Study of student costs using activity based costing methodology - aair

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Whereas Commonwealth funding, which currently represents in excess of 80% of most institution income, was previously on an annual basis, a rolling triennial process was introduced from 1989 for the 1990/92 triennium to enable institutions to plan for future growth. Institutions were required to negotiate annually with the Commonwealth their growth proposals and educational profile for the following triennium. Another major resource initiative was the introduction from 1991 of a Relative Funding Model (RFM) for higher education. This was aimed at meeting the Government’s commitment in the Green and White Papers to fund institutions of higher education on the basis of what they do rather than historical precedent and arbitrary classification. The Government recognised that significant distortions existed in the base allocation of Commonwealth higher education operating grants and undertook to develop an approach which would provide a more equitable distribution of base funding. 5 Following the commissioning of three studies of relative teaching costs and consultation with universities on the principles and framework for the model, the Commonwealth Department of Education, Employment and Training (DEET) developed the RFM based on a two dimensional matrix, using discipline cost as one axis and course level as the other. A limited number of teaching cost categories (or clusters) were selected in order to keep the model simple (5 clusters were selected at undergraduate and 2 at postgraduate level) and 3 course levels were adopted -undergraduate, other postgraduate, and research degree. The relative weightings of each cell in the matrix were established from the findings of the three teaching cost studies. Details of the model are shown below. Relative Funding Model: Clustering of disciplines 6 Cluster 1 2 3 Undergraduate Accounting Administration, Economics Law Other Humanities Behavioural Science Education Mathematics, Statistics Other Social Studies Computing Nursing Other Built Environment Other Health Other Languages Visual & Performing Arts Other Postgraduate Accounting Administration, Economics Law Other Humanities Education Mathematics, Statistics Other Social Studies Computing Nursing Other Built Environment Other Health Other Languages Visual & Performing Arts Research Degree Accounting Administration, Economics Computing Education Law Mathematics, Statistics Nursing Other Built Environment Other Health Other Humanities Other Languages Other Social Studies Visual & Performing Arts 4 5 Engineering Science Surveying Agriculture Dentistry Medicine Veterinary Science Agriculture Behavioural Science Dentistry Engineering Medicine Science Surveying Veterinary Science Agriculture Behavioural Science Dentistry Engineering Medicine Science Surveying Veterinary Science 5 Assessment of the relative funding position of Australia’s higher education institutions, The Hon. Peter Baldwin, M.P., Minister for Higher Education & Employment Services, August 1990, p. 1. 6 Ibid., p. 13.
Relative Funding Model: Relative teaching costs matrix 7 Cluster 1 1.0 1.4 2 1.3 2.0 3 4 5 Undergraduate 1.6 2.2 2.7 Discipline Weights Other Postgraduate 1.8 3.0 Research Degree 4.7 Operating grants for the 1991-93 triennium were calculated by summing the institution’s teaching load (which, in Australia, is expressed in Equivalent Full-Time Student Units - EFTSUs) in each cell of the matrix after multiplying the load in each cell by the relative weighting factor. DEET has advised institutions that the formula would be used on a once only basis, for determining 1991-93 operating grants and thereafter would determine grants on an historical basis. With the exception of special funding for students on industrial experience, given a weighting of 0.2 EFTSU, the model does not attempt to cover institution-specific cost factors, such as, remoteness of campus, smallness of scale, etc. Furthermore, the RFM provides for a discretionary element to be allocated to institutions on an annual basis. In publishing the RFM the Government noted that the weightings were consistent with the bands established for funding purposes by the UK Department of Education and Science and the New Zealand Ministry of Education. 8 During the development of the model there were several steps taken to consult with institutions and to seek feedback on critical attributes of the model. In November 1989, at an early stage in the development of the model, there were many suggestions presented at a seminar held in Canberra, including comments that the development of the model should be open and objective, the model should be simple, and should contain real costs rather than ideal inputs. In relation to this latter comment it was stated: The model should relate directly to current patterns of institutional expenditure rather than costs based on ideal inputs, and differentiate reliably between institutions with different educational profiles. 9 In this context, some Vice-Chancellors argued that the costs of administering part-time students and the industrial component of co-operative education or sandwich courses should be fully recognised. Subsequently, a special loading was acknowledged for administering the industrial component of co-operative education courses but hard data was sought on the cost of administering part-time students. This paper reports on a study undertaken for the University of Technology, Sydney (UTS) by the consultants, Ernst and Young on the cost of pan-time study. UTS is the largest national provider of part-time education, with almost 9,000 students enrolled under this mode in 1990 (46% of total enrolments), although all thirty-six public institutions of higher education in Australia reported a proportion of their total students enrolled in pan-time study in 1990. The study focused on pan-time, internal students not external or continuing education students. Whereas pan-time students were for many years counted by the Commonwealth Government as equivalent to half a full-time student and this served also as the basis for funding institutions, in 1982 the Government adopted EFTSU as a student load measure and counted part-time students as students undertaking 0.75 or less of a full-time student load. As the principal basis for determining institutional operating grants has been reported student load, the claim of institutions committed to pan-time education has been that, for most if not all, administrative and support activities, a pan-time student incurs at least the same administrative load and cost as a full-time student, not one-half or three-quarters of the load and cost. 7 Ibid., p. 13. 8 Ibid., p. 21. 9 Relative Funding Model: A Draft Proposal. Department of Employment, Education and Training, National Board of Employment, Education and Training, June 1990, p. 6.
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