REVIEW OF HIGHER EDUCATION FINANCING AND POLICY

SUBMISSION FROM THE

AUSTRALASIAN INSTITUTE OF TERTIARY EDUCATION ADMINISTRATORS
(VICTORIAN BRANCH)

Clive T Vernon

April 1997

SUMMARY

This submission addresses the review’s term of reference on options for financing higher education teaching, and in particular, it considers the administrative costs of the financing options raised in the committee’s guidelines for submissions. The submission also considers the administrative costs of a likely hybrid of financing options, HECS-liable places supplemented with up-front fees levied by institutions.

The submission is made by the Victorian branch of the Australasian Institute of Tertiary Education Administrators, but forms part of a larger submission being made by the national body on behalf of the Institute. The Institute is the professional association of staff involved in the management and administration of tertiary education.

The Institute makes no comment on the merits of the options and does not mean to imply that a financing method is preferable simply because it is cheap to administer. However, administrative cost is a relevant criterion in deciding policy and is usually important in its implementation.

The Institute has used several techniques to calculate and estimate the administrative costs of financing methods, which are detailed below. For the purposes of comparison administrative costs have been expressed in $ per equivalent full-time student unit (EFTSU), although this unit is not directly applicable to some of the financing methods. The estimates set out in the table below have been rounded to nearest whole dollars. Details of the costings are given in the main body of the submission in paragraph number of the ‘Ref’ column.

WHO WE ARE

There are 41,447 general staff employed by universities out of a total of 72,703 staff (DEETYA 1996, table 4, page 11). General staff are therefore the majority of staff employed by universities.

Forty-nine per cent of general staff are employed at higher education worker (HEW) level 4 or below (Sanders, 1997). Rates of pay differ around the country, but the top of HEW 4 is paid about $30,000 p.a. The median classification of academic staff is in about the middle of the range of lecturer B, from $43,000 to $51,000 p.a. (DEETYA 1996, table 2, page 7). General staff are therefore much cheaper than academic staff although of course the two groups perform generally different functions.

We do not know of any good national statistics on the type of work done by general staff. However, from our experience we identify three roles.

1. Skilled support

Skilled support staff work under the direct supervision of more senior academic or general staff. Typically they have interpersonal skills and technical skills in using equipment, often computer applications. They are normally occupy posts classified at Higher Education Worker levels 3 to 7, although there is some overlap with expert support and middle management staff. They work in:

(a) academic department offices with two or three other members of general staff under the supervision of a middle to senior level of academic staff;

(b) teaching laboratories, teaching support laboratories such as computer, and language laboratories with two or three colleagues under the supervision of middle level general staff;

(c) faculty offices with up to ten other general staff colleagues under the direction of a middle level general staff;

(d) academic support services such as libraries and computer centres with up to several hundreds of general staff colleagues under the direction of middle level general staff;

(e) administrative support services such as student records, finance, human resource management and secretariat with up to several hundreds of general staff colleagues under the direction of middle level general staff (the review committee is supported by several of such staff);

(f) general service areas such as cleaning, catering, security and maintenance with up to a score of colleagues under the direction of a middle level member of general staff.

These are the roles performed by most general staff.

2. Expert support and middle management

Expert support and middle management staff work under the general supervision of senior academic or general staff. Typically they have a specialist technical skill and themselves supervise general staff. They are normally occupy posts classified at Higher Education Worker levels 7 to 10 although at the lower levels there is some overlap with skilled support staff and at the highest level there is some overlap with senior management. They work:

(a) as managers of and expert practitioners in academic services such as teaching laboratories, teaching support laboratories and faculty offices under the direction of a senior member of academic staff;

(b) as managers of and expert practitioners in academic support services such as libraries, computer centres English language and study skills centres and counselling services under the direction of senior member of general staff;

(c) as managers of and expert practitioners in administrative support services such as student records, finance, human resource management and secretariat under the direction of senior general staff (the review committee is supported by a number of such staff);

(f) as managers of and expert practitioners in general service areas such as cleaning, catering, security and maintenance under the direction of a senior member of general staff.

These are the roles performed by about 20% of general staff and are the staff who are most active in the institute.

3. Senior management

In senior management we include vice-chancellors, deputy vice chancellors, pro vice chancellors, registrars, business managers, chief librarians, heads of information technology and heads of similarly large units. Few senior managers retain significant involvement in their initial area of expertise, whether that be in teaching and research or one of the predominantly general staff areas. They are employed on individual contracts which on the general staff scale are above level 10. They are the most prominent of staff but at only 2% of general staff or 1.2% of all staff, are in a small minority.

ADMINISTRATIVE COSTS OF FINANCING OPTIONS

In this, the core of our submission, we consider the administrative costs of:

1. untied block grants;

2. a model of the current arrangements;

3. performance-based funding using system-wide measures;

4. performance-based funding using institutional portfolios;

5. competitive tendering;

6. scholarships;

7. fees;

8. student loans;

9. vouchers; and

10. a hybrid of HECS and supplementary up-front fees.

1. Untied block grants

1.1 The simplest scheme to administer is an untied block grant with full discretion to spend on the university’s objects, subject to a general audit. This is the closest of the options considered to universities’ previous funding arrangements.

1.2 To administer a block grant a university needs, apart from the administrative support it needs for its internal purposes, about 15% of the time of a middle-level member of staff with financial management expertise to check that the grant is received as planned and to acquit the grant at the end of the financial period. The total administrative cost directly attributable to an untied block grant is about $15,000 p.a. For a medium-sized institution of 15,000 equivalent full-time student units (EFTSU) this cost would be -

$1 per EFTSU.

1.3 To implement block grants the Commonwealth needs to:

1.3.1 allocate grants to universities by the principle determined by Government;

1.3.2 commit funds to universities;

1.3.3 ensure that funds are acquitted appropriately and that universities’ audit reports are satisfactory;

1.3.4 report on the expenditure to Parliament and the public.

1.4 Assume that DEETYA’s cost levels were the same as universities @ $1 per EFTSU, totalling almost $420,000 in 1997. This would give a total cost of administering untied block grants of -

$2 per EFTSU.

 

2. A model of the current arrangements

2.1 It is hard to identify the administrative costs of collecting measures such as total student load and the Martin equity indicators (1994) which are currently reported to the Commonwealth because the student load data now also has to be collected to implement the students’ Higher Education Contribution Scheme, universities would collect enrolment data anyway for their internal academic records and most of the Martin indicators are different aggregations of data already collected. However, a conservative estimate of the administrative work required of a medium-sized university of 15,000 Equivalent Full-Time Student Units (EFTSU) just to collect, verify, validate and report the student load and Martin indicators would be:

2.1.2 the equivalent of 1 students’ systems person over a year to install and manage the administrative and computer systems to collect, verify, validate and report the data, @ a total cost of salary, salary overheads and personal equipment and facilities of approximately $100,000 p.a.;

2.1.2 the equivalent of 2 staff over a year to collect and check the data, @ a total cost of approximately $120,000 p.a.;

2.1.3 the equivalent of 0.5 person over a year to analyse the data reported to ensure that it is correctly understood by the Commonwealth and internally, @ a total cost of $50,000 p.a.;

2.1.4 computer processing time of, say, $100,000 p.a.

Institution’s costs                                        $370,000 p.a.
                                                                  or 24.67 per EFTSU.

2.2 The department reported that its running costs for providing operating grant funding to higher education institutions in the unified national system as well as the four small non-government tertiary institutions was $8.2m in 1994-95 (DEET, 1995:107). Assume that this is now the department’s cost of administering funds for the publicly subsidised universities. Therefore DEETYA’s total cost of administering the present funding arrangements are:

DEETYA’s costs                               $ 8.20m
or                                                      $16.70 per EFTSU

TOTAL                                             $41.37 per EFTSU

3. Performance-based funding using system-wide measures

3.1 Universities’ current funding arrangements have some rudimentary elements of performance-based funding: operating grants are subject to universities’ meeting student load targets, the research quantum of $222m is allocated according to institutions’ performance on the research composite index and the equity fund of up to $5m has been allocated by a relatively crude assessment of performance.

3.2 The administrative load of performance-based funding depends very much on the type of mechanism implemented and on what performance measures are used. If the Commonwealth built on the current arrangements by expanding the number of performance measures it used to allocate universities’ operating grants, applying the same set of measures to all universities it would need to:

3.2.1 develop the measures and the performance-based funding formula;

3.2.2 model the application of the formula to the sector;

3.2.3 respond to issues raised by the sector, Government, Members of Parliament and the public;

3.2.4 allocate grants to universities according to the performance measures;

3.2.5 commit funds to universities;

3.2.6 ensure that funds are acquitted appropriately and that universities’ audit reports are satisfactory;

3.2.7 report on the expenditure to Parliament and the public;

3.2.8 calculate the measures and allocations for the next funding cycle.

3.3 The administrative load on universities would depend very much on the type of performance measures adopted.

Cost of performance measures already used by the Commonwealth Performance measures collected but not yet used by the Commonwealth

3.4.1 Indicators such as the student progress rate (Linke and colleagues, 1991:66) that are already commonly used for policy analysis within the sector, or funding by successful student load (Anderson and colleagues, 1996:65) that is readily derivable from data already collected but is not now explicitly used by the Commonwealth may have their collection costs absorbed within current data collections, estimated above. However there will be considerable once-off implementation costs in analysing the new measure and its effect on the university. After all, the purpose of performance-based funding is to change performance, and universities will want to consider very carefully the implications of new measures and what action they should take to maximise their performance.

3.4.2 Again, for a medium-sized university of 15,000 EFTSU to implement funding based (in part) on student progress rates the start-up costs would be:

3.4.2.1 the equivalent of 2 months of the time of the vice-chancellor’s office in leading the analysis and policy development within the university, considering and co-ordinating implementation within the sector through the AVCC and other forums and representing the university’s position to Government, the public and key stakeholders, @ a cost of approximately $80,000;

3.4.2.2 the equivalent of 3 months’ time of a deputy vice chancellor in overseeing policy implementation within the academic and administrative areas of the university, @ a cost of approximately $50,000;

3.4.2.3 the equivalent of one half-day meeting of academic board and each of, say, 6 faculties, @ a cost of approximately $50,000;

3.4.2.4 the equivalent of 6 months’ time of data analysis support, @ a cost of approx $50,000;

3.4.2.5 restructuring costs of re-allocating resources within the university to maximise performance on the new measure, @ a cost of $50,000;

TOTAL                                         $280,000

Performance measures developed from data already collected

3.5.1 Indicators such as student satisfaction, graduation rates and the more difficult graduate employment rates would be based largely on data that are already collected, but the construction of the performance measures would be difficult, and contentious in at least some cases. For example, student satisfaction measured by the course experience questionnaire is consistently higher for liberal courses such as arts and sciences and consistently lower for rigid courses such as engineering. The indicator would have to correct for institutions’ discipline mix. Graduation rates would require institutions to collect longitudinal data on their students - currently the data reported to the Department of Employment, Education, Training and Youth Affairs is a series of snapshots (at each census date). Adding a longitudinal collection to the current ‘snapshot’ collections would require a new student database structure. Employment rates depend on the proportion of students who are studying part-time (and thus most likely to have a job already), the employment rate in the university’s region and the employment rates for different vocations. Employment measures would have to be adjusted for universities’ different circumstances.

3.5.2 For each such measure one might double the policy development and implementation cost of the more readily acceptable measures estimated above.

TOTAL                                         $560,000

For each such measure there would be a continuing additional data analysis cost.

TOTAL                                         $10,000 p.a.

Performance measures developed from data collected but not systematically

[Return to Top] [Go to Part 2]