources are shown below. RESOURCES ACTIVITIES COST OBJECTS Preparing Lectures Courses Preparing Lectures Delivery Modes Preparing Lectures Faculties Preparing Lectures Programs Preparing Lectures ACC 1100 Delivering Lectures Payroll System Delivering Lectures Delivering Lectures B. Bus SCC1123 Delivering Lectures Delivering Lectures Academic Support B. Sc Student Records System Assessing Students Assessing Students Assessing Students Students Assessing Students B. Arts Time Surveys Assessing Students International Onshore M. Bus Administration Support M. Sc Liaising with Students International Offshore M. IB Marketing Supporting Student Domestic HECS Researching Research Support Domestic Fee Paying Enrolling Students Library Research Business Sustaining Financial Systems Grants Providing Library Services Finance, IT, HR Leadership Publications Strategy Providing Corporate Services Facilities Govern HRD Completions Compliance

5. Model Demonstration Resource Costs are assigned to Activities based on statistical drivers. The cost of Academic Salaries, for example, is assigned to activities based on Salary Weighted Time Survey results as shown below.

6. 2003 Results: Course Contribution Cliff The USQ cumulative “Course Contribution Cliff” is shown below. The courses on the left are the most profitable with the courses on the right being the least profitable. $10M in value is eroded by 200 courses 537 Courses 528 Courses

7. Key: 2,000 20,000 Enrolments Enrolments 2003 Results by Faculty The contribution from teaching from each of the Faculties is shown below. The size of the bubble represents the number of enrolments. Faculties below the x-axis are providing a negative contribution. Contribution Margin = 15%

8. Key: 2,000 20,000 Enrolments Enrolments 2003 Results by Delivery Mode The contribution from teaching from each of the modes is shown below. The size of the Bubble represents the number of enrolments. Modes below the x-axis are providing a negative contribution. Contribution Margin = 15%

9. 2003 Results by Educational Partner Educational partner results are shown below. The size of the bubble represents the number of enrolments. Partners below the x-axis are providing a negative contribution. Target Contribution Margin - 15% 20% 10% Break Even Contribution ($000) 45 Partners Key: 250 2000 Enrolments Enrolments (10%) (20%) (40%) (30%) Revenue ($000) Note: Construction of this level of detail from the ABC Model result requires further analysis outside of the model.

10. Performance Management For USQ the economic denominator is the “Course Contribution Margin” The Economic Denominator Course contribution targets will be set for each Faculty/ Department Department Contribution Course Level Management A framework is being developed to address possible course /program rationalization

11. Performance Management (cont’d) Educational Partners USQ has changed its Learning Management System for online delivery and is now investigating an open source/open standards based approach • An Educational Partner Model is being developed addressing such issues as: • Pricing model; • Standard Contract; and • “Partner non-performance” escape clauses

12. University Example Total Revenue $130M Revenue from Teaching $110M Return @ 5% = Net Profit $6M Add: Investment in Research $10M Add: Strategic Projects $8M Required Contribution From Teaching $24M Baseline Teaching Margin = 22% (24/110  100) The Economic Denominator The University is in the process of setting targets for all output groups (Teaching, Research, Commercial, Community, etc). Course contribution is the Economic Denominator. Well structured programs with a reasonable sized student cohort deliver a 30% - 40% Contribution Margin

13. The Economic Denominator With course contribution as the economic denominator, USQ is committed to reducing the number of courses which provide a negative contribution, thus “Trimming the Tail off the Whale”. 537 Courses 528 Courses

14. Model Utilisation and Enhancement • The Activity Based Costing Model is a journey, not a destination • Current enhancements include: Calculating program contribution; Deployment of model reporting and analysis; Data collection of time surveys online • Data is to be refreshed annually • The use of the ABC Model for budgetary allocation purposes is via the Budget Management Committee, which is chaired by the VC