Page 65 - Transformation Report

The following special projects are linked to the abovementioned pillars to ensure the medium- and long-term sustainability of
the University, namely:
• Academic programme optimisation and strategic differentiation
• Review of organisational structures, including implementing the business models for reintegrated services
• Improving cost efficiencies

The University’s budget is based on an Institutional Resource Allocation Model that allocates high-level block allocations of
resources per funding category and activity, that is, Strategic Allocations, Academic Staffing Allocations, CAPEX, Bursaries,
and other expenses that are further distributed via budgetary processes and allocation models. Various committees allocate
funds based on models and processes informed by the Vision 2020 strategy. The Annual Performance Plan, the three-year
cash flow and reserve accumulation plans support the budget and are used for the purposes of monitoring and evaluating
expenditure trends and future sustainability. Council exercises its oversight in terms of financial viability of the University,
and annually includes the achievement of a balanced budget being approved, inclusive of a 5 to 10 percent reserve). When
Council assesses its annual performance, these objectives form the basis of such an evaluation. To assist MANCO in assessing
the financial status of the University, several mechanisms have been put into place to monitor and flag areas that may require
attention:
• Reviewing the annual and three-year rolling budget directives
• Annually updating the Affordability Model
• Tracking of the Annual Performance Plan via the Mid-Year Performance Review Report
• Using the financial indicators to track performance over several years in order to analyse trends and flag anomalies

The ongoing review of business process, reduction in wastage, use of alternative energy and water to reduce utility costs, and
enhancing the institutional capacity to optimise the use of its facilities (green building) as vehicles to reduce costs, collectively
contribute toward the overall financial sustainability of the University.

1.2 Financial Performance Indicators
Over the period under review, the institutional financial indicators show that the University maintained a relatively healthy
financial position. However, the full extent of the financial implications of the COVID-19 pandemic remains unknown. A key
sustainability indicator is the salary benchmark which was approved at 65 percent including a provision for the cost of
harmonisation and organisational redesign. Any material changes in subsidy and fee assumptions impact the amount available
to fund staffing costs.

Table 22 below provides an overview of several quantitative financial indicators over the past five years (2016 to 2020). A
gradual increase in Council-controlled state support income can be seen, increasing from 48.15 percent in 2018 to 52.28
percent in 2020. With the University’s funding making up the total Council-controlled recurrent income purse (100 percent), it
is understandable that there would be a concomitant decline in the proportion of own-funding generated.

For the period under review, the staffing costs were below the normal range of 58 and 63 percent when calculated as a
proportion of total revenue. Also, when calculating the staff costs as a proportion of total revenue based on tuition fees and
operational subsidy only, the indicator remains around 59 percent (Council’s benchmark is 65 percent).

As previously indicated, the annual Council-approved budget includes provision for 5 to 10 reserve/surplus. Despite the decline
over the period under review, the surplus generated was well within the prescribed range, with 2020 showing the lowest at
6.25 percent and 2018 the highest at 11.76 percent surplus (when interest from financial investments are included). However,
when investment interest is excluded, 2018 was the only year when the surplus (5.12 percent) was within the prescribed range.
In 2019 and 2020, the University generated a 3.01 percent surplus and -0.16 deficit. The small deficit for 2020 may be partly
due to the extraordinary expenses associated with the COVID-19 pandemic.

65 TRANSFORMATION REPORT