Financial Management Policy Relating to International Entities

Please note that this policy has not yet been converted to the new format.

Purpose

To establish a financial management policy relating to global entities that will ensure that global enterprise in the greater Monash is seen to be financially self-sustaining. The policy will provide for a transparent costing process and avoid any significant long-term cross-subsidisation between global entities.

Background

As stated in "Leading the Way: Monash 2020" (LTW), the vision for Monash is to become a "self-reliant, broad-based, global university and learning organization….". "Becoming global" is clarified as referring to the "process of locating operations, either physically or virtually, around the world."(p.7)

The updated Global Development Framework and Global Development : 2002 to 2006, spell out the benefits for all stakeholders arising from the global strategy, and it is important that these benefits are communicated both internally and externally.

It is equally important that internal and external stakeholders are aware that the approach adopted in achieving the global vision has, from the outset (e.g. as outlined in LTW p.10), encompassed the view that such developments will be self-sustaining, and only be implemented following the application of rigorous business and academic tests.

This approach has been successfully applied, with separate company structures for our Malaysian and South African campuses ensuring a clarity of understanding of financial outcomes and an ability to ensure that cross-border services can be charged for, and capital investments recovered with appropriate interest.

As the University develops a sounder understanding of cost structures through the application of strategic cost management, and as it continues along the global development path, it is now an appropriate time to clarify the approach already adopted in terms of a policy statement, so that the sources of funds that are supporting global developments are clearly identified; and so that any developmental cross-subsidisation occurring is seen to be funded long term from international activities.

Policy

There are three broad phases in the establishment of global entities: planning, implementation and operational.

Planning

Where the university is exploring the feasibility of an opportunity overseas all direct expenditure will be captured and costed as a project with the country or place name. Direct expenditure in this feasibility stage is most likely to arise from the International Development Office. Indirect costs may arise in the offices of the Vice-Chancellor, Deputy Vice-Chancellors, Deans and other senior executives, and will probably comprise travel and accommodation. Such costs should be borne by the relevant cost centre, but be clearly identified.

When the Vice-Chancellor’s Group has given approval, on the basis of a report on feasibility, to move to the stage of detailed planning and preparation of a business case, direct and indirect costs should be captured by resource managers of cost centres using the Project name, and reported on a quarterly basis using an online reporting tool developed by Financial Resource Management. The Project line will appear under the International Development Office budget line. Should a decision be taken not to proceed with the project, the total costs will be written off in that year. Should a decision be taken to proceed with the project, the cost may be capitalized and charged to the project itself as it becomes operational.

The International Development Office will be funded in part from direct royalties from international activities, such as the Malaysian campus, and in part from a proportion of dividends returned to the university from Monash International Pty Ltd, a profitable entity operating access programs internationally. If the International Development Office budget in any year requires, it may also be funded in part from a service charge to faculties relating to their share of income derived from international activities.

Implementation

When Council has given approval to proceed with the implementation of an international entity, all costs incurred will be captured on a monthly basis by the resource managers of the cost centres involved, and reported on a quarterly basis using the online reporting tool developed by Financial Resource Management.

These costs will accrue to the entity concerned and will constitute a deficit to be repaid with interest when the entity becomes profitable. Where capital funding is made available from within an existing Monash entity it will be similarly supported at commercial interest rates until the principal is fully repaid.

Operational

When an entity is fully operational and services are required on a continuing basis, agreement will be reached with faculty or support services for the provision of those services which will be charged on a quarterly basis. This will be identified in the entity’s annual financial plan.

Once fully operational it will at some point become the case that the international entity will also be supplying services to other members of the greater Monash. A similar mechanism for charging costs will be applied.

Conclusion

The above policy and associated mechanisms will provide assurance to all stakeholders that costs and revenues are properly recognized and any developmental cross-subsidisation is funded long term from international activities.