AIT Financial Results Board of Trustee Meeting 28 March 2007

1. AIT Financial Results Board of Trustee Meeting 28 March 2007

3. FUND 10 2004-2006 Actual v 2007 Budget v YTD 2007 (Feb)

4. Financial Situation of AIT upon Assuming Presidency and Actions Taken • Assumed Presidency of AIT on 1 July 2005. • Large deficit recorded in 2004 and projected deficit for 2005. • Briefed the Chairman of the Board and Chairman of the Executive Committee. • Extraordinary meeting of the Executive Committee (resident members) convened on 28 July 2005. • Efforts to immediately inform the community about the prevailing situation in a coordinated, systematic and unified manner so as to work together in better tackling the situation.

5. Financial Situation of AIT upon Assuming Presidency and Actions Taken • School visits and meetings with units. Instructions for a 10% minimization of annual costs to be implemented in the second half of 2005 announced. Action plans that would result in the savings – cost-cutting and / or revenue increase received. Efforts to increase intake in January 2006. • Review of budget procedures and processes –actual results often short of targets – efforts to instill greater accountability.

6. Financial Situation of AIT upon Assuming Presidency and Actions Taken • Institute-level working groups set up with representation of faculty, staff, students and alumni, along with inputs of external resource persons, to look into areas where there could be cost savings as well as towards improving revenue generation. New and potential countries as target markets – Central Asia, China, India, Indonesia, Middle East, Russia. • Cancelled planned meetings of the Executive Committee and Academic Advisory Panel in Vietnam and Sri Lanka – venue shifted to AIT. • Overseas members of the Board, Committees and Panels requested to cover the airfare portion of their travel expenses.

7. Analyses of Net Deficit Trend Observed in July 2005 • Tuition and other Fees as well as AIT Fellowship : fee reduction and change in semester effected in August 2003 not brought in desired results. Discounts or fellowships offered without true understanding of actual costs and correct break-even levels. • Research Grants and Contracts : insufficient and non recovery of institute direct and indirect costs. • Promotional Strategies: lack of coordinated and clear promotional strategies to realize revenue targets

8. Analyses of Net Deficit Trend Observed in July 2005 • Accountability of Budgets : need to increase budget accountability and transparency as well as awareness of financial status at all levels. Mechanisms to follow up on budget variances and clear performance evaluation indicators. • Cost Management : concerted cost management measures had not been initiated prior to July 2005 • Financial and Student figures as well as Staff Headcount: Information systems not fully integrated

10. FUND 10 SCHOOLS SET - School of Engineering and Technology SOM – School of Management SERD – School of Environment, Resources and Development

11. FUND 10 School Performance 2004-2006 Actual v 2007 Budget v YTD 2007 (Feb) SET SERD SOM Budget 2 mths Budget 2 mths Budget 2 mths 05 06 07 07 05 06 07 07 05 06 07 07

13. FUND 10 President office RES Research & Education Support Student office ERCO External Relations & Communication CENTRAL ADMINISTRATION Finance Infrastructure HRO

14. FUND 10 Central Administration Expenses

15. FUND 10 Central Administration Expenses % to Revenue

16. FUND 10 Central Administration Expenses % to Revenue

18. FUND 21 Academic Centers AIT Community School InterLab AIT Extension Non Academic Support Services Conference Center Fund Raising InfrastructureStaff Housing, Motor pool etc Student Accommodation Outreach Building

19. FUND 21 2004-2006 Actual v 2007 Budget v YTD 2007 (Feb) 2005 2006 2007 AITCV result + 9 M -5 M +5 M

20. FUND 21 Operating Results 2006 Key Units in Fund 21

22. FUND 30 2004-2006 Actual v 2007 Budget v YTD 2007 (Feb) Operating surplus from completed Projects F30 = 15 M Cash Surplus from ongoing Projects = 59 M

23. Fund 23 Reserve Fund

24. Operating Results of Fund 10, 21 and completed projects of Fund 30 will be closed to the Institute Reserve Fund (Fund 23) Fund 23 Reserve Fund Fund 10 Schools & Administration Fund 21 Non Academic Supporting Units Fund 30 Completed Sponsored Projects

25. FUND 23 Movement of Reserve Fund Decrease due to Operating Losses and Capital Investments Includes AITCV 42 M

26. FUND 23 Movement of Reserve Fund F10 2003 40M + F10 2004 86 M Key Impact • Operating deficit F10 125 M • Fixed Assets investment 55 M • Operating deficit F10 128 M • Fixed assets investment 56 M • Construction of Students dorm/AIT Community school Bldg 110 M Includes AITCV 40 M Includes AITCV 49 M • F10 & F21 net results + 6 M • F30 completed projects + 15 M • F50 recovery + 16 M • Fixed Assets investment - 20 M Includes AITCV 42 M

27. 2007 BUDGET

28. FUND 10 FUND 21 Non Academic Support Units Schools & Central Administration FUND 30 Sponsored Projects

29. FUND 10 Schools & Central Administration 2007 Budget: Revenues 2007 Budget: Expenditures OH recovery received from F21 33 Mill (reduce F10 exp)

30. FUND 21 2007 Budget: Revenues Non Academic Support Units 2007 Budget: Expenditures

31. FUND 10 Schools & Central Administration FUND 21 Non Academic Support Units BUDGET Consolidation F10-F30 FUND 30 Sponsored Projects

32. Consolidated Fund 10, 21 and 30 Actual 2004-2006 v Budget 2007 For F30, includes Operating surplus from completed Projects = 15 M and Cash Surplus from ongoing Projects = 59 M

33. Asian Institute of Technology Past Present and Future

34. Past • As you all know in years 2004 and 2005 Fund 10 made losses of about Baht 86 million and Baht 127 million, respectively • These losses dried up Institute reserves to the extent that we have not been in a position to invest in new strategic areas and / or maintain / upgrade existing activities as we would have liked

35. Present We need to rectify our weaknesses by changing ways we manage our finances The indications are that collective efforts of faculty, staff, students, Executive Committee and Board have halted decline in the financial health of the Institute, however, we are not yet out of the“woods”

36. Present & Future • For 2006, we had net operating loss of Baht 13 million in Fund 10 which was significantly improved from the net loss in year 2005 and 2006 of Baht 86 million and Baht 127 million respectively

37. Future • In the coming year 2007 , the focus should be more on increasing revenues from all sources in addition to continued cost awareness.We need to make selective, strategic investments

38. Future • But this need can only be met if we have collective surplus and positive reserves • Therefore budget for 2007 is formulated with a surplus of baht 30 million for Fund 10. This surplus is achievable provided we remain committed to our financial goal

39. Future We also need to think about building Institute reserves in the coming years

40. Future • The following are broad guidelines for year 2007 budget:

41. Guidelines for year 2007 budget 1. Schools are expected to maximize revenue from fields of studies and make every attempt to earn sufficient revenue to cover all expenditures Those fields of studies which fail to meet the financial viability standard are being identified and corrective measureswill be taken as soon as possible

42. Guidelines for year 2007 budget • Schools should continue to recover correct amount of overhead and faculty time from Sponsored activities. Exception should be kept to minimum and permitted only where there are other compensatory factors All Academic Centers must contribute 20% on direct revenue and operations of these Centers should breakeven at the least on a yearly basis, and not drain resources of the Institute

43. Guidelines for year 2007 budget 3. The budget for payroll includes additionalpositions considered necessary but should only be filled in relevance to the financial viability of fields of study

44. Guidelines for year 2007 budget • The expenditure budget for non salary items are dependent on achieving the target of revenues from tuition and fees and contribution from sponsored activities. The expenditure budget allocation is the maximum amounts that could be expended, but will be adjusted during the year by maintaining a constant percentage to budgeted revenues

45. Guidelines for year 2007 budget • The non-revenue generating and Support/Servicing Units are required to exercise utmost care in utilization of resources.

46. AIT Institutional Assessment by KPMG Sweden

47. Report of AIT Institutional Assessment by KPMG Sweden • Summary • The KPMG assignment is actually divided into two sub- assignments. The first assignment was performed at AIT in Bangkok during the first week in December 2005, and 9 – 20 January 2006, and was reported to Sida and AIT 6 April 2006 • The first assignment contained reviews of: organizational structures and the delegation of authority; work performed by working groups within AIT; financial management; program management; management information systems; employee and compensation structure; and the new business plan process

48. Report of AIT Institutional Assessment by KPMG Sweden • Summary (continue) • The second assignment of the institutional assessment contained support in development of an Implementation Plan, and training to implement agreed plans. The assignment was performed during 13 – 17 March 2006. The draft report was submitted to Sida and AIT 30 April 2006, and the final report 12 July 2006.

49. Report of AIT Institutional Assessment by KPMG Sweden • Summary (continue) • Since the first assignment, AIT has discovered that the financial situation of the institute is severe. The institute has taken a lot of measures to deal with the situation. For instance, new budget restrictions, and the establishing of task forces dealing with specific issues based upon the work performed by the previous working groups. The new AIT Five-year Strategic Development Plan contained a lot of new initiatives regarding core values, aims/themes, governance, ownership, and financial sustainability etc.

50. Report of AIT Institutional Assessment by KPMG Sweden • Summary (continue) • This third assignment is a follow up of the other assignments, and was conducted 24-27 October 2006. A Management Response from AIT covering our two previous reports was received 20 December 2006. The two reports from KPMG have been dealt with at both the 30 October 2006 AIT Board of Trustee meeting, and the 27 November 2006 AIT Executive Committee meeting