Following on from our post on ‘why’ institutions should be delving into Academic Program Financial Management, and the previous tips on data requirements and project staffing, this week’s tip provides advice on Model Business Rules and Assumptions.

Tip 3 – Model Business Rules and Assumptions (a list of some of most essential ones)

Firstly, the ‘rule to rule them all’ – what should be costed? The answer to this forms the foundation of your model. It involves putting a fence around what’s ‘in’ the model and what is ‘outside’ of the model:

• Organizational Structure – should all entities be included? Should international campuses be included? Are there any types of students that are typically not counted in the official student load figures that should be removed from the model?
• Accounting Period – What accounting periods should the model cover? These types of models are typically based on a fiscal year, allowing the financials to (mostly) match the teaching output. Special consideration on how to treat Summer sessions is often needed as they often span two fiscal years.
• Outputs – Whilst costing Academic Programs is the primary focus of these models, your institution does more than just teach. It conducts externally (grant) funded research, internally funded research and scholarship, community support, and commercial services (such as student accommodation and childcare centers). Without these outputs in the model, the cost of teaching may be significantly over-estimated as many of the central / corporate services support more than just teaching. For example, the cost of the library should be allocated to both teaching and research, likewise, HR, IT and Finance activities.

Subsequent Business Rules should cover:

• Academic (Faculty) workload assumptions
• Professional (non-academic) workload assumptions
• Non-student revenue allocation rules
• Expenditure allocation rules (specific rules by account code, cost center, fund etc)
• Treatment of corporate overheads and their cost drivers
• Treatment of facility space, and in particular, who should ‘wear’ the cost of any excess capacity
• Treatment of ‘Free’ support. This often comes in the form of Honorary appointments, for example, the clinicians who deliver guest lectures on campus. Or the university may get the free use of a room or piece of equipment at another organization.
• Allocation of student revenue:
  • Team-taught subjects: where a subject is taught by different departments, yet course is “owned” by one department, who gets the revenue?
  • Service subjects taught to non-majors: the program is bringing in the revenue, yet teaching is occurring outside the program department, how do you split the revenue?
  • Multiple majors and minors: how do you split the revenue when a student is taking multiple majors/minors across different schools?
  • Revenue offsets from financial aid: how do you handle the fact that different students have different discounts that may end up skewing revenue allocation?
• Driver assumptions are also key. As both revenue and cost drivers can be complicated, our advice is:
  • Let the data be a guide.
  • Involve key stakeholders in the decision-making process.
  • Start simple and build complexity as needed.
  • Be flexible.
  • Use what you have but build for the future.
  • Experiment with different assumptions.

Below is a list of some example drivers we traditionally use in Academic Program Financial Management models.

Name – Calculation – Assumptions

Academic Salary – Direct – Assuming Academic salaries are identified by account in GL

Professional Salary – Direct – Assuming Professional salaries are identified by account in GL

Employee Salary – Academic Salary + Professional Salary

Room Hours – credit hour rating * weeks

EFTSL – EFTSL

IT – Academic Salary + Professional Salary + (credit hours * 100)

to Commercial – Evenly Assigned

to Research – Evenly Assigned

For more information on Academic Program Financial Management please click here.