1 5 Year Financial Plan : 2008 – 2012 Presentation to Senate by Hollie Clarkson Acting Chief...

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5 Year Financial Plan : 2008 – 2012

Presentation to Senateby

Hollie ClarksonActing Chief Finance Officer

Wednesday 9 April 2008

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2007 . . . . A re-cap . . . . italisation !

Achievements . . . . .

Sustained guidance from the Budget Working Group Adoption of Budgeting Framework Development of Resource Allocation Model 2007 Annual Operating Budget : “A manageable

deficit” Presentation to Council of inaugural 5 Year Institutional

Financial Plan Establishment of Physical Planning Committee Merger-related Capital Infrastructure : +- R500 million New Westville Residences : +- 900 students A consolidated surplus in excess of R100 million Research-related revenue exceeded student fee income

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What did we not achieve?

A “breakeven” operating budget Optimum overhead recoveries A significant yield from third stream income Formal adoption of a consolidated Residences budget A comprehensive capital expenditure budget A widespread understanding of the RAM Adequate support for financial management

Regular reviews and revisions of the Main Fund Budget A functional MISB Reliable and timely management accounting Satisfactory fee and general collections

2007 . . . . A re-cap . . . . italisation !

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UKZN . . . . Some of the challenges

Student Enrolment Planning

Access and Affordability : Student admissions, including provision of adequate and affordable accommodation

Student Financial Aid : Scholarships, bursaries and loans

Student Fee Debtors : Collections and improving cash flow management

Development of sustainable sources of third stream income, innovation and (capital) endowment funds

Resource Allocation Issues : Strategic vs operational

5 Year Financial Plan : 2008 - 2012

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UKZN . . . . Some of the challenges (continued)

Capital expenditure needs : proper planning, prioritisation and life cycle financing

Putting the “balance” back into the UKZN balance sheet, i.e. restoration of solvency margins, positive funds (Council controlled) and improved liquidity ratios

Personnel costs : Academic salaries and productivity. To develop and implement an appropriate reward system

Working towards and achieving targeted expenditure levels in terms of DoE prudent guidelines

Multiple Campus facilities, expenditure efficiencies and need for benchmarking and adoption of “Best Practice”, especially in administrative support services


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Planning Imperatives : Revenue

Main (Operating) Fund financial viability within 3 to 5 years

Sustainable operating surpluses

Significant contribution from third stream income

Adherence to prudent expenditure guidelines

Affordable loan-funded capital expenditure


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Planning Parameters : Expenditure

Annual budget allocations based on Resource Allocation Model

Contractual liabilities represent “top slices” from Resource Base : Council approved and centrally controlled, i.e. statutory obligations, conditions of service or debt service obligations

Strategic Appropriations largely historic in nature and should be reviewed regularly, at least annually by all stakeholders

Need to finance University Strategic Plan (+-R365m), in part from annual Revenue budget

DoE prudent expenditure guidelines represent targets for major components of operating expenditure, i.e. personnel costs, goods and services, finance costs and depreciation

Amount available for Capital expenditure budget depends on debt service capacity (Council-imposed threshold of 3% per annum)


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5 Year Financial Plan : 2008 – 2012Prudent DoE Budget Guidelines

Acceptable Ranges

UKZN5 Year Plan

% % 2007 2012

Personnel 57,5 63,0 68,1 61,0

Goods & Services 32,0 29,0 34,8 28,0

Finance Costs 3,0 2,5 0,7 3,0

Depreciation 6,5 4,5 4,8 5,8

Surplus/(Deficit)

1,0 1,0(8,4)

2,2

TOTALS 100,0 100,0 100,0 100,0

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5 Year Financial Plan : 2008 – 2012Prudent DoE Budget Guidelines

-8.5 -20%

0%

20%

40%

60%

80%

100%

DoE 1 DoE 2 UKZN2007

UKZNTarget

Surplus / (Deficit)DepreciationFinance CostsGoods & ServicesPersonnel

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Planning Principles : Capital Expenditure

Priority to capital maintenance backlogs and compliance with safety, health and environment (“SHE”) requirements (+-R70m)

Standby Generators (+-R13m) to be installed shortly

Proposed 5 Year Capital Expenditure Programme (R638m) to be phased in and financed by external borrowings

Approximately 45% of total capital requests from 2008 to 2012 can currently be planned, based on anticipated borrowing and debt service capacity

Responsibility for prioritisation and allocation to be delegated to Resource Planning Committee and sub-groups


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Year Total CapitalRequested

Percentage Proposed

Total Proposed Budget

R’m % R’m

2008 519 50 259

2009 398 50 199

2010 175 40 70

2011 144 40 58

2012 173 30 52

Total 1 409 45 638

5 Year Capital Expenditure Programme : 2008 - 2012

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519

259

917

458

1092

529

1236

586

1409

638

0

250

500

750

1000

1250

1500

2008 2009 2010 2011 2012

Total CAPEX RequestsAffordable CAPEXProposed CAPEX Budget

5 Year Capital Programme :Cumulative Expenditure 2008 - 2012

R million

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2008 . . . . The way forward . . . . . . . . A Sustainable Financial Plan for UKZN

What will we achieve?

A better and more widespread understanding of the RAM

Benefit of experience with the new RAM . . . . . . Ewe be the judge!

Development of a 5 Year “Rolling” Revenue Budget

Progress towards reducing the Main Fund operating deficit

A comprehensive and properly financed 5 Year Capital Budget

A consolidated Residences Budget

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2008 . . . . The way forward . . . . . . . . A Sustainable Financial Plan for UKZN

What will we achieve?

Finalisation of the Merger-related Infrastructural Programme

Full devolution of budgetary control and responsibility

A functional and effective MISB . . . . No Misbevaviour!

Efficient Financial management support services

Continued growth in Research-related revenue

Development of meaningful and sustainable third stream income?

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5 YEAR INCOME PROJECTIONS : 2008 - 2012

2,11

8

1,96

0

1,81

4

1,76

9

1,58

4

1,36

9

1,83

3

1,72

1

1,59

4

1,47

7

1,36

6

1,200

1,300

1,400

1,500

1,600

1,700

1,800

1,900

2,000

2,100

2,200.

2007 2008 2009 2010 2011 2012

2007

Pla

n

2008

Pla

n

2007 Plan

2008 Plan

R’Million

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5 YEAR EXPENDITURE PROJECTIONS : 2008 - 2012

1,97

9

1,86

3

1,75

7

1,64

4

1,53

1

1,40

31,

748

1,67

0

1,59

4

1,52

2

1,44

1

1,35

31,300

1,400

1,500

1,600

1,700

1,800

1,900

2,000

2,100

2,200

R Million

2006 2007 2008 2009 2010 2011 2012

2007

Pla

n

2008

Pla

n

2007 Plan

2008 Plan

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NET SURPLUSES / DEFICITS : 2007 - 2012

-75

-45

0

51

-109

-82

-59

-26

9

47

84

-125

-100

-75

-50

-25

0

25

50

75

100

2007 2008 2009 2010 2011 2012R Millions

2007 Plan

2008 Plan

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UKZN . . . . What If . . . . ?

We do not achieve our Student Enrolment Plan?

Funding for Student Financial Aid, i.e. scholarships, bursaries and loans, is not forthcoming?

Debtors do not pay their fees on time (or at all) and bad debt write-offs increase?

Budgeted sources of third stream income, innovation and (capital) endowment funds do not materialise?

Targeted reductions in personnel costs and operating expenses are not reached?


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5 YEAR INCOME PROJECTIONS : 2008 - 2012

20072008

20092010

20112012

Total2007 Plan2008 Plan

"The Low Road"

2,118

1,946

1,200

1,300

1,400

1,500

1,600

1,700

1,800

1,900

2,000

2,100

2,200.

2007 Plan2008 Plan"The Low Road"

A potential loss of income of +- R892

million in the 5 years from 2008 to

2012

R’Million

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5 YEAR EXPENDITURE PROJECTIONS : 2008 - 2012

2,126

1,979

1,300

1,400

1,500

1,600

1,700

1,800

1,900

2,000

2,100

2,200

R Million

2006 2007 2008 2009 2010 2011 2012

2007

Pla

n

2008

Pla

n

"The

Low

Road

"

2007 Plan

2008 Plan

"The Low Road"

A potential increase in total expenditure of +-

R444 million in the next 5 years (2008

to 2012)

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-75

-45

0

51

-109

-82

-59

-26

9

47

84

-125

-100

-75

-50

-25

0

25

50

75

100

2007 2008 2009 2010 2011 2012R Millions

2007 Plan

2008 Plan

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-75

-45

0

51

-109

-82

-59

-26

9

47

-159

-190

84

-187 -198 -200

-225

-200

-175

-150

-125

-100

-75

-50

-25

0

25

50

75

100

2007 2008 2009 2010 2011 2012R Millions

2007 Plan

2008 Plan

"Low Road"

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“If you have built castles in the air,Your work need not be lost;

For that is where they should be.Now put the foundations under

them!”

(With acknowledgement to Henry David Thoreau)

Thank you

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