Study of student costs using activity based costing methodology - aair

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2. The cost of a student includes a fixed element and a variable cost element which is dependent upon the student’s workload (or EFTSU); 3. A method of funding based entirely on EFTSUs is not a reflection of the level of expenditure required to support a diverse student population, and 4. UTS, with a large part-time student population, is under funded through the Commonwealth Government Relative Funding Model which fails to address the fixed element of administration costs. 22 A more appropriate funding model would recognise the following costs in a student profile: • a set administration cost; • a set faculty cost • a variable faculty cost. This could be represented in the fashion of the following formula: funding = a x (student #‘s) + b x (EFTSU) where: a = the fixed cost per student for the faculty b = the variable cost per student for the faculty Clearly the fixed amount per student would vary between disciplines as would the coefficient of the variable amount. As the study of part-time student costs at UTS was the first reported application of activity based costing methodology in higher education it is worthwhile reflecting on some of the limitations and difficulties experienced in the application. 1. Some of the organisational units such as Student Administration and Publicity and Public Affairs were responsible for several activities and it was necessary to carry out a detailed analysis of staffing and expenditure to separate out the costs of individual activities. Sometimes staff performed more than one activity as part of their job and it was necessary to estimate the amount of time spent on individual activities. This task was time consuming. 2. In the case of some cost drivers data was not readily available, for example in relation to space which was a driver for a number of overheads, such as cleaning, power, security. In these cases it was necessary to make technical estimates as a basis for allocating costs. Appropriate cost driver information was also not available for the library or for computing and technical estimates were necessary in these areas. 3. Another difficulty arose from the fact that in the first year of amalgamation the organisational structure for a number of administrative areas had not been finalised and there was some duplication of costs between old UTS and Kuring-gai. 4. In a broader application of the methodology, particularly for comparative purposes, it would be necessary to recognise a potential problem may arise from individual differences between one university and another in the treatment of certain administrative activities. For example, at UTS, careers and appointments activities are carried out by the Union, whereas at many universities these costs are met by the university administration. 22 Ibid., p. 14.
Many of these points highlight not so much limitations of the methodology, but some complexities in its application, particularly as a result of the way in which universities are structured and financial information is recorded. Despite the added complexity of the application of the methodology at UTS in its first year of amalgamation, it should be noted that the study was completed by Ernst & Young in just over three months. The UTS study in 1990 should probably be treated as a pilot application of the ABC methodology in higher education. Two further initiatives which might be explored would be a study using the methodology in a multiple university setting, and a more detailed microstudy of certain key activities in university administration, such as University admissions.
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