Principles

• The accounting procedure to be followed is set out here in a paper by Dr. David Back.  Please refer to this for a layperson's guide to accounting concepts and terminology.  Also available: a demonstration spreadsheet using the paper's example and an earlier paper paper by Dr. Back.
• A basic concept in management accounting is to report revenue and expenditure items that match project activities in the reporting period (all those items and only those items).  For example, if students were taught in a period but UNE's share of revenue has not yet been received, the revenue should be reported and an asset should appear in the University's 'accounts receivable'.  DEST requirements are irrelevant in this context.
• All direct costs associated with a project should be reported ('claimed') through the University's financial management system using the designated project code.  This is the 'operating activity' code that appears as the second set of four digits in the general ledger account code.  There is to be one such code per project.  Please contact Bill Colless for details.
• Teams will be provided with regular reports of direct costs that have been claimed.  They should review these, and where appropriate dispute items with the Head of the unit that claimed the cost.  If reconciliation cannot be reached, the matter should be referred to the Executive Dean or to the DVCIE for resolution.
• All projects are to be financially evaluated for the six-month periods ending 30 June and 31 December.  (Full project reviews are annual as per IPM requirements.).  All reports are to be treated in strict confidence and not circulated except to the Team, to relevant Heads of Schools, and to relevant Deans.

Format of Reports

• In addition to the financial statements in Dr. Back's paper, reports are to include a reconciliation of the reported revenue against the number of student unit-enrolments, fee per unit enrolment and revenue share.
• Reports are to include a balance sheet.
• Direct costs are to be itemised using meaningful categories (not just codes).

Treatment of Staff Time

• Normally staff time should be treated as a direct cost charged to the project at the time that it is expended.  Please refer to the discussion and treatment of staff and course coordinator time in Dr. Back's paper.  Note the definition of direct cost as 'expenditure which can be economically identified with and specifically measured in respect to a relevant cost object'.
• Costs of staff time are to include on-costs.
• As observed in the paper's appendix, it could be argued that salaries and on-costs of existing staff would be incurred irrespective of the project (i.e., they are 'sunk costs'), in which case the marginal salary cost is nil.  The question can be asked: why is the opportunity cost, or the value of alternative activities, zero?  If the marginal argument is used, details and explanation must be provided at the time the financial statements are prepared and noted in the statements.

Treatment of Overheads and Revenue Distribution

• The accounting method reports contribution to overheads, without allocating overheads to the project or a basis for distributing the revenue.  UNE financial reports include additional sections that (i) assess overheads and intellectual property expense, for comparison against the project's reported contribution to overheads, and (ii) the basis for distributing the project's revenue.
• Overheads are assessed on the direct costs of staff salaries plus on-costs, with components shown separately for faculty and central overheads.
• An intellectual property expense per unit is calculated from academic initial development time (salary with on-costs and overheads for time spent writing the unit), IP lifetime (the period from a unit's first-use to its final use), the fractional share with other study modes (e.g., if the unit is provided in five modes assume 20%), and academic weeks spent on annual maintenance.
• As the first priority, revenue is distributed against direct costs.  The contribution to overheads, and any surplus, is then distributed to Faculties and to the Centre with equal priority.
• A complete specification of the principles, a sample calculation and a simulation are available here.

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IPM