1. Activity Based Costing Project 2003 - 2005 Executive Summary

2. USQ Student Enrolments 2004

3. The Economic Denominator The Activity Based Costing Project sought to address the question: “What drives USQ’s Economic Engine?” What are you deeply passionate about? What you can be the best in the world at? What is the economic denominator (profit per x or, in the social sector, cash flow per x) which has the single greatest impact on moving the organisation “From Good to Great”? What drives your economic engine? “The Hedgehog Concept” – Collins, 2001.

4. Methodology ABC attempts to link the inputs of the University (people, premises, technology and consumables) with the outputs teaching courses and programs and research. A typical cost architecture and model data sources are shown below. Faculties RESOURCESACTIVITIESCOST OBJECTS Academic Support Academic Support Administration Support Administration Support Marketing Research Support Supporting Student Supporting Student Researching Enrolling Students Providing Library Services Providing Library Services ACC 1100 SCC1123 Courses B. Bus B. Sc B. Arts M. Bus M. Sc M. IB Programs Research International Onshore International Onshore International Offshore International Offshore Domestic HECS Domestic HECS Domestic Fee Paying Domestic Fee Paying Students Library Finance, IT, HR Providing Corporate Services Providing Corporate Services Liaising with Students Liaising with Students Time Surveys Floorspace / Timetabling Systems Grants Publications HRD Completions Business Sustaining Business Sustaining Leadership Govern Strategy Compliance Financial Systems Payroll System Facilities Preparing Lectures Delivering Lectures Assessing Students Preparing Lectures Delivering Lectures Assessing Students Preparing Lectures Delivering Lectures Assessing Students Preparing Lectures Delivering Lectures Assessing Students Preparing Lectures Delivering Lectures Assessing Students Student Records System Timetabling System Delivery Modes

5. Model Demonstration Resource Costs are assigned to Activities based on statistical drivers. The cost of Academic Salaries, for example, is assigned to activities based on Salary Weighted Time Survey results as shown below.

6. The USQ cumulative “Course Contribution Cliff” is shown below. The courses on the left are the most profitable with the courses on the right being the least profitable. 537 Courses528 Courses $10M in value is eroded by 200 courses 2003 Results: Course Contribution Cliff

7. The contribution from teaching from each of the Faculties is shown below. The size of the bubble represents the number of enrolments. Faculties below the x-axis are providing a negative contribution. 2003 Results by Faculty Key: 2,000 20,000Enrolments Key: 2,000 20,000Enrolments Contribution Margin = 15%

8. The contribution from teaching from each of the modes is shown below. The size of the Bubble represents the number of enrolments. Modes below the x-axis are providing a negative contribution. 2003 Results by Delivery Mode Key: 2,000 20,000Enrolments Key: 2,000 20,000Enrolments Contribution Margin = 15%

9. Educational partner results are shown below. The size of the bubble represents the number of enrolments. Partners below the x-axis are providing a negative contribution. Revenue ($000) Contribution ($000) 20% 10% (10%) (20%) (30%) Target Contribution Margin - 15% Break Even (40%) 45 Partners Key: 250 2000Enrolments Key: 250 2000Enrolments 2003 Results by Educational Partner Note: Construction of this level of detail from the ABC Model result requires further analysis outside of the model.

10. Performance Management The Economic Denominator The Economic Denominator Department Contribution Department Contribution Course Level Management Course Level Management For USQ the economic denominator is the “Course Contribution Margin” Course contribution targets will be set for each Faculty/ Department A framework is being developed to address possible course /program rationalization

11. Educational Partners Educational Partners USQ has changed its Learning Management System for online delivery and is now investigating an open source/open standards based approach Performance Management (cont’d) An Educational Partner Model is being developed addressing such issues as: Pricing model; Standard Contract; and “Partner non-performance” escape clauses

12. The University is in the process of setting targets for all output groups (Teaching, Research, Commercial, Community, etc). University Example Total Revenue $130M Revenue from Teaching $110M Return @ 5% = Net Profit $6M Add: Investment in Research$10M Add: Strategic Projects $8M Required Contribution From Teaching$24M Baseline Teaching Margin = 22% (24/110  100) Course contribution is the Economic Denominator. Well structured programs with a reasonable sized student cohort deliver a 30% - 40% Contribution Margin The Economic Denominator

13. With course contribution as the economic denominator, USQ is committed to reducing the number of courses which provide a negative contribution, thus “Trimming the Tail off the Whale”. 537 Courses 528 Courses The Economic Denominator

14. Model Utilisation and Enhancement The Activity Based Costing Model is a journey, not a destination Current enhancements include: Calculating program contribution; Deployment of model reporting and analysis; Data collection of time surveys online Data is to be refreshed annually The use of the ABC Model for budgetary allocation purposes is via the Budget Management Committee, which is chaired by the VC