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5 Year Financial Plan : 2008 – 2012 Presentation to Senate by Hollie Clarkson

5 Year Financial Plan : 2008 – 2012 Presentation to Senate by Hollie Clarkson Acting Chief Finance Officer Wednesday 9 April 2008. 2007 . . . . A re-cap . . . . italisation !. Achievements . . . . . Sustained guidance from the Budget Working Group Adoption of Budgeting Framework

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5 Year Financial Plan : 2008 – 2012 Presentation to Senate by Hollie Clarkson

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  1. 5 Year Financial Plan : 2008 – 2012 Presentation to Senate by Hollie Clarkson Acting Chief Finance Officer Wednesday 9 April 2008

  2. 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

  3. 2007 . . . . A re-cap. . . . italisation ! • 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

  4. 5 Year Financial Plan : 2008 - 2012 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. 5 Year Financial Plan : 2008 - 2012 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

  6. 5 Year Financial Plan : 2008 - 2012 • 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

  7. 5 Year Financial Plan : 2008 - 2012 • 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)

  8. 5 Year Financial Plan : 2008 – 2012Prudent DoE Budget Guidelines

  9. 5 Year Financial Plan : 2008 – 2012Prudent DoE Budget Guidelines

  10. 5 Year Financial Plan : 2008 - 2012 • 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

  11. 5 Year Capital Expenditure Programme : 2008 - 2012

  12. 5 Year Capital Programme :Cumulative Expenditure 2008 - 2012 R million

  13. 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

  14. 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?

  15. 5 YEAR INCOME PROJECTIONS : 2008 - 2012 R’Million

  16. 5 YEAR EXPENDITURE PROJECTIONS : 2008 - 2012

  17. NET SURPLUSES /DEFICITS : 2007 - 2012

  18. 5 Year Financial Plan : 2008 - 2012 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?

  19. 5 YEAR INCOME PROJECTIONS : 2008 - 2012 R’Million A potential loss of income of +- R892 million in the 5 years from 2008 to 2012

  20. 5 YEAR EXPENDITURE PROJECTIONS : 2008 - 2012 A potential increase in total expenditure of +- R444 million in the next 5 years (2008 to 2012)

  21. NET SURPLUSES /DEFICITS : 2007 - 2012

  22. NET SURPLUSES /DEFICITS : 2007 - 2012

  23. “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

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