Compared sustainability analysis of the University’s Departments A and B over 3 years

Conclusions
Department A records a significant loss of £2,180k in year 3 due to: 1) the decrease of Home Student Income, 2) the increase of
non-staff costs and 3) the high level of academic salary costs, having a cumulated loss of £2,350k over 3 years. In the same time,
Department B records an increased surplus of £1,120k having a cumulated surplus of £2,795k over 3 years.

B had a constant number of Home Students for 3 years but A's decreased by 43% in the same period. B applied reduced fees for
International Students in year 2 and 3 (15k and 14k respectively, compared with the expected value of 20k) that lead to a
significant increase of their FTE (289% and 71%) and Income (192% and 60%).

The income generated by £1 spent for A’s Academics decreased overall by 22% compared with a 16% increase for B. Overall, the
income generated by £1 spent for A’s Academics is 58% less than B's.

A has a more research-intensive department than B but the income received is quite similar to that of B's. There is a gap between
A's and B's average academic salary of 30k meaning that overall A's academic salary is 31% higher than B's for comparable work
and time. Meantime, both A and B have a similar Central contribution in year 3 but A has 42% more academics. A’s non-staff
costs doubled overall compared with the constant level for B’s, being 3.53 times higher than B's for a similar Student FTE and
83% more academic FTE than B’s.

Recommendations
Concerning the Teaching activity and related to Student Home/EU, a cost benefit analysis of A's courses and programmes should
be performed to assess their sustainability and to adjust A's courses portfolio accordingly. It can also help to adjust the required
number of academics, aiming to increase A's sustainability because, overall, the income generated by £1 spent for A’s Academics
is 58% less than B's. This means A should eliminate inefficiencies and adjust the resources consumed to the level of income
generated by those spent. However, the reduced fees for Home Students of A in year 3 (8k compared with the expected value of
9k) should be double-checked for human errors or erroneous policy application, because the fees for Home/EU Students are not
under University’s control being set up by the government. Furthermore, I recommend also checking if this is not the result of
offering a 1k bursary in year 3.
Regarding the Student International population, department A should analyse B’s marketing mix that proved to be very successful
in increasing the number of new international students. However, the reduced fees for International Students of B’s in year 2 and
3 (15k and 14k respectively, compared with the expected value of 20k) should be double-checked as the fees are set up by the
University and the right level can be chosen ensuring they are sustainable and cover all the costs involved.
Concerning the Research activity, certainly A has a more research-intensive department than B but the income received is similar
to that of B's. It is possible that A's contribution to REF and to the University's external and international reputation are much
higher than of B's in terms of sustainability. However, A's Research Income is a significant challenge being under expectations
and reputation itself cannot compensate for the financial loss and the low income received. An internal audit should be performed
as the average value of A's grants is 2-3 times lower than B's so it’s worth checking both A’s pre and post-award work’s
compliance with the University's policies and Regulations. This should include checks if A invoiced the funders as required,
contacted the funders/partners if they delayed transferring the contracted funds, A's costings are raised using fEC methodology
and if some A's research income has been miscoded when recorded in the financial system.
There is a gap between A's and B's average academic salary of 30k, meaning that overall A's academic salary is 31% higher than
B's for comparable work and time. A’s Academic salaries costs are at an average of 97k per academic in year 3 compared with
67k for B’s, so an internal audit should be performed to check A's compliance with the University's policies and Regulations to
ensure consistency in application of HR policies for academic recruitment, payment and promotion over all departments.
I also recommend an audit of A's internal resources and non-staff costs to find justifications for being 3.53 times bigger than B's
in year 3 and doubling in 3 years’ time. In this case, A’s Academics' travel and subsistence costs should be revised and audited.
Furthermore, it should be checked if A's grants have been costed at fEC or whether the funders accepted to fund only a small
proportion of the costs involved for some projects and the difference was paid by the A department. It should also be checked if
there were any cost drivers that affect the costs of the activities consumed to achieve the grant‘s goals but which were not
identified and included when A's costings were performed.
Meantime, both A and B have a similar Central contribution in year 3 but A has 42% more academics and 3 times more grants
than B. This is possible because this contribution is set up as a lump sum of 4k per capita of a student or an academic. I
recommend this procedure is revised to appropriately reflect the different efforts that University made for a student and those
made for an academic and setting up different rates for students and academics.
Department A records a significant loss of £2,180k in year 3 due to: 1) the decrease of Home Student Income by 31%, 2) the
increase of non-staff costs by 100% and 3) the high level of academic salary costs that are 2.67 times higher than B's. Sensitivity
analysis allows us to consider the impact that a change in one variable would have. For example, what the Home Student Income
would need to be for A's loss to come to 0. Consequently, by using this method, A's Home Student Income should increase by
78% or A's Salary Academic should decrease by 68% or the Non-staff costs should decrease by 73% compared with the last year
(year 3) for A's surplus to become 0. The above figures show what areas A's departmental board should focus on to improve A's
financial position.

Further details to support the above conclusions and recommendations:

Student Home/EU
Overall, A’s Student FTE decreased by 23% but B’s Student FTE increased by 14% in 3 years. In year 1, A had 43% more Home
Students than B and in year 3, A and B have the same number of Home Students. B had a constant number of Home Students for
3 years but A's decreased by 43% in the same period. As a result, for the same Home Students FTE, A receives 11% less income
than B. This is because A's Home student FTE fell by 22% in year 3 even when A reduced the fees to 8k.

Student International
A receives 71% more income from International students than B but A has only 20% more International student FTE than B. A’s
fees are higher than B’s, so this explain the 71% higher income but B, which applied reduced fees for international recruitment,
increased its International Student FTE by 4.67 times in 3 years, confirming they chose the right marketing mix. B applied
reduced fees for International Students in year 2 and 3 (15k and 14k respectively, compared with the expected value of 20k) that
lead to a significant increase of the FTE (289% and 71%) and Income (192% and 60%). The increase is due to applying an
appropriate marketing mix and courses portfolio, unlike A’s scenario, where fees were reduced for Home Students from 9k to 8k
but they had 22% fewer students enrolled and received 30% less income. As a result, B’s Student International FTE increased
6.67 times in 3 years, but A’s increased only by 44% because B developed an aggressive approach/marketing regarding
international recruitment including a penetration price (4-5k lower than the market price).

Research Grant
A received higher value grants in year 2 and 3 compared to year 1. This suggests they actioned to improve the Research Income
generated by A's grants. In the same time, B’s structure of grants possibly changed, as some of those having high values were
ended and others of lower value were started, which can explains why B’s grant income generated decreased by 7%.
A’s Research Grant FTE in year 1 is 3 times higher than B's but the related income is lower by 23%; in year 2 it is 3.2 times
higher than B's but equal Income is received; in year 3 it is 2.57 times higher than B's but A’s Income received is higher than B’s
just by 29%. This means that A’s REF looks better than B's and A has more papers published (IP) than B due to A’s higher
number of live grants that increases A’s reputation. In 3 years, A has increased the Academic FTE by 10% (3 FTE), while A’s
Student FTE decreased by 23% and the live grant number increased by 3 (20%).

Academic Salary Cost

For a comparable Student FTE, A has 82% more academic FTE than B. A has academic salary and non-staff costs 2.67 times and
3.53 times, respectively, higher than B's. In the same time, A and B’s Students generated a quasi-equal income and A’s grants
generated A return just 29% higher than B’s. It means that some inefficiencies could be in place or policies might be applied
inconsistently or A's grants might not providing the expected overheads and a proportional return for the costs involved.
A’s Salary academic costs increased overall by 19% compared with B's, which remained constant, and compared with A’s Home
Student Income that decreased overall by 38%. A’s Salary costs are 2.67 times higher than B's and actually, academics in A could
have the salaries much higher because a portion of their time allocated for research is paid by the funders and mitigate this cost.
B’s academic salary is predominantly constant compared with A's, which constantly increased year by year. A’s Salary academic
costs are 2.67 times higher than B's but A’s Income generated by the Home Students is 11% lower. It is also only 71% higher than
that generated by International Students and 29% higher than that generated by Research grants. A’s Salary academic cost and
non-staff costs should be analysed because I consider these are the factors that lead to the significant loss of 2,180k in year 3
(compared with B's surplus of 1,120k).

Non-academic Cost
A’s non-academics are paid similarly to B on average but A’s FTE is half of B's. This can be due to the same inconsistent
application by B of the University's policies or because B has higher value grants requiring a centre manager or an admin staff to
be hired for appropriately managing those grants.

Non-staff Cost
A’s non-staff costs doubled overall compared with the constant level for B’s, being 3.53 times higher than B’s for a similar
Student FTE and 83% more academic FTE than B’s.

Central Contribution
A’s Central contribution decreased overall by 28% compared with a 20 % increase for B, A’s becoming equal in value with B's in
year 3. It means that both A and B contribute equally to the University’s recoup of central admin costs but A’s contribution is on a
descendent trend overall and can be challenging for A still contributing to central costs in a time their loss significantly increased.