PAST, PRESENT AND FUTURE COLLABORATIVE WORK –

BENCHMARKING, STRATEGIC PROCUREMENT AND

ACTIVITY BASED COSTING

Go8 Directors Presentation 29 May 2009David Sturgiss, CFO ANU

PAST, PRESENT AND FUTURE The Past

• Go8 CFOs have operated as an informal group.

• Meeting held once or twice a year since 2006.

• Sector wide state based meetings generally held twice per annum.

Key issues that have been covered at CFO meetings have been-

PAST, PRESENT AND FUTUREAugust 2006 at UNSW (first meeting):

• Financing of major capital projects.• Traditional fixed term loans.• Indexed Annuity Bonds.• BOOT Schemes for Student

Accommodation.

• Procurement – collaborative opportunities.• Considered Energy , Telco’s and IT

equipment.• Joint buys more likely on a state basis.• Qantas is an example of sector wide

success.

• Benchmarking of financial processes.• Against a global database of Service

organisations.

PAST, PRESENT AND FUTURE

May 2007 at Melbourne University:

• Revenue recognition.• Business intelligence tools.

• Generally we are just starting out.• Business interruption insurance.

November 2007 at University of Western Australia:

• Financing University Capital programs.• Traditional and new.• HEEF.

• Student accommodation.• Financing models.

PAST, PRESENT AND FUTURE

• RQF update.• Information Management.

• Centralisation versus devolved service delivery models.

July 2008 at University of Sydney:

• Benchmarking/KPIs – financial processes, systems and practices.

•Senior Finance Officer’s Forum.

• Benchmarking – financial management.• Shared services.

_________________________________

Go8 Financial BenchmarkingThe way forward.

A presentation by Gaye McMath

Background

Objectives:

• Strengthen collaboration & benchmarking process.

• Compile data; for the Go8 dashboard & for analysis.

• Report; identify areas for further in-depth analysis.

Financial Benchmarking Project

Benchmarking Process

• Commenced late Feb 2009

1. Identified benchmarks; focused on high level, publically available information.

2. Developed & populated standard template for the data; data collected from 2006 – 2008

3. Report drafted - summarises data, identifies trends & highlights areas for further analysis.

• All responses are now received and the report is in the final stages of review.

Financial Benchmarking Project

Examples of key points

• Operating Margin decreased significantly in 2008 due to the poor performance of investment markets

Financial Benchmarking Project

• Return on Investment in 2008 was significantly lower than in prior years, driven down by unrealised revaluation losses & impairment

-9.00%

-6.00%

-3.00%

0.00%

3.00%

6.00%

9.00%

12.00%

Operating Margin

2006200720082008 less unrealised investment gains/(losses)

-100,000

-80,000

-60,000

-40,000

-20,000

0

20,000

40,000

60,000

80,000

100,000

Return on Investment - Breakdown

2006

2007

2008

Example of key points (Cont.)

• Benchmarking indicates a large variance in State & Local Government income between universities, indicating a potential growth area

Financial Benchmarking Project

10,000

20,000

30,000

40,000

50,000

60,000

State & Local Government Income ($'000)

State & Local 2008 $

• Although research income is increasing, the rate of increase is lower than the increase in academic staff spend

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

Research Income over Academic Staff Spend

2006

2007

2008

Future Financial Benchmarking Opportunities

Recurring Opportunities:

• Benchmark publically available information to track high level trends and populate the Go8 dashboard

Specific Benchmarking Opportunities:

• Debt & Investment Strategies

• Capital Expenditure Strategy

• IT spend

• Efficiency of research

Financial Benchmarking Project

PAST, PRESENT AND FUTURE COLLABORATIVE

WORK –STRATEGIC PROCUREMENT

Go8 Directors Presentation 29 May 2009Shane McGregor, CFO, The University of Adelaide

PAST, PRESENT AND FUTURE

• Strategic Procurement has had an increased focus across the GO8 Universities recently.

• In many cases, the Strategic Procurement Manager/Director now reports directly to the CFO.

• Spend analysis including number of suppliers used and average spend per transaction indicated significant savings were possible (typically 90% of the transactions are 10% of the spend).

• GO8s have been investigating collaborative opportunities.

Sciences Top 10 Vendors by Transaction Number

- Approximately one third of transactions with Top 10 Vendors (with also one third of spend) - Six vendors in both Top 10 by Spend and Transactions for Sciences in 2006

9,68933%

19,34667% 10,965

36%19,30664%

11,52636%

20,51564%

Top 10 Total

Rest 2,120 (2006)2006

2005

2004

PAST, PRESENT AND FUTURE

PAST, PRESENT AND FUTURESciences Transactions by Monetary Amount

Sciences 0 - $1000 Transactions- 88% of transactions in 2006- 9% increase from 2004 to 2006

Total Faculty 0 - $1000 Transactions- 88% of transactions in 2006- 3.5% decrease from 2004 to 2006

5%4%2%

6%

4% 2%6%

4% 2%

25,89489%

26,77388% 28,231

88%

0 to $1000

$1001 to $2000

$2001 to $5000

greater than $5000

2006

2005

2004

PAST, PRESENT AND FUTURESciences Commodity Spend

- Top two spend commodities (50% of Sciences spend) comprise mostly Chemicals, Lab Equipment and Lab Consumables.

- Laboratory and Medical spend is greater than 50% of the total University spend for this commodity.

5%

11%

4%1%4%

26%

25%

10%

5%2% 4%

24%

15%

14%

12%

4%3% 2%

35%

25%

15%16%

12%

26%

Office and Educational Equipment

Laboratory and Medical

Business Services

Travel and Entertainment

Chemicals and Cleaning

Information Technology and Telecommunications

Buildings and General Machinery

Farming Plantation and Livestock

2006

2005

2004

• $6m received through WPP for Newcastle and AUPN for cross sector benchmarking including:

- Stationary and office supplies - IT Leasing- Telecommunications - Lab Supplies- Travel - Banking services- PC & Laptop purchasing - Multifunction

devices & copiers

• Some Universities have leveraged off these exercises to achieve direct savings through renegotiating contracts/pricing agreements.

• The University of Adelaide will use this intelligence when it renegotiates supply arrangements as part of its on-line requestioning implementation and in other tendering projects this year such as the telecommunications tender.

• Some University wide Australia wide contracts implemented:- Technical, specialist and scientific gases – UoA savings $50k p.a

- Airfares – Qantas- Travel - Thrifty

PAST, PRESENT AND FUTURE

• There are various similar projects occurring across the GO8s and market intelligence and prior experiences are regularly shared:

- Online Requisitioning Systems including links to OHS and asset management systems and supplier hubs to improve value for money and lower risk.

- Wider use of credit cards to support travel and other high volume/low value transactions.

- Establishment of tender panels and use of tools such as eTendering to improve governance.

- Sharing of intelligence around spend analysis and spend analysis tools.

- Sharing opportunities around different commodity groupings.

- Working with academics when acquiring new equipment for research.

PAST, PRESENT AND FUTURE

Presented by David PittMay 2009

Costing at Monash

Overview

- Activity based costing at Monash- How we use it- The future

Costing at Monash

- Monash costs all centrally provided services and university wide infrastructure (e.g Space and ICT) using ABC techniques

- Done annually and integrated with the budget process- Costs are attributed to all users of a service based on

consumption (no exceptions)- Service are identified as holistic – not functional (e.g. cost

of research applications management will include Research office, legal and finance functional units)

Costing at Monash … cont

- Drivers closely match consumption and are reviewed on an annual basis in consultation with faculties

- Faculty based ABC costing exercises, done periodically, assess costs, revenue and profitability of programs, student types (UG, HDR) and research.

How we use it- Assessing faculty financial performance: gross revenues,

costs and margins- Keep a focus on service costs and the cost of

accommodation- Easy assessment of overheads to different situations or

new business opportunities (e.g cost of HDR students in India, indirect costs of competitive research)

- Decision makers understand the revenues & costs of projects and courses via tools provided for profitability assessment

To develop a culture of cost management

The future

- Cost transparency and reporting will be driven harder by Governments in the future

- Facts for backing-up arguments to stakeholders and governments will be pivotal for the sector

- Understanding overhead costs (especially when you are a larger organisation), is vital for business strategy and competing in the future

Emphasis on costs will increase in the future