A long term financial plan for New Futures
Recently Council endorsed the University's Long Term Financial Plan (LTFP), a five year framework for financial and strategic decision-making.
This is a significant step toward ensuring that UON's financial future underpins our end-goals of excellence in research and educational outcomes, and does so in a sustainable way.
Developed by UON leaders with support over several months from Chief Financial Officer Paul Dunn and his team in Financial Services, the plan has provided Council with the confidence that the key initiatives outlined in NeW Futures can be funded. We are excited to share it with staff more broadly.
What is the LTFP?
Importantly, despite the constrained financial environment impacting the whole sector, our LTFP is a strategic growth and investment plan for New Futures. Under the LTFP, we will invest significant funds into areas that staff have indicated are important or we know have been underfunded over time, namely our facilities, information technology and research support.
By 2020, we plan to increase the annual IT investment by 25% and research support by 50%. These are significant amounts, the positive impact of which will be felt by every member of staff, as well as our students.
What is required to achieve the targets in the LTFP?
The LTFP makes it very clear what needs to be achieved in terms of revenue and expenditure, to make the strategic investments we have identified as priorities.
At its most simple, the plan assumes:
- growth in undergraduate student numbers
- growth in post-graduate student numbers
- growth in international student numbers to a level consistent with the sector
- growth in academic staff numbers as student load increases
- continued focus on aligning resourcing to the strategic priorities and finding greater efficiencies as we have over the past few years
- significant investment in major infrastructure developments in support of New Futures goals
- a widening of the gap between the revenue and expenditure lines (you may hear this referred to as widening of the 'Jaws').
What are the key parameters which have shaped the LTFP?
As with any financial forecasting, the longer term plan is based on certain parameters and a series of assumptions and targets. The three main parameters which shaped the LTFP were:
- maintaining minimum level cash reserves (net financial assets) necessary to maintain the University's credit rating
- ensuring ongoing sustainable operating surpluses
- a shift to load targets (away from load modelling) for which everyone is responsible.
Our cash reserves, or net financial assets, are of critical importance to Council who are rightly focused on maintaining our A credit rating.
Who is responsible for implementing the plan?
While there will be organisation-wide support to achieve some of these assumptions (eg. a co-ordinated approach to boosting international student numbers), under the plan, expenditure is largely managed by individual areas, who know their needs and priorities best.
How will progress against the LTFP be monitored?
Management have developed a Financial Sustainability Scorecard which contains 8 financial KPIs which will guide future reporting and monitoring of the University's progress against the LTFP. Provided UON operates within the ranges specified for each of these 8 financial KPIs, Council can have assurance that UON is financially sustainable.
What if these assumptions or financial KPIs are not realised?
Of course, there is a level of flexibility built into the plan. However, should any of the assumptions prove to be wildly off the mark or performance strays outside the ranges specified for each of the 8 financial KPIs, changes in the University's cost base and/or further revenue growth and/or adjustment of the University's capital expenditure plans will be required in order to reset our longer term financial position to within agreed parameters. That is why it is imperative that each one of us takes responsibility for achieving the targets specified within the LTFP.
What is the impact on annual budgets?
Budgets have been set to ensure that the performance levels specified in the LTFP can be achieved. Most leaders will have a budget for 2016 and beyond which will require choices around priorities for expenditure and clear strategies and plans to meet revenue numbers (mainly linked to student load).
This will involve certain changes to annual operating budgets in the immediate term, which will be reassessed over time against the 8 financial KPIs. Financial Services are in the final stages of developing a new budget model and once agreed, this will be further communicated to our leaders. More so than ever, managing our budgets will be based on the principles of transparency, flexibility and incentive.
Whilst most leaders would prefer their budget to contain a higher expenditure budget and lower revenue budget, our LTFP tells us that if we want to be able to invest in buildings, research and IT, we need to make some wise choices and achieve these targets. The budgets will require clear management by leaders but will be quite achievable when benchmarked across the sector.
While the health of our finances is everyone's responsibility, we will continue to do everything possible to minimise the impact of constraints on our Faculties and those Divisions which have a direct role in achieving growth targets within the LTFP. We are acutely aware of the unique budgetary pressures on parts of the organisation and we will continue to work hard to mitigate the impacts. The key is for everyone to understand the LTFP requires whole of UON perspective.
The LTFP is an important step for UON as we mature as an organisation. We believe it is an appropriate mix of responsible planning, ambition and accountability. On behalf of my team in Resources Division, we look forward to working with you all to deliver these exciting investments.