1 5 year financial plan : 2008 – 2012 presentation to senate by hollie clarkson acting chief...
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5 Year Financial Plan : 2008 – 2012
Presentation to Senateby
Hollie ClarksonActing Chief Finance Officer
Wednesday 9 April 2008
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2007 . . . . A re-cap . . . . italisation !
Achievements . . . . .
Sustained guidance from the Budget Working Group Adoption of Budgeting Framework Development of Resource Allocation Model 2007 Annual Operating Budget : “A manageable
deficit” Presentation to Council of inaugural 5 Year Institutional
Financial Plan Establishment of Physical Planning Committee Merger-related Capital Infrastructure : +- R500 million New Westville Residences : +- 900 students A consolidated surplus in excess of R100 million Research-related revenue exceeded student fee income
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What did we not achieve?
A “breakeven” operating budget Optimum overhead recoveries A significant yield from third stream income Formal adoption of a consolidated Residences budget A comprehensive capital expenditure budget A widespread understanding of the RAM Adequate support for financial management
Regular reviews and revisions of the Main Fund Budget A functional MISB Reliable and timely management accounting Satisfactory fee and general collections
2007 . . . . A re-cap . . . . italisation !
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UKZN . . . . Some of the challenges
Student Enrolment Planning
Access and Affordability : Student admissions, including provision of adequate and affordable accommodation
Student Financial Aid : Scholarships, bursaries and loans
Student Fee Debtors : Collections and improving cash flow management
Development of sustainable sources of third stream income, innovation and (capital) endowment funds
Resource Allocation Issues : Strategic vs operational
5 Year Financial Plan : 2008 - 2012
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UKZN . . . . Some of the challenges (continued)
Capital expenditure needs : proper planning, prioritisation and life cycle financing
Putting the “balance” back into the UKZN balance sheet, i.e. restoration of solvency margins, positive funds (Council controlled) and improved liquidity ratios
Personnel costs : Academic salaries and productivity. To develop and implement an appropriate reward system
Working towards and achieving targeted expenditure levels in terms of DoE prudent guidelines
Multiple Campus facilities, expenditure efficiencies and need for benchmarking and adoption of “Best Practice”, especially in administrative support services
5 Year Financial Plan : 2008 - 2012
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Planning Imperatives : Revenue
Main (Operating) Fund financial viability within 3 to 5 years
Sustainable operating surpluses
Significant contribution from third stream income
Adherence to prudent expenditure guidelines
Affordable loan-funded capital expenditure
5 Year Financial Plan : 2008 - 2012
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Planning Parameters : Expenditure
Annual budget allocations based on Resource Allocation Model
Contractual liabilities represent “top slices” from Resource Base : Council approved and centrally controlled, i.e. statutory obligations, conditions of service or debt service obligations
Strategic Appropriations largely historic in nature and should be reviewed regularly, at least annually by all stakeholders
Need to finance University Strategic Plan (+-R365m), in part from annual Revenue budget
DoE prudent expenditure guidelines represent targets for major components of operating expenditure, i.e. personnel costs, goods and services, finance costs and depreciation
Amount available for Capital expenditure budget depends on debt service capacity (Council-imposed threshold of 3% per annum)
5 Year Financial Plan : 2008 - 2012
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5 Year Financial Plan : 2008 – 2012Prudent DoE Budget Guidelines
Acceptable Ranges
UKZN5 Year Plan
% % 2007 2012
Personnel 57,5 63,0 68,1 61,0
Goods & Services 32,0 29,0 34,8 28,0
Finance Costs 3,0 2,5 0,7 3,0
Depreciation 6,5 4,5 4,8 5,8
Surplus/(Deficit)
1,0 1,0(8,4)
2,2
TOTALS 100,0 100,0 100,0 100,0
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5 Year Financial Plan : 2008 – 2012Prudent DoE Budget Guidelines
-8.5 -20%
0%
20%
40%
60%
80%
100%
DoE 1 DoE 2 UKZN2007
UKZNTarget
Surplus / (Deficit)DepreciationFinance CostsGoods & ServicesPersonnel
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Planning Principles : Capital Expenditure
Priority to capital maintenance backlogs and compliance with safety, health and environment (“SHE”) requirements (+-R70m)
Standby Generators (+-R13m) to be installed shortly
Proposed 5 Year Capital Expenditure Programme (R638m) to be phased in and financed by external borrowings
Approximately 45% of total capital requests from 2008 to 2012 can currently be planned, based on anticipated borrowing and debt service capacity
Responsibility for prioritisation and allocation to be delegated to Resource Planning Committee and sub-groups
5 Year Financial Plan : 2008 - 2012
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Year Total CapitalRequested
Percentage Proposed
Total Proposed Budget
R’m % R’m
2008 519 50 259
2009 398 50 199
2010 175 40 70
2011 144 40 58
2012 173 30 52
Total 1 409 45 638
5 Year Capital Expenditure Programme : 2008 - 2012
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519
259
917
458
1092
529
1236
586
1409
638
0
250
500
750
1000
1250
1500
2008 2009 2010 2011 2012
Total CAPEX RequestsAffordable CAPEXProposed CAPEX Budget
5 Year Capital Programme :Cumulative Expenditure 2008 - 2012
R million
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2008 . . . . The way forward . . . . . . . . A Sustainable Financial Plan for UKZN
What will we achieve?
A better and more widespread understanding of the RAM
Benefit of experience with the new RAM . . . . . . Ewe be the judge!
Development of a 5 Year “Rolling” Revenue Budget
Progress towards reducing the Main Fund operating deficit
A comprehensive and properly financed 5 Year Capital Budget
A consolidated Residences Budget
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2008 . . . . The way forward . . . . . . . . A Sustainable Financial Plan for UKZN
What will we achieve?
Finalisation of the Merger-related Infrastructural Programme
Full devolution of budgetary control and responsibility
A functional and effective MISB . . . . No Misbevaviour!
Efficient Financial management support services
Continued growth in Research-related revenue
Development of meaningful and sustainable third stream income?
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5 YEAR INCOME PROJECTIONS : 2008 - 2012
2,11
8
1,96
0
1,81
4
1,76
9
1,58
4
1,36
9
1,83
3
1,72
1
1,59
4
1,47
7
1,36
6
1,200
1,300
1,400
1,500
1,600
1,700
1,800
1,900
2,000
2,100
2,200.
2007 2008 2009 2010 2011 2012
2007
Pla
n
2008
Pla
n
2007 Plan
2008 Plan
R’Million
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5 YEAR EXPENDITURE PROJECTIONS : 2008 - 2012
1,97
9
1,86
3
1,75
7
1,64
4
1,53
1
1,40
31,
748
1,67
0
1,59
4
1,52
2
1,44
1
1,35
31,300
1,400
1,500
1,600
1,700
1,800
1,900
2,000
2,100
2,200
R Million
2006 2007 2008 2009 2010 2011 2012
2007
Pla
n
2008
Pla
n
2007 Plan
2008 Plan
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NET SURPLUSES / DEFICITS : 2007 - 2012
-75
-45
0
51
-109
-82
-59
-26
9
47
84
-125
-100
-75
-50
-25
0
25
50
75
100
2007 2008 2009 2010 2011 2012R Millions
2007 Plan
2008 Plan
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UKZN . . . . What If . . . . ?
We do not achieve our Student Enrolment Plan?
Funding for Student Financial Aid, i.e. scholarships, bursaries and loans, is not forthcoming?
Debtors do not pay their fees on time (or at all) and bad debt write-offs increase?
Budgeted sources of third stream income, innovation and (capital) endowment funds do not materialise?
Targeted reductions in personnel costs and operating expenses are not reached?
5 Year Financial Plan : 2008 - 2012
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5 YEAR INCOME PROJECTIONS : 2008 - 2012
20072008
20092010
20112012
Total2007 Plan2008 Plan
"The Low Road"
2,118
1,946
1,200
1,300
1,400
1,500
1,600
1,700
1,800
1,900
2,000
2,100
2,200.
2007 Plan2008 Plan"The Low Road"
A potential loss of income of +- R892
million in the 5 years from 2008 to
2012
R’Million
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5 YEAR EXPENDITURE PROJECTIONS : 2008 - 2012
2,126
1,979
1,300
1,400
1,500
1,600
1,700
1,800
1,900
2,000
2,100
2,200
R Million
2006 2007 2008 2009 2010 2011 2012
2007
Pla
n
2008
Pla
n
"The
Low
Road
"
2007 Plan
2008 Plan
"The Low Road"
A potential increase in total expenditure of +-
R444 million in the next 5 years (2008
to 2012)
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NET SURPLUSES / DEFICITS : 2007 - 2012
-75
-45
0
51
-109
-82
-59
-26
9
47
84
-125
-100
-75
-50
-25
0
25
50
75
100
2007 2008 2009 2010 2011 2012R Millions
2007 Plan
2008 Plan
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NET SURPLUSES / DEFICITS : 2007 - 2012
-75
-45
0
51
-109
-82
-59
-26
9
47
-159
-190
84
-187 -198 -200
-225
-200
-175
-150
-125
-100
-75
-50
-25
0
25
50
75
100
2007 2008 2009 2010 2011 2012R Millions
2007 Plan
2008 Plan
"Low Road"
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“If you have built castles in the air,Your work need not be lost;
For that is where they should be.Now put the foundations under
them!”
(With acknowledgement to Henry David Thoreau)
Thank you