La Trobe University Central Cost Allocations

1. La Trobe UniversityCentral Cost Allocations Head of School Budget Information

2. Agenda • Introduction- old model, new model • Central Cost Allocation Model- April 2009 • Cost Driver review report- May 2009 • Space • ICT • Library • LTI • Research administration • All other central administration • Regional campuses • Cost Driver Summary

3. Introduction • The 2009-2011 budget was prepared using a new model • features the allocation of cost for space, corporate and service areas • based on drivers which act as proxies for how these services are consumed

4. Old Budget Model INCOME Research DEERW Fees Commercial Investment Deduct Corporate Levies Deduct Corporate Levies Corporate Faculties

5. Issues not transparent distributions of “pie” driven by historical percentages no separation of what drives costs difficult to understand operating margins and contributions to overhead difficult to cost courses and activities

6. New Budget Model Income DEEWR, Fees, Investment, Research, Commercial 100% 100% 100% 100% 100% Commercial Faculties Regional Campuses Other Capital CENTRAL ADMINISTRATION net cost attributed using cost drivers

7. Regional Campus Administration Faculties Central Administration Commercial Areas Other Revenue Revenue Revenue DEEWR Fee and Charges Sales Investment Fees Other Fees and Charges Earnings Research ....... Other ....... ....... ....... Expenses Expenses Expenses Faculty Direct Direct Central Services Net Costs Comm. Equivalent costs Regional Admin Profit Profit Profit Less: Cost of University Commitments and Initiatives The combined profits from Academic; Commercial and Research Investment other activities meet the cost of Teaching & Learning Initiatives University commitments and Other Strategic Initiatives initiatives Scholarships University Budgeted Operating Result Budget Model - Budget Process Schematic

8. Budget Model • Budget Model Characteristics • Student fee income (DEEWR & Fee Paying) and DEEWR research are allocated 100% to faculties based on planned teaching load, teaching performance and research performance • Central costs (space, ICT, library & other) allocated to faculties, regional campuses and central using cost drivers which most appropriately reflect usage of each service • Commercial areas are allocated costs based on ‘commercial equivalent cost allocation model’. Cost is based on % of revenue which is benchmarked against similar businesses • Faculties and commercial areas will be accountable for delivery of an agreed financial outcome • University investments and initiatives will be met from surpluses of faculties, commercial areas and other University income 8

9. Central Cost Allocation Model • The sequence of allocation of costs • 1.Space- related cost is allocated to all areas, based on space occupied and usage of central teaching space • 2. ICT division cost (incl. space allocation) allocated out to all areas based on a series of drivers appropriate to each ICT service • 3.All other service group costs allocated to faculties, regional campuses and research centers based on the best available cost drivers includes each service groups space & ICT cost allocation • 4.Regional campus (admin overheads) costs allocated out to faculties based on regional campus staff FTE (incl. space and ICT cost allocation)

10. Areas receiving cost allocation All costs allocated are net (i.e. total costs less any sundry income) and allocated to the cost center, where possible.

11. Cost Driver Review • In May 2009 a series of workshops were held to refine the cost drivers • process of consultation with all areas • consultant HLB Mann Judd • to agree on appropriate set of cost drivers • faculties – Registrar, Finance & Resource Managers rep. • research centers- Finance & Resource Manager • central admin- Directors, Managers from B&G, ICT, library, LTI, Academic Services, Finance • E.g. of refinements; established type of space and weighting, allocation to the cost center level

12. Commercial Equivalent Model • HLM Mann Judd Consulting • developed the ‘Commercial Equivalence’ framework to provide the basis for an appropriate performance management system for commercial areas of the University. • Appropriate set of commercially based performance targets to facilitate assessment of the return to the University • A set of commercial equivalent cost benchmarks to drive central cost allocations to the commercial areas • Residential Services • Power Station • Beechworth • Sports Center • Children’s Center • Uni Bar/Functions • Gift shop

13. Cost Drivers Summary

14. Indirect costs allocated to Faculties (Final cut, Dec 2009) Owned Space (m2) & Timetable Space (usage) • COST POOL MADE OF: • Applications • Finance, HR & Staff OnLine • ICT Service Delivery • ICT Relationship Management • ICT Connectivity • ICT Management Services • Learning Mgt System Support • Messaging & Collaboration • Teaching & Learning Facility Support • On Line Services • Research • Training • COST POOL MADE OF: • Maintenance • Landscaping • Cleaning • Refurbishment • Security • Administrative B&G • Insurance • Depreciation • Loan interest

15. Overview of methodology applied to allocate indirect cost Space ICT Library Central Administration La Trobe International Research

16. Space • The cost of space includes building depreciation, repairs & maintenance, cleaning, financing of loans, security, building insurance, landscaping and building and grounds management overheads • Space is broken down into two; occupied/’owned’ space and central teaching space • Occupied space by cost centre was audited by B&G • Central teaching space was allocated based on usage- Syllabus One timetabling database across all campuses • Space is charged to Faculties, Central Administration and Regional Campuses

17. Space Source space costs: 2011 B&G budget ICT budget (AV costs) CA Budget (Depreciation, loan, interest, etc.) • Compile total space costs: • Maintenance • Landscaping • Cleaning • Refurbishment • Security • Administrative B&G • Insurance • Depreciation • Loan interest SPACE COSTS INPUTS $ 28 million $ Cost Pool • Allocate space cost to users: • Costs allocated as per size and quality of occupied room area. • Cost allocated as per percentage usage of common area. Source space and Timetable information: “Owned space” & Common Teaching areas space – ARCHIBUS data (B&G) Syllabus Plus room booking – Academic Services COST DRIVERS COST DRIVER Based Upon Weighting per room class Teaching 1.0 Teaching Labs 1.5 Research labs 1.75 Admin Office 1.0 Space costs allocated to all Faculties, central administration units, regional campuses and centres.

18. ICT • The costs of delivering ICT services by the central ICT Division were driven out to all groups. • These have been broken down into the activities delivered (such as applications development, PC support for staff and students, communication costs) • And these, allocated based on appropriate cost drivers (for example – the cost of SIS One was allocated based on student load and PC support for staff was allocated based on staff FTE. • The cost of delivering ICT services to faculties, central administration and regional campuses is allocated based on appropriate cost drivers; total student EFTSL, teaching space, staff FTE, evenly, no. of PC users, direct, active LAN points and HDR Load.

19. ICT Source ICT costs: 2011 ICT budget split by activity Space cost allocated to ICT by relevant activity. • Compile total ICT costs: • Applications • Finance, HR & Staff OnLine • ICT Service Delivery • ICT Relationship Management • ICT Connectivity • ICT Management Services • Learning Mgt System Support • Messaging & Collaboration • Teaching & Learning Facility Support • On Line Services • Research • Training ICT COSTS INPUTS $ 20.3 million $ Cost Pool • Allocate ICT cost to users: • Percentage of Total FTE (CC level) • Percentage of Total EFTSL(Faculty Level). • Number of users per cost centre. • LAN points per faculty level group. • ICT information: • ICT staff FTE by activity • Staff FTE • Student Load (EFTSL) • LAN Points • Number of SAP users COST DRIVERS COST DRIVER ICT costs allocated to all Faculties, central administration units, regional campuses and centres.

20. Library • The costs of the Library, which include electronic resources, have been allocated to Faculties based on student load, weighted : • Research: 10 • PG coursework: 3 • UG students: 1 • This weighting represents a view about the relative costs of servicing these different student groups (Under revision for 2011 Budget).

21. Library Source Library costs: 2011 Library operating budget (net cost) Space and ICT cost allocated to Library LIBRARY COSTS INPUTS $ 29.2 million $ Cost Pool Allocate Library cost to users: Based on student load by teaching faculty, weighted 10:3:1 for Research: PG coursework: UG students (weightings are under review) COST DRIVER • Library information: • Student Load (EFTSL) by Teaching faculty. Includes offshore load. COST DRIVERS Library costs allocated to all Faculties.

22. La Trobe International • The cost of LTI, inclusive of space and ICT overhead costs, were allocated to faculties. • Four activities in the group were identified as the basis for cost allocations, plus the costs of agent commissions.

23. La Trobe International Source LTI costs: 2011 LTI operating budget (net cost) Space and ICT cost allocated to LTI. Activity breakdown provided by LTI financial officer. LTI COSTS INPUTS • Compile total LTI costs: • Provide Marketing, Recruitment & Admission of Students • Provide support to international students • Manage student mobility program • Agent commissions $ 14 million $ Cost Pool LTI information: Commencing international student load (EFTSL) Total international student load Total student load (EFTSL) excluding offshore by teaching faculty. COST DRIVERS COST DRIVER • Allocate LTI cost to users: • Based on percentages of EFTSL per Faculty. LTI costs allocated to all Faculties.

24. Research Administration • The costs of research administration, inclusive of space and ICT overhead costs were allocated to faculties and centres. • Four different drivers were applied to the identified activities. • RGSO • DVC Office • E-Research Office • Animal House.

25. Research Administration Source Research costs: 2011 Research budget split by activity Space and ICT cost allocated to Research by relevant activity. • Compile total Research costs: • RGSO • DVC Office • E-Research Office • Animal House, net off WEHI income recovery RESEARCH ADMIN. COSTS INPUTS $ 6 million $ Cost Pool • Allocate Research cost to users: • Based on total animal house costs. • Based on % Research FTE. • Based on % HDR. • Number of grants each faculty receives for research projects. • Research information: • Animal house usage • Research Only staff FTE • 2011 projected HDR load • Number of grants administered by RGSO. COST DRIVERS COST DRIVER Research costs allocated to all Faculties and centres.

26. Proposed NEW METHODCost to be allocated based on two components Fixed Cost and Proportional deficiency in achieving research targets

27. Cost to be allocated based on two components Fixed Cost and Proportional deficiency in achieving research targets

28. All other central administration • The net costs of all other central areas, such as the Vice-Chancellors office, Marketing and Academic services, were allocated based on an appropriate cost driver. • For most of these costs, the drivers were student load (used for example to allocate the net costs of Academic Services) and staff FTE (used for example to allocate the net costs of the Vice-Chancellor’s Office).

29. All other central administration Source Central Admin costs: 2011 Central Administration budgets. Space and ICT cost allocated to Central Administration per centre. Compile total central administration costs: Vice Chancellor Exec Director, Office of the Vice Chancellor Legal Risk Management Deputy Vice Chancellor (Academic) CTLC Academic Services Pro Vice Chancellor (Quality Enhancement) Pro Vice Chancellor (Equity & Student Services) Campus Life PVC (Regional) Deputy Vice Chancellor (Research) Deputy Vice Chancellor (International & Future Students) La Trobe International Marketing China Centre People & Culture Finance and Resource Planning B&G (net of space charges) CENTRAL ADMIN COSTS INPUTS $ 67.8 million $ Cost Pool Source central administration information: FTE and Headcounts to all faculties, except central administration groups. EFTSL student loads to all faculties. Regional Campus FTE. Operating expenditure per cost centre Allocate central admin to users: Based on % FTE per cost centre. Based on % EFTSL per Faculty. Based on % Total Head count per cost centre. Based on % of expense incurred by cost centres. COST DRIVERS COST DRIVER Central Administration costs allocated to all Faculties, regional campuses and centres.

30. Central Admin centres per cost driver

31. Regional campuses The costs of operations of each of the regional campuses, which includes space, ICT, central administration costs and the costs associated with the new role of the Regional Pro Vice-Chancellor, have been allocated to Faculties based on staff FTE (academic and administrative staff, excluding casuals) at each regional campus. (currently under review)

32. Regional campuses Source Regional costs: 2011 Regional campuses operating (net) budgets. Space and ICT cost allocated to Regional campuses. REGIONAL COSTS INPUTS $ 7.8 Million $ Cost Pool • Allocate Regional costs to users: • Based on % Regional FTE. COST DRIVER Source Regional costs information: Regional campus staff FTE COST DRIVERS Central Administration costs allocated to all Faculties.

33. Cost Allocation per Regional Campus (2010 Budget)

34. Example – Cost Allocation (Albury-Wodonga)

35. Exceptions to Cost Allocations • Commercial areas have been excluded from the cost allocation calculation . • Beechworth Campus • Commercial Student Services • LTU International College • LTU Power Station • Residential Services • Exclude Murray Darling FRC (Faculty of Science and Technology) • Drivers under revision • Research drivers (new approach being studied) • Library weightings (Previously based on Federally funded project report Library Provision in Higher Education Institutions released in 1990) • Animal House pending to update.

36. Questions