Roberto Escarré, Oana Driha, Maryna Makeienko & Dimitrios Doukas, Claudia Linditsch

Project Coordinator Dimitrios DOUKAS, Mag. [email protected] +43 (0)316 5453 6816

Graz, February 2018

This project has been funded with support from the European Commission. This publication reflects the views only of the authors, and the Commission cannot be held responsible for any use which may be made of the information contained therein. Project number: 561905-ePP-1-2015-1-AT-EPPKA2-CBHE-JP

‟Higher education can be a powerful engine for building a stronger society [...]. It can serve the community by contributing knowledge and advanced skills as well as basic competencies and research through its so-called third mission . ” (World Bank)

Table of Content

Executive Summary ...... 1 Introduction ...... 2 Detailed Macro Analysis ...... 7 Main national sources for financing of public higher education ...... 15 Methods/Models for assigning state resources to higher education ...... 17 Reforms in the higher education system in the last 15 years ...... 18 Strengths and weaknesses in the financing system of higher education ...... 20 Favorable opportunities for the financing system of higher education ...... 22 Threats to the financing system of universities ...... 22 Principal trends with regards to the financing of higher education ...... 23 Detailed Micro Analysis ...... 24 Other Funding Sources ...... 27 Legal Forms of the Universities ...... 28 Internal Procedure for Budgeting ...... 34 Distribution of Budget to individual Departments ...... 37 Accountancy Standard (National, IFRS, USGapp, Other…) ...... 38 IT Systems for Accountancy ...... 38 Controlling unit/department within the Institution and outside of it ...... 39 Budget Cycle Time - Controlling Cycle ...... 40 Form of Partnership with Industry Partners...... 40 IPR policies ...... 41 IPR Valorization Policies ...... 42 Number of Patents ...... 43 Annual Revenues from marketing Patents or other IPR ...... 43 IP Management Unit/Office ...... 43 Intellectual property rights (IPR) ...... 44 Good Practices and Case Studies ...... 45 Sustainable Financial Management – a Good Practice by FH Joanneum – University of Applied Sciences – Austria ...... 45 Sustainable Financial Management – a Good Practice by University Alicante – Spain ...... 57 Financial Management at Saarland University at a Glance – a Good Practice by University of Saarland – Germany ...... 66 Best practice for financial management and disbursement of government budget – Naresuan University – Thailand ...... 68 Budgeting of Thai Autonomous University: Case Study of Thaksin University – a Good Practice by Kasetsart University – Thailand ...... 71

Comparative Analysis Study by Universiti Putra Malaysia – Malaysia ...... 81 Sustainable Procurement Management as Part of Financial Management Practices – a Good Practice by UiTM Puncak Alam – Malaysia ...... 90 Accountable Financial Report as Part of Financial Management Practices – a Good Practice by USU – Indonesia ...... 96 UGM’s Integrated Financial Management Systems (Simkeu) – a Good Practice by Universitas Gadjah Mada – Indonesia ...... 101

Executive Summary

ADVANSE’s overall objective is to promote the modernization of financial management (FM) practices and income diversification strategies in Southeast Asian (SEA) higher education institutions (HEIs), with a view to sustainably strengthen the Higher Education systems and maximize the social return on investment in Higher Education (HE). Further, the project has two specific objectives: a) to enhance human, organizational and technical capacities of Southeast Asia countries HEIs to increase efficiency in FM and income diversification, promoting accountability and transparency through systematization and promotion of good practice; b) to promote regional integration through creating a network of financial managers pursuing modernization of FM systems and practices.

The present study is included in the analysis work package of the ADVANSE project. The study contemplates data gathered from three European countries (Austria, Germany, and Spain) and three from Southeast Asia (Indonesia, Malaysia and Thailand). The period covered is from 2013 to 2015 and include both macro and micro approaches.

In the first part of the document a detailed Macro Analysis is presented, covering economic and social indicators from the various partners of ADVANSE. Each university partner representing its own country filled a macro analysis format with data from their own region. This data was complemented by proper research on reliable alternative resources (mainly from international organizations like the World Bank, OECD, etc.). The collected information includes various socio- economic indicators, such as GDP per capita, population, unemployment rate, etc. For each of the macroeconomic indicators, the study includes a matrix of data for the countries during the analyzed years and a graph illustrating the average behavior of the variables for all the countries. The results were compiled according to social and economic indicators and constitute a diagnosis of the financing mechanisms of higher education institutions.

The second part of the document includes a detailed Micro Analysis from the seven HEIs participating in the study. The collected data covers crucial financial and institutional management topics like funding sources, internal procedures for budgeting or IPR Policies.

Finally, the third part of the document includes relevant Good Practices and Case Studies at institutional level. Each ADVANSE partner has included the most relevant experiences in the area, which in most of the cases have interesting reproducibility potential.

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Introduction

Under a favorable economic context and counting with improvements of their economic growth potential in the medium run (i.e., global competitiveness), human capital and global talent competitiveness, emerging economies are growing in the last decades at a faster rhythm compared to advanced economies. Among emerging countries, the Association of Southeast Asian Nations (ASEAN) members are experiencing also a great progress registering a GDP growth of over 5% in the last years, a trend that seems to be maintained at least up to 2023 (IMF, World Economic Outlook 2018). The ASEAN-5 economies (Indonesia, Malaysia, Philippines, Thailand, Vietnam) has a growth projection of 5.3% in 2018 and 5.4% in 2019. Indonesia and Malaysia are expected to grow at similar average rate (5%) while Thailand is supposed to grow under 4%.

Deepening globalization does not mean only economic increase and life standards improvements. Talent mobility is becoming a relevant element of dynamism, innovativeness and competitiveness (World Economic Forum, GCTI 2015-16). Hence, there is no doubt of the relevance of the government (national, regional and also municipal) and the business community nor of the role of higher education institutions (HEIs).

Individuals as well as the society as a whole are benefiting from higher education. On one hand, the population with tertiary education is more environmentally alert, have healthier lifestyle and is more civic involved. On the other hand, the economic returns for higher education graduates are estimated to perform an increase of about 17% in their earnings, while primary and secondary education imply an increase of 10% and 7% respectively (World Economic Forum). Thus, higher education graduates generally benefit from better quality education, count with improved wages and thus their tax revenues are higher. Both aspects (better wages and higher tax revenues) contributing to an improved and stronger welfare society.

Up to date, there are about 200 million higher education students compared to 89 million in 1998, which means about 124% more students enrolled in less than two decades or, in other words, an yearly increase of over 4% in the number of students enrolled. These 200 million students and the ones to come are prepared within HEIs not only by providing them with adequate and relevant job skills, but also by facilitating them the knowledge and critical view which encourage them to be active members of their communities and societies.

The whole educational system must be adapted to the new social and economic needs of the global economy, with a upward demand of a better-trained, more skilled, and adaptable workforce. In order to do so, collaboration between government, industry and university is needed as well as a solid financial support of the higher education system.

Moreover, with the demographic evolution of emerging economies and Southeast Asia (SEA), with an enlarged youth population (in ASEAN countries almost half the population is aged under 30 ) and each time better graduation rates in elementary and secondary education, an increased demand of access to tertiary education is experienced in the region. This is not new anymore and the trend is expected to continue, making higher education a critical public policy issue. Additionally, the large numbers of students put a strain on publicly-funded institutions of higher learning and many countries with limited resources are struggling to finance the growing needs of a larger student body, without compromising the quality of their educational offerings.

In Southeast Asia HEIs are facing unprecedented challenges in financial management to meet the huge market demand (increasing student enrolment), expectation on research activities, provide quality teaching and sufficient infrastructure with a declining financial support from the government (ADB). There is no exception in Indonesia, Malaysia and Thailand.

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It is worth mentioning that by doubling the number of HEIs in a region is expected to obtain an increase of about 4.7% of the regional GDP per capita within a five years period. Indeed 21st century is considered the "Asian century" due to their explosive economic and investment growth that leaded as well to a huge improvement of their HE systems. About 289 Asian universities from 24 countries are in the global list of 980 HEIs and 19 of them are in the top 200.

Source: The Times Higher Education, World University Ranking . www.thewur.com

The Times Higher Education (in collaboration with the Centre for Global Higher Education at the UCL Institute of Education), based on a range of academic and economic metrics (e.g., research publication rates, higher education participation rates and GDP per capita) identified the range of countries that have an institution in this year´s ranking as well as seven countries that are in leading position to succeed (TACTICS).

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Source: The Times Higher Education, World University Ranking . www.thewur.com

Despite not being the global economic rising stars like the BRICS (Brazil, Russia India, China and South Africa), Thailand, Argentina, Chile, Turkey, Iran, Colombia and Serbia have the potential to outstrip the BRICS from a higher education perspective.

In fact, with a GDP per capita below US$15,000, at least half the youth population is enrolled in higher education. The trend is getting even better as participation increased over 5% between 2010 and 2014, research output is growing from a base of at least 30,000 papers a year and they count with at least one university in the Times Higher Education World University Rankings.

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Sources: The Times Higher Education, World University Ranking . www.thewur.com

It is interesting to see as well their research output, university participation and performance in global rankings compared to other emerging countries with even better economic context (e.g. BRICS).

Sources: Elsevier, World Bank, United Nations, UNESCO, Transparency International, Organisation for Economic Cooperation and Development (extracted from The Times Higher Education)

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The explosive growth in enrolment in higher education over the past decades has put extra pressure on the resources for higher education across SEA. Between 1970 and 2011 the expansion of enrolment was considerable and 46% occurred in SEA (UIS 2013). In order to keep up with the enrolment increase in our target countries, the budget of HEIs should also grow considerably. Instead, universities cut corners to accommodate the situation and this means quality of teaching and learning is highly distressed, such as employing less qualified teachers, higher student-teacher ratio, less investment on libraries, laboratories or facilities in the unis and worse supporting services (ADB 2011). The financial pressure eventually put on the students and families, which limits the access and equity of HE for poorer students.

Quality education does not only suffer from insufficient funding in public HEIs mainly financed by the government. In response to the larger student population in the last decades, private HEIs have dominated higher education market in Indonesia, Malaysia and Thailand. These private HEIs are usually differentiated in the third tier and tend to have lower quality. A more efficient financial management in public HEIs will uptake more students and better guarantee qualified graduates. It is fair to say that quality education and financial management in HEIs are mutually related. Stable and solid finance basis is important for HEI operation and deliver quality outputs. Oblivious to duration of schooling, student learning depends on the quality of education (Hanushek and Woessmann, 2007). Given to the attenuated budget from the government, HEIs are in need to diversify funding streams to support academic and research activities so as to guarantee quality education.

Despite the diversity in the region, the HE systems in SEA share similar challenges as well as the support of their governments in the 3 target countries encouraging HEIs to share financial responsibilities through decentralisation. Meanwhile, ADB revealed that HEIs in SEA were hunger for qualified manpower in leadership and operation. Managers and administrators in HEIs are unfamiliar with efficient and effective financial management under the progressively granted autonomy.

ADVANSE, advancing financial management practices in Southeast Asia countries, aims at modernising financial management practices and income diversification strategies in HEIs with a regional dimension. Therefore, in the following pages some insides of the higher education systems and the financial management good practice are depicted.

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Detailed Macro Analysis

The 10 countries that make up the Association of Southeast Asian Nations (ASEAN) collectively form the seventh-largest economy in the world with a GDP of roughly $2.6 trillion as of 2016, and a population of about 640 million. Within ASEAN region, Indonesia has by far the largest economy and contributes about a third part to the region’s total GDP. With an estimated population of about 259 million and territory encompassing 17,500 islands, Indonesia features significant investment potential, a large domestic population of consumers, and abundant natural resources. In the European case, Germany the biggest economy with over 82 million inhabitants.

Table 1. Some macroeconomic figures

EUROPE ASIA Austria Germany Spain Indonesia Malaysia Thailand Total population (millions) 8.70 82.70 46.30 258.70 31.70 69.00 Working age population (mi llions) 5.73 54.17 31.26 170.11 21.15 48.60 % over total population 65.82% 65.50% 67.51% 65.75% 66.71% 70.43% Tertiary -educated population (millions) 1.18 16.08 10.26 11.70 4.16 5.79 % over total population 13.56% 19.44% 22.16% 4.52% 13.12% 8.39% Aged dependency ratio (%)* 26.40% 31.60% 25.20% 7.70% 7.20% 12.40% Child dependency ratio (%)* 21.90% 20.40% 22.00% 45.80% 41.00% 26.90% Median age of population (years)* 42 44 40 27 26 35 GDP per capita (US$, PPP) 44,498.40 41,902.30 26,608.90 3,604.30 9,360.50 5,899.40 GDP (US$ billions) 386.80 3,466.60 1,232.60 932.40 296.40 406.90 Labor force participation rate (%)* 61.00% 59.90% 59.00% 67.70% 59.40% 72.30% Employment -to -population ratio (%)* 58.00% 56.70% 43.50% 63.50% 57.50% 71.70% Unemployment rat e (%) 6.00% 4.10% 19.60% 6.20%* 3.20%* 0.70%*

Source: World Economic Forum. Note: * information as by 2015.

It is interesting to underline that in both regions more than 65% of total population could be considered as working age population and about 60% of the active population is really working. The employment rate in both Indonesia and Thailand are remarkable: close or even higher than 70% of active population (see table 1).

Despite the considerable higher median average age in the European countries compared to the analyzed Asian ones, tertiary-educated population is higher. However, it the case of Malaysia the percentage is rather similar to the Austrian one.

The World Economic Forum analyze the global competitiveness index of over 135 countries each year and one of the main pillars that encourages global competitiveness is higher education and training. As depicted in table 2, in both European and Asian countries the score is rather high. However according to the university ranking, Germany and Malaysia excels in their respective regions and this seems to be linked to the high expenditure in tertiary education. Despite that, Austria and especially Spain seem to be better ranked regarding their workforce with tertiary 7

education in Europe, while in Asia the leading position is still on Malaysia. Moreover, the very same countries with the highest tertiary expenditure are also the ones with the leading score on capacity to retain talent. These aspects should be beyond doubt strongly considered by the government and HEIs.

Table 2. Some global competitiveness aspects related to tertiary education

EUROPE ASIA Austria Germany Spain Indonesia Malaysia Thailand Higher education and 5.7 5.7 5.2 4.5 4.9 4.6 training GCI University ranking GTCI 52.91 76.72 56.81 32.63 49.58 38.51 Tertiary enrolment GTCI 71.68 53.9 78.32 25.95 32.75 44.81 Tertiary education 43.01 49.14 20.87 9.83 51.37 13.97 expenditure GTCI Workforce with tertiary 50.97 43.53 60.03 13.59 35.92 20.55 education GTCI Population with tertiary 26.13 23.19 46.68 12.89 27.07 24.82 education GTCI Brain gain GTCI 50 61.31 30.68 52.48 71.73 47.42 Capacity to attract talent 4.12 4.70 2.81 4.31 5.03 3.95 Capacity to retain talent 4.36 5.06 2.90 4.15 5.07 4.15

Source: World Economic Forum. www.weforum.org

Note: GCI - global competitiveness index, ranked from 1 (worst) to 7 (best); GCTI - global competitiveness talent index, ranked from 0 (worst) to 100 (best); capacity to attract and to retain talent are scored from 1 to 7.

A more detailed picture of the higher education systems of these three European and Asian countries is given in the following pages.

During 2013-15, among Asian countries, Indonesia is the country that spends less on higher education in terms of % of its GDP. Among the European countries analyzed, Germany is the one that invests the lowest share of the GDP in higher education. On the other extreme, the highest share of GDP invested in higher education corresponds to Austria in Europe and Malaysia for the case of Asia. Though it needs to be considered that the average expenditures on education in Asia is generally much higher than in Europe.

Table 3. Total spending on higher education in % of GDP

Country Total spending on higher education in % of GDP Average Year 2013 2014 2015 Asia Thailand 4.20% 4.20% 4% 4.13% Indonesia 0.35% 0.39% 0.36% 0.37% Malaysia 5.90% 5.21% 4.98% 5.36% Europe Austria 1.36% 1.35% 1.37% 1.36% Germany 0.30% 0.30% 0.30% 0.30% Spain 0.85% 0.83% 0.81% 0.83%

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The data on the number of HEIs shows that there is no specific trend in Asian and European countries. However, Indonesia in Asia and Germany in Europe can be defined as having a very high number of higher education institutions.

Table 4. Total number of higher education institutions

Country Total number of higher education institutions Average Year 2013 2014 2015 Asia Thailand 168 168 171 169 Indonesia 3,189 3,280 3,223 3,230.67 Malaysia 88 90 93 90.33 Europe Austria 55 55 55 55 Germany 467 467 467 467 Spain 83 83 83 83

When analyzing the number of public and private Higher Education Institutions in Asia and Europe, it can be concluded that the main part of HEIs in Europe is public while the biggest part of Asian HEIs is private (except Thailand, where more than half of the institutions are public as well).

Table 5. Percentage of public higher education institutions

Country Percentage of public higher education institutions Average Year 2013 2014 2015 Asia Thailand 57% 57% 56% 56% Indonesia 3% 3% 4% 3% Malaysia 23% 22% 22% 22% Europe Austria 78% 78% 78% 78% Germany 66% 66% 66% 66% Spain 60% 60% 60% 60%

Indonesia definitely becomes the outlier when analyzing private HEIs with 97% of private HEIs followed by Malaysia at 20% less private HEIs. In Europe only Spain reaches 40% while the other two countries are far away from this level.

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Table 6. Percentage of private higher education institutions

Country Percentage of private higher education institutions Year 2013 2014 2015 Average Asia Thailand 43% 43% 44% 44% Indonesia 97% 97% 96% 97% Malaysia 77% 78% 78% 78% Europe Austria 22% 22% 22% 22% Germany 27% 27% 27% 27% Spain 40% 40% 40% 40%

The % of students over the whole population of the countries is similar with levels between 2 and 4%, except in Thailand where almost 20% of the population enter in the category of students. This phenomenon can be caused by the easier conditions for accessing university studies or the lower tuition fees. Further analysis will show if financial issues are the main cause in this case.

Table 7. Students, percentage of population

Country Percentage of students Average Year 2013 2014 2015 Asia Thailand 18% 18% 18% 18% Indonesia 2% 2% 2% 2% Malaysia 3% 2% 2% 2% Europe Austria 4% 4% 4% 4% Germany 3% 3% 0,3% 2% Spain 3% 3% 3% 3%

The division of students between private and public universities shows that during the last three years the average level of students in public universities in Asian and European countries was kept on the same rank.

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Table 8. Percentage of students - public universities

Country Percentage of students in public universities Average Year 2013 2014 2015 Asia Thailand 82% 82% 82% 82% Indonesia 33% 35% 37% 35% Malaysia 54% 51.24% 49% 51.41% Europe Austria 98% 98% 98% 98% Germany 93% 93% 92% 92.67% Spain 88% 88% 88% 88%

Based on the information facilitated for each one of the countries, during 2013-15 the percentage of students enrolled in private universities was on average a lot higher in Asian countries than in European ones.

Table 9. Percentage of students - private universities

Country Percentage of students - private universities Average Year 2013 2014 2015 Asia Thailand 18% 18% 18% 18% Indonesia 67% 65% 63% 65% Malaysia 46% 48,76% 51% 48.59% Europe Austria 2% 2% 2% 2% Germany 7% 7% 8% 7.33% Spain 12% 12% 12% 12%

Indonesia stands out for the highest percentage of the population employed at HEIs. The European countries show a higher percentage of employees in HEIs than Malaysia, but the average percentage of the population employed at HEIs still ranges between 0,3% and 0,8%. The leader in Europe is Germany.

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Table 10. Percentage of employees at HEIs

Country Percentage of employees at HEIs Average Year 2013 2014 2015 Asia Thailand 0.08% 0.09% 0.10% 0.09% Indonesia 3.61% 3.88% 4.51% 4% Malaysia 0.19% 0.20% 0.20% 0.20% Europe Austria 0.34% 0.34% 0.34% 0.34% Germany 0.79% 0.82% 0.83% 0.81% Spain 0.31% 0.31% 0.31% 0.31%

The average annual tuition fee is higher in European countries, especially in Spain (up to 1,850 Euros), while Asian countries in general have a lower tuition fees fewer (under 1,600 Euros). Nevertheless, it is worth mentioning that the pressure of tuition fees is a lot higher in Asia ranging from 9% of the GDP per capita in Indonesia to 17% of the GDP per capita in Malaysia, while in Europe the range goes from less than 2% of the GDP per capita in Austria to almost 7% in Spain.

Table 11. Average annual tuition fees - public universities

Country Average annual tuition fees - public universities Average Year 2013 2014 2015 Asia Thailand 748.00 € 748.00 € 748.00 € 748.00 € Indonesia 226.64 € 352,07 € 358.12 € 312.28 € Malaysia 1,572.00 € 1,572.00 € 1,572.00 € 1,572.00 € Europe Austria 726.72 € 726.72 € 726.72 € 726.72 € Germany 1,860.00 € 1,550.00 € N/A 1,705.00 € Spain 1,675.50 € 1,675.50 € 2,200.00 € 1,850.33 €

It is also important to examine the differences in the time needed to finish both master and bachelor degrees among countries. Table 12 shows clearly that the average time to complete the bachelor degree is more or less the same in all the countries. However, it should be noted that data for Spain is difficult to investigate and in Thailand it takes one year more to finish this type of studies.

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Table 12. Average study time to complete bachelor level or equivalent

Average study time to complete bachelor level or Country equivalent (in years) Average Year 2013 2014 2015 Asia Thailand 4.75 4.75 4.75 4.75 Indonesia 4.00 4.00 4.00 4.00 Malaysia 4.00 4.00 4.00 4.00 Europe Austria 3.90 3.95 4.05 3.96 Germany 3.55 3.58 3,65 3.57 Spain 4.00 4.00 4.00 4.00

Considering the duration of master studies it was observed that in Malaysia a master degree can be obtained in 1.5 years on average. In Thailand, on the other end of the scale, the duration of master programs is twice as long, thus needing 3 years for finalizing this kind of programs on average. Countries in which a master degree can be achieved in about two years are Germany, Spain and Indonesia.

Table 13. Average study time to complete master level or equivalent

Average study time to complete master level or Country equivalent (in years) Average Year 2013 2014 2015 Asia Thailand 3.00 3.00 3.00 3.00 Indonesia 2.00 2.00 2.00 2.00 Malaysia 1.50 1.50 1.50 1.50 Europe Austria 2.50 2.60 2.7 2.60 Germany 1.95 2.06 2.11 2.04 Spain 2.00 2.00 2.00 2.00

One should also take into account the average expenditure per student per year. There is no particular trend in Asian and European countries, but there are countries that spend more than others. In Europe it is Austria that spends 40% more than others on a student per year. This could be considered as a kind of compensation for the high tuition fees in public universities. On the contrary, Spain is the one that spends less money (among all the countries), but tuition fees are on as similar level as in Germany. In Asia, Malaysia spends more than 8,000 Euros per student, and, like Austria, seems to compensate the high tuition fees pressure. Despite the low spending of Indonesia per student per year among Asian countries, it exceeds the spending made in Spain. 13

Table 14. Average expenditure per student per year

Country Average expenditure per student per year Average Year 2013 2014 2015 Asia Thailand 3,018.00 € 3,018.00 € 3,018.00 € 3,018.00 € Indonesia 1,581.27 € 1,723.58 € 1,895.94 € 1,733.60 € Malaysia 8,086.00 € 8,571.16 € 9,085.43 € 8,580.86 € Europe Austria 12,162.21 € 12,336.56 € 12,481.33 € 12,326.70 € Germany 7,353.00 € 7,633.00 € 7,700.00 € 7,562.00 € Spain 1,500.00 € 1,500.00 € 1,500.00 € 1,500.00 €

The unemployment rate shows that Spain suffers most due to the economic crisis of 2008-09 (exceeding 26% during the crisis and under 20% in 2015). Among Asian countries Indonesia is the one with the highest unemployment rate (around 6%), which still means that it remains at the lower spectrum when compared to European countries.

Table 15. Unemployment rate of graduates

Country Unemployment rate of graduates Average Year 2013 2014 2015 Asia Thailand 3,00 % 4,00 % 3,00 % 3,20 % Indonesia 0,36 % 0,40 % 0,46% 0,40 % Malaysia 27,00 % 27,00 % 27,00 % 27,00 % Europe Austria 4,70 % 4,70 % 5,70 % 5,03 % Germany 2,30 % 2,50 % 2,50 % 2,43 % Spain 26,00 % 23,70 % 48,00 % 32,57 %

Concerning graduate´s unemployment Spain and Malaysia are unfortunate leaders, as the unemployment among those recently graduated is over a quarter. Indonesia, on the other hand, has the lowest graduate unemployment while showing a high overall unemployment rate. In Europe Germany embraces the lowest unemployment rate, due to a good communication policy between industry and HEIs as well as the economic structure and the lower impact of the recent crisis. The internship systems is sounded in Germany as students often continue their career in these companies straight after obtaining their bachelor degree.

As mentioned before, Spain suffers most from unemployment in Europe, but the situation for graduates is even worse. An over-education issue is underlined in this case with lack of specialists in “unpopular” areas. This situation is also observed in Thailand. The office of statistics 1 has shown that in 2015 there were 310,000 new graduates out of which almost 50% are unemployed. The top five disciplines of the unemployed include business, computer, engineering, social science and humanities.

1 http://web.nso.go.th/ 14

Main national sources for financing of public higher education

Public universities in Spain receive their funding from three sources: taxes, tuition fees, contracts and private resources. Contracts are mostly done with the private person or companies that are using university facilities. The major part of it is derived from taxes, namely 70%, tuition fees constitute 20% of the budget, and contracts and private resources account for 10%.

Diagram 1. Funding of public universities in Spain

In Austria there are two types of higher education institutions: Universities of Applied Sciences and traditional Universities. They are funded differently. While Universities of Applied Sciences are funded through federal, regional and research and development funds, Traditional Universities are funded through federal funds and research and development activities. Data from Statistic Austria 2015 2 reveal the following funding distribution: the total funding for Universities of Applied Sciences was 308.07 million Euro, over 70% coming from federal funds, 26% from regional funds, and there are no community funds. Traditional universities had a total funding of 3,609.03 million Euro, which can all be attributed to federal funds.

In Germany there are 3 ways of funding: state subsidy (this being the most important source of funding) next to third-party funds and administrative revenues.

2 http://www.statistik.at/web_en/statistics/index.html 15

The financial sources of all public universities in Indonesia come from four kinds of sources: (1) tuition fees, (2) federal government budget, (3) research and project grants and (4) auxiliary activities and charity from private companies. The government budget provides sources for research, capital expenditures, and operating expenses. At Gadjah Mada University for example, the budget is made up with the following proportions: tuition and fees (30%), federal government budget (37 %), research and project management grants (26 %), and auxiliary activities and charity (7 %).

Diagram 2. Funding of public universities in Indonesia

Public universities are funded by the government and are defined as self-managed institutions under the Universities and University Colleges Act 1971. However, universities with autonomy status are required to generate income. In 2015 the ratio was 80% government funding, while the remaining 20 % had to be provided by generating own income.

In Thailand, budget allocated to public universities is divided into two categories: government budget and university revenue.

In Malaysia public universities a very small share is coming from development activities while the rest is received via tuition fees, block grants and other incomes.

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Macro analysis key findings at a glance

° South-Asian countries have higher growth potential and growth rate, but lower GDP per capita than European ones. ° While in Europe public HEIs are predominant, in Asia private ones are much more numerous especially in Indonesia. ° Despite the rather low number of public HEIs in Asia, a high percentage of students are enrolled in public HEIs. ° Average annual tuition fee are very heterogeneous among the countries analyzed, but in the tuition fees pressure is a lot higher in Asia than in Europe especially in Malaysia. ° Average expenditures on education are much higher in Asia than in Europe especially in Malaysia and Thailand. ° The high level of tuition fees in Malaysia and Germany seems to be compensated through a higher level of average expenditure per student per year, while this is not the case of Spain with the highest tuition fees in the European countries analyzed and the lowest average expenditure per student per year. Austria, in the opposite situation, counts with the lowest tuition fees and the highest average expenditure per student per year. ° Overall percentage of the population holding an academic degree is much higher in Europe than the one in Asia. ° The average time needed to complete a bachelor or master degree does not vary significantly among the countries. ° The leading countries in both regions in terms of population are also the leaders regarding the average percentage of population employed at HEIs: Indonesia in Asia and Germany in Europe. ° The unemployment rate in Asian countries is much lower than in the European countries. ° More than ¼ of the graduates in Spain and Malaysia suffer from unemployment.

Methods/Models for assigning state resources to higher education

European countries show better developed models for assigning state resources to higher education institutions than Asian countries. Thus, in Thailand, each of the universities will need to establish a budget for each fiscal year (1 Oct to 30 Sep) through their Divisions of Planning and propose it to Bureau of the Budget for screening and adjusting. Representatives from universities may be summoned to defend the proposed budget by the Cabinet.

On the other hand, allocation of federal government budget to public universities is supposed to cover the gap (budget deficit) between a university's revenues and its expenses. However, the calculation of budget allocation is done based on universities' performance target decided by the Minister of Education and Research. Performance targets cover the number of students, awards of students' performance, number of Ph.D. degrees among lecturers, accredited study programs, publications, innovation/patents, and the university’s level within the world university rank.

As far as Europe is concerned, the Austrian method for assigning federal funding goes as follows: Universities of Applied Sciences are funded according to the federal norm cost model. This is a federal fund calculation model related to the number of study places. Financing volume is based on the type of curriculum (technical versus non-technical curricula) and the norm place number. Hereby, the norm place number is a federally fixed maximum number of funded study places for one degree program. However, regional funding is based on a global budget which is distributed across institutions and study programs. The assigning of research and development funding depends on the activities of each higher education institution. The overall budget is agreed for the period of three years, the amount is divided into basic budget and formula-bound budget. Each 17

university receives a global budget (80 % basic and 20 % formula-bound budget) which is determined for three years in advance. Moreover, each university receives its share based on quality and quantity indicators (teaching, R&D, social goals). Each university has to display other revenues, the quantity of which does not decrease state allocation.

In Germany an additional link between the amount of state subsidies to the duties and the performance of HEIs can be observed. The financing models of HEIs indicate clearly not only the reception of money by HEIs but also the specific use of allocated funds. Thus, the volume of duties can be quantified and the performance of universities is measured. The composition of indicators can express certain political targets. However before measuring the targets with indicators the most important thing is that there must be clarity and consensus about those targets.

Another key point is that there is a contract program in Spain where a contract is signed between the university and the state, the main feature of which is as follows: the university receives financing in return for accomplishing specific objectives. Three main aspects are considered in this program: equity in financing, goal ‐based funding and the efficiency of the regional university system. Progress in the definition of structured financial instruments needs to serve four main objectives: financial stability, adequacy, efficiency and institutional equity. Resource allocation is done according to objectives and results.

Private universities, however, have different types of models for assigning resources. The allocation of federal government budget to private universities in Indonesia is very limited. In general, there is no direct allocation of government budget to private universities. The government budget usually only covers a small part of the private universities' employees (lecturers and administrative staff) who have the status of government officers. Additionally, the federal budget always allocates research grants for private universities based on research proposal competition. Finally, the government can allocate subsidies to private universities depending on their accreditation status by the Ministry of Research and Higher Education. In Malaysia, however, each university has its own business model as they are based on self-reliance.

Going further, Austria’s private universities do not receive significant public funding, while Germany participates in competitive public funding programs. Spain receives contributions from different kind of payers, both external donors, in the face of private companies and individuals, and governmental funds and institutions.

Reforms in the higher education system in the last 15 years

Talking about reforms in higher education, one should notice that European countries had to introduce significant changes due to the introduction of the Bologna process. Thus, in Austria the Universities Act 2002 replaced the Universities Organization Act from 1993, which led to the adaptation to Bologna Process and helped to standardize study programs (3 years bachelor/2 years Master, Diploma Supplement, QA in Higher Education). Furthermore, the introduction of study fees was discussed intensely, new labor contracts for teaching and scientific staff based on performance records were created, and as a final result the autonomy of universities was strengthened. All these changes had a great impact as they led to higher comparability on an international level and to the adaptation of study programs according to labor market needs. Furthermore, teaching became more qualified and students appeared to have higher performance through competition.

Germany had to introduce more changes due to the composition of the Bologna Reform, the Lisbon Recognition Convention and the Bucharest Communiqué. All the changes implemented in the last 15 years led to transparency and comparability of academic degrees, mutual recognition of

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studies and qualifications and higher internationalization thanks to the Mobility Strategy for the European Higher Education Area.

In the same sense, Spain introduced the Bologna process, based on quality via the evaluation and unique European space for Education which gave the economic autonomy to public universities. Furthermore, adequate resources for basic quality operations must be guaranteed. Moreover, universities develop programs for multiannual periods that can be agreed with regional governments. These programs include goals, funding and evaluation. What is more, a document for the improvement and monitoring of policies for financing universities to promote academic excellence and increase the socioeconomic impact of the Spanish University System was introduced. Changes were based on the quality of the universities and led to an increase in graduate employability and the standardization with the common European system.

However, universities in Southeast Asia didn’t implement the same changes. For example, in Thailand a reform of a higher education system was introduced that resulted in an increase of efficiency in administration, the improvement of the educational standard, more creativity and innovation, which in its turn led to flexibility in an uncertain environment, and later to the establishment of university governance.

While in Indonesia there were no significant changes or reforms in the higher education systems over the last ten to fifteen years. However, in 2014 the new President restructured two ministries: the minister of education and culture became responsible for the basic and middle level of education and culture, and the minister of research and higher education is responsible for higher level education and research. This policy has increased the proportion of budget allocated to human resource development (lecturers and administrative staff) and research in higher education. Additionally, from the years of 2013-2016, the government has given more autonomy for academic and administrative affairs for the eleven most prominent public universities. It is likely that in the coming years this policy will also apply to other public universities. Finally, during the last three years the government has acquired some private universities as public universities through the ministry of research and higher education. These changes encouraged universities to seek funding besides government sources through cooperation in teaching, research and community services. Public universities are also encouraged to develop cooperation with private companies and industry in research and development programs. This led universities to strive towards improving the quality of teaching, research and community service.

Furthermore, Malaysia introduced some changes like PSPTN, which is an abbreviation used for Pelan Strategik Pengajian Tinggi Negara or National Higher Education Strategic Plan (NHESP). PSPTN was created with the aim to produce human capital that supports the endeavors of the National Mission in order to improve knowledge, capability and innovation, as well as inspire first- class mentality. PSPTN encompasses four phases:

‹ Phase 1 (2007 - 2010): Laying the Foundation ‹ Phase 2 (2011 - 2015): Strengthening and Enhancement ‹ Phase 3 (2016 - 2020): Excellence ‹ Phase 4 (Beyond 2020): Glory and Sustainability

There are five institutional pillars that are emphasized in the PSPTN: Governance, Academic Leadership, Learning and Teaching, and Research and Development. All HEIs need to execute certain initiatives for all CAP (Community Action Plan) that have been identified to be implemented at institutional level. Nevertheless, targets set for each HEI are closely related to factors like the maturity of the university, availability of resources and the capability of its human capability, infrastructure etc. The finished reform is supposed to increase the visibility of Malaysia Higher Education (e.g. QS Ranking, number of international students´ enrollment).

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Strengths and weaknesses in the financing system of higher education

The main weaknesses and strengths of higher education institutions are listed bellow We should also state some strong and weak points within the financing system of higher education.

Malaysia

Weak points:

‹ Engagement between universities and industry is still at a low level

Strong points:

‹ Government grants ‹ Number of international students (income generation) ‹ Malaysia is currently the hub for education for under developed countries ‹ Universities also bid for allocations from other industries/agencies within and outside Malaysia by its expertise in various field of research

Indonesia

Weak points:

‹ Public universities are struggling to implement a financing system in higher education since there are disputes and conflicts of policies between the policies of the Ministry of Research and Higher Education and the Ministry of Finance

Strong points:

‹ Rector is elected and approved by the University Board of Trustees ‹ Members of University Senate are elected ‹ Bottom-up budgeting system ‹ Performances (outcomes) based budgeting ‹ Financial management ‹ More access for capacity building in revenue generating activities

Thailand

Weak points (For public university):

‹ Block grant is provided by the government ‹ Flexibility of financial management (especially for autonomous university)

Strong points:

‹ Lack of university – industry linkage (Public Private Partnership) in some disciplines ‹ Biggest portion of government budget go to personnel expenses ‹ Less budget for R&D

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Austria

Weak points:

‹ Full cost model used for federal and regional funds does not allow for budgeting fixed and variable costs and is therefore not precise ‹ Financing of HE is a strong political issue ‹ Current financing model for traditional universities is very weak as it is flat rate based ‹ Dependence on public funding - private funding targets are not reached

Strong points:

‹ Federal norm place number model at universities of applied sciences allows flexibility to reallocate budgets across study degree programs ‹ Some universities of applied sciences are privately organized (limited liabilities - are organized more economically) ‹ Financing for universities is organized on a mid-term basis (for 3 years) - offers some kind of stability and planning opportunities

Germany

Weak points:

‹ Political determination of the HEI profile ‹ Dependencies from industrial partners

Strong points:

‹ Planning reliability ‹ Autonomy

Spain

Weak points:

‹ During economic crisis - high level of dependence in public financing system ‹ Absence of financing autonomy ‹ Lack of private contributions

Strong points:

‹ The main part of R&D and Innovation is being realized at universities ‹ Great expectation to achieve financing from private companies through provision of services ‹ High scientific production ‹ Excellent research facilities

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Favorable opportunities for the financing system of higher education

There are some favorable opportunities in every country in favor of financing system of higher education. Thus, universities in Thailand have their own authorities to collect tuition fee and study related fees besides financial support from the government. Commercialization of research, innovation and patented products, particularly done under the Public Private Partnership (PPP), are also responsible for the financial support of universities.

Indonesian public universities, on the other hand, especially the Public University Legal Entity, now have opportunities to develop business units, to build up entrepreneurship, to speed up the agenda of higher education management reform, to develop and extend collaboration with foreign institution in joint teaching and research activities, and to develop international joint and/or double degree programs.

Furthermore, the Malaysian strategies implemented by universities for revenue generation include different types of opportunities, both for university staff and students: international students fee, rental of space, facilities and equipment, sale of research products, organizing of seminars, workshops and conferences, consultancy services, grants from industries/agencies within and outside Malaysia, establishment of endowment funds.

In Austria internal cost allocations can be seen as an opportunity to overcome some short-comings of the full cost model applied at universities of applied sciences for federal and regional funds. The reintroduction of tuition/study fees and the development of a better cooperation with the industry could also lead to some improvement. The establishment of higher efficiency in administration would result in cost savings. And one of the opportunities would be developing more industry or privately financed courses (postgraduate programs).

Similarly, favorable opportunities in Spain and Germany are: an increase of demand from the private sector, framework programs, both European and national, for the purchase of equipment, efficiency in the management of universities, implementation of an output-oriented culture, quality programs, adequate positioning at new technologies used in education.

Threats to the financing system of universities

Together with opportunities that arise with the developing of financial systems of universities, there are threats that must be taken into account. For instance, in Indonesia as well as in other countries threats to the financing system of public universities can appear when the implementation of financial management contradicts government regulations due to a lack of control system. Another threat might be the university management concentrating more on finding grants rather than on raising academic and research quality of the university’s work. Furthermore, for Universities of Applied Sciences (i.e. in Austria) one of the threats can be missing basic financing for R&D activities. Universities are obliged to conduct R&D by law, but do not receive any financing for these activities, which can result in poor performance in this area. Other threats for the entire system can be cuts in the number of study places, federal and provincial budget cuts, an unclear situation concerning tuition/study fees.

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Principal trends with regards to the financing of higher education

There is a number of the trends appearing during the development of the financial system in every country.

Malaysia

‹ The budget from the government is decreasing ‹ Universities are required to generate income

Indonesia

‹ Public universities that have not been categorized as public university legal entities are encouraged to improve their status to public university legal entity, since this change will provide more authority and autonomy in the financial management of universities ‹ Private universities strive to improve their level of accreditation status from national and international bodies in order to receive more subsidies from the federal government budget

Thailand

‹ The number of students in higher education level will decline due to demographic change ‹ Universities will no longer be able to rely on the collection of tuition fees

Austria

‹ Trend to private financing ‹ Decrease of public basic financing ‹ Increase of financing by projects/programs ‹ Introduction of study-place based financing also for traditional universities instead of the global budget approach ‹ Internationalization of study programs - number of international students will increase (Moderate increase in the number of students)

Germany

‹ State subsidies are the most important source of funding ‹ Third-party funds ‹ Administrative revenues ‹ Tuition fees ‹ Third-party funds ‹ Grants of carriers

Spain

‹ Establishment of financing system connected to the accomplishment of goals ‹ Implementation of cost analysis model aimed at optimizing the use of resources ‹ Adoption of flexible organization model focused on efficient University management

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Detailed Micro Analysis

The objective of this analysis is to understand institutional capacity, human, technical and current practices in financial management.

Illustration 1. Private funding

University Gadjah Mada shows the highest percentage of private funding with 69%. Generally, the percentage of private funding is higher in SEA than in Europe.

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Illustration 2. Public funding

University Technology MARA is financed with 95% public funds which is the highest percentage in the partnership, although the lowest public funding rates are found in SEA.

Illustration 3. Tuitions % of total budget

On average, European universities derive a smaller share of their budgets from tuitions compared to their Southeast Asian counterparts. Kasetsart University show the highest percentage of tuitions as constituting the budget.

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Illustration 4. Donations per year

Most of the universities receive less than 1 million Euro in donations. University Gadjah Mada shows a very high number of donations with 12.903.225 €.

Illustration 5. Financial resources gained from projects

The highest amount of financial resources gained from projects belongs to University of Saarland. Most of the European universities gain higher financial resources from projects than SEA universities.

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Illustration 6. Sponsoring

Sponsoring is a rather small part of the universities’ budgets. Only Universiti Putra Malaysia shows a high amount of sponsoring compared to all other universities.

Other Funding Sources

‹ University of Saarland: 10.933.000 (3%) Reimbursement of personnel expenses, transfer of energy, income for other accounting periods

‹ Naresuan University: 30.465.568,85 €

‹ Kasetsart University: 56.330.000 €

‹ Universiti Putra Malaysia: 17,585,400.00 € (9,1%)

‹ University Teknologi MARA: Trust Funds, UiTM Holdings, Investment (Fixed Deposit)

‹ University Gadjah Mada: Asset leasing

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Legal Forms of the Universities

‹ FH JOANNEUM: Limited liability company

‹ University of Alicante: Independent public body set up by law

‹ University of Saarland: Corporation under public law

‹ Naresuan University: Public university governed by the Thai Office of Higher Education Commission, Ministry of Education

‹ Kasetsart University: Autonomous university

‹ Universiti Putra Malaysia: Statutory Body The University and University Colleges Act 1956

‹ University Teknologi MARA: Higher Education Provider

‹ University Sumatera Utara: Legal entity state university (PTN-BH)

‹ University Gadjah Mada: Stated Owned Legal Entity

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Illustration 7. Employees

The number of employees differs very much between all universities. FH JOANNEUM with 585 employees has the smallest body of employees.

Illustration 8. Average expenditure per student per year

European universities show a higher expenditure per student per year than SEA universities. There is one exception, University of Putra Malaysia has similar expenditures as European universities.

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Illustration 9. Average study time to complete bachelor level or equivalent

The average study time on bachelor level is similar in all countries (6-8 semesters).

Illustration 10. Average study to complete master level or equivalent

The average study to complete master level is similar in all countries as well (3-6 semesters).

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Illustration 11. Average percentage of spending on administration

Spending on administration varies from 13,34% to 45% of the total budget. There are no significant differences between European universities and SEA universities.

Illustration 12. Average percentage of spending on research

There are huge differences between the universities concerning the average percentage of spending on research. University Naresuan shows the lowest figure with 1,93%, with the University of Saarland demonstrating the biggest with 55%.

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Illustration 13. Average percentage of spending on teaching

There are big differences in the spending on teaching. FH JOANNEUM shows the highest share of the total budget with 69,20%. In SEA the highest spending on teaching is shown by the University of Kasetsart with 71,96%.

Illustration 14. Number of partners in the industry

University of Saarland has a large number of industry contacts. In SEA the University of Putra Malaysia has the largest number of partners within the industry.

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Illustration 15. Annual revenues from industry cooperation

Kasetsart University shows the highest amount of annual revenues from industry cooperation.

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Internal Procedure for Budgeting

1) FH JOANNEUM

For implementing change in the organization a well-planned process was necessary to effectively reach the objectives. An internal project should be planned and executed accordingly. The following chart provides an example of the time plan for the implementation of the new system of budget and performance planning at FH JOANNEUM.

Faculty 2) submit framework 2) submit final proposal framework 1) Preparing general framework (proposal)

Head of 6)Preparing budget based upon Department TOP DOWN vlues

8) Appraisals

November December January February March April May June

Management 4) Creating forecast 3) Redesign Budgetprocess 7) Performance review and Budget negotitations

4a)Defining TOP-DOWN Values for all departments

5) Submit Budget Information to Departments

Time plan of the implementation of the new system

2) University of Alicante

The basic criteria for drawing up the budget of the University shall be defined by management, once the needs of the various functional units of the University are known. These criteria will be approved by the Governing Council, once they have been revised by the Social Council to form proposals. The draft budget prepared by management will be informed by the Governing Council, subject to approval by the Social Council and subsequently published. Multiannual programming and strategic planning of the University shall be approved by the Social Council on the proposal of the Governing Council. The same procedure is followed for any budget modifications such as concessions of an extraordinary credit or credit supplement, any expense needed that cannot be postponed to the following year and for which there is no or insufficient credit recorded in the budget. The Social Council also authorizes transfers of capital expenditures to other chapters of the expenditure budget of the University.

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3) University of Saarland

The claims of the faculties are composed of appeal negotiations of professorships and historically developed commitments. During the contract negotiations following the appeal to Saarland University, the president and the new professor agree on the human and material resources of a professorship Based on the coordinated claims the budget values were determined for each organizational unit. The demands for staff positions are calculated using average rates in budget values. Tangible means have already been received in Euro. These were summed to each discipline level and determined with individual savings rates by the University board. In addition to the provision of individual savings each organizational unit had to provide a non-response rate of 5%. In this way, target budgets were determined, which then firmly put the University board. The financial framework of a faculty, that means the annual budget which is a faculty available, consists of the following components: 1. Target Budget 2. Income of the current year 3. Deposits of the previous year In future be checked in target and budget discussions in the 4th quarter of each year, the agreed targets, new targets agreements for the following year and the target budget for the following year due to intra-year changes or modifications negotiated.

4) Naresuan University

a) The process of budget allocation from the university to its governed Faculties/Schools/Divisions can be done in three steps. Firstly, the governed units estimate their revenues and expenses and send them to Division of Planning. Secondly, the Division of Planning reviews these data based on relevant financial regulations and proposes them to the University Council for approval. Thirdly, the Division disburses the requested amount of budget to the recipients using its 3D Accounting System. b) The process of budget allocation (federal funding) from the Thai Bureau of the Budget is done the following way. The governed units estimate their revenues and expenses and sent to the Division of Planning, which then reviews these data and submits them to the university for endorsement before they are sent to the Thai Bureau of the Budget. The Cabinet then reviews the information based on the Financial Act (Expense), which they enact for each fiscal year. Finally, the approved budget will be handled by the Division of Planning and disbursed to the recipients.

5) Kasetsart University

a) The university council sets a budgeting policy consistent with government policy, national strategies and the Ministry of Education policy. b) The faculties and divisions provide information and figures, and request the university planning division to set the university budget. The university council then approves the budget and allocates resources to faculties and divisions.

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6) Universiti Putra Malaysia

1. Budget university is regulated by the Ministry of Finance, so circular from MOF are issued to public universities including UPM. Based on that circular, UPM will start the preparation of the annual budgeting.

2. The internal budgeting process starts with Bursar engagement with Cost Centre to get budget proposal from each Cost Centre.

3. After receiving the budget proposal from CC, Bursar will conduct a review meeting.

4. In the meeting, the Bursar’s Office will review and evaluate the proposed budget each of CC.

5. The budget proposal will be forwarded to University management committee for recommendation.

6. Then the budget proposal will be forwarded to the university board of directors for approval.

7. The next step in the process involves a review of proposal by Ministry of Finance.

8. After the review, a meeting will be held for budget screening. The parties involved are MOF, MOHE, PSD and UPM.

9. After necessary amendment and changes by UPM based on the recommendation made in the meeting (If any), MOF will recommend the proposed budget to be tabled before the Parliament.

10. Upon receiving the approval from the Parliament, the Bursar Office will prepare a proposal for allocation of the budget to cc based on the budget approved by the Parliament.

11. Bursar will allocate the budget to the cc based on student enrolment and weightage (cc priority and performance) and “must have” expenses.

7) University Teknologi MARA

The university's budget is formalized through a centralized process:

1. The university receives a one-line budget warrant from the Ministry of Higher Education

2. The Bursar's Office allocates the budget based on budget requests from the Heads of Responsibility Centers (HRCs)

3. The University's budget allocation to HRCs is presented to the University's Board for approval

4. Budget warrants are sent to HRCs

5. The HRCs sub-allocate to various activities/accounts

6. The HRSs spend the budget for example, purchase requisition, etc.

7. Budget Reports 36

8) University Sumatera Utara

The budget cycle begins with the budget being drawn up with the current budget calculation authorized by law. The budget cycle is different from the fiscal year. The fiscal year is a period of one year to account for the implementation of the budget or the time at which the budget is accounted for. The budget cycle consists of several stages (phases):

1. Budget preparation stage

2. Budget approval stage

3. Stages of implementation of the budget

4. Stage supervision of the budget implementation

5. Validation stage budget calculations

9) University Gadjah Mada

Each work unit prepares the annual work and budget plan and submits the plan to the university through the Budget committee. The Vice Rector for Planning, Finance and Information System as chief of the budget committee discusses the proposed plans with its members. After that, the annual budget draft is submitted to the Board of Trustees which later gives its approval to the proposed work and budget plans.

Distribution of Budget to individual Departments

‹ FH JOANNEUM: Despite an overall central approach the budget is distributed to the departments who manage their own budget.

‹ University of Saarland has recently adopted a two-stage budgeting process. First, the faculties receive a target budget that was negotiated between the dean and the board. Then the budget is distributed to the cost centers (meaning professors and facilities) as human and material resources budget. The Deans are responsible for compliance with the target budgets, while the invoices are carried out centrally by the financial accounting. The central finance department performs the budget transactions and monitors compliance with the budget.

‹ University of Alicante: Decentralized.

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The general budget of the university defines the departments’ budgets, but the managing of the budget is provided by each department itself.

‹ Naresuan University: Budget administration of the university is based primarily on decentralization, which allows each unit to administer its approved budget independently through the process of reimbursement/disbursement by the Division of Finance.

‹ Kasetsart University: Decentral approach

(own budget management for individual departments)

‹ Universiti Putra Malaysia practices a centralized budgeting system where the UPM Bursar’s Office disburses funding to various department twice a year.

‹ University Teknologi MARA's budget is handled through a centralization process.

‹ University Sumatera Utara: First of all, each department proposes a work plan and annual budget. Then the planning department evaluates and reviews the proposed budget. Once the budget is approved, the budget is allocated to each department in accordance with the approved budget. Financial system is centralized, meaning that each department may submit a request to the central finance office each time activities are carried out according to plan, and the central finance officer will award the department the appropriate amount of funds approved in the budget plan per activity.

‹ University Gadjah Mada: Centralized

Accountancy Standard (National, IFRS, USGapp, Other…)

‹ National FH JOANNEUM, University of Alicante, Kasetsart University, University Sumatera Utara, University Gadjah Mada

‹ National, HGB (BilMoG): University of Saarland

‹ Public Sector Accounting Standard set forth by the Comptroller General’s Department: Naresuan University

‹ Malaysian Accounting Standard Board (MASB): Universiti Putra Malaysia

‹ Malaysian Private Entities Reporting Standards (MPERS): University Teknologi MARA

IT Systems for Accountancy

All the partners use IT systems for accountancy:

‹ FH JOANNEUM and University of Saarland: SAP R/3

‹ Naresuan University: SAP/R3, 3D Accounting System

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‹ University of Alicante: SIC II (tutored by the General Comptroller of Public Administration System) and the internal system called "System of Economic Management"

‹ Kasetsart University: ERP (Enterprise Resource Planning)

‹ Universiti Putra Malaysia: Standard Accounting System for Government Agencies (SAGA) by Century Software Sdn Bhd.

‹ University Teknologi MARA: FAIS (Financial Accounting Intergrated System)

‹ University Sumatera Utara: Quality National System

‹ University Gadjah Mada: Simakun (in house development system)

Controlling unit/department within the Institution and outside of it

All the partners have a controlling department within the university.

External controlling units:

‹ FH JOANNEUM: Annual audit by external certified accountant

‹ University of Alicante: Office of Budgetary Control (Two audits: Regional and National Level)

‹ University of Saarland: External auditing company

‹ Naresuan University: The Office of the Auditor General of Thailand/The Comptroller General’s Department/The Ministry of Finance

‹ Kasetsart University: Office of the Auditor General of Thailand)

‹ Universiti Putra Malaysia: Ministry of Finance (MOF), Ministry of Higher Education (MOHE), Auditor General (National Audit of Malaysia)

‹ University Teknologi MARA: Ministry of Finance (MOF), Ministry of Higher Education (MOHE), Auditor General (National Audit of Malaysia)

‹ University Sumatera Utara: Quality assurance system

‹ University Gadjah Mada: External Audit Company

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Budget Cycle Time - Controlling Cycle

‹ Annual for a 3 Years period (rolling forecast) FH JOANNEUM

‹ Annual University of Alicante, University of Saarland, University Sumatera Utara and University Gadjah Mada

‹ From October 1 of the present year to September 30 of the following year Naresuan University and Kasetsart University

‹ Operating Budget - annual. Development Budget - 2 years. Rolling Plan. Universiti Putra Malaysia and University Teknologi MARA

Form of Partnership with Industry Partners

‹ Several FH JOANNEUM

‹ R & D, technical support, licensing, collaboration, services, training and others University of Alicante

‹ Cooperation, R&D contracts University of Saarland

‹ Collaboration agreements, memorial of understanding, service agreement Naresuan University

‹ Agreement, memorandum of understanding (MOU) Kasetsart University

‹ http://www.cirnet.upm.edu.my/PROJEKJARINGANINDUSTRI#PROJEKJARINGANINDUST RI Universiti Putra Malaysia

‹ Research Grants University Teknologi MARA

‹ Joint research and development is conducted. A place for internships and work practice for students, some industries providing scholarships to students. Practitioners give general lectures to students, lectures for master and doctoral programs in their relevant field, support specific activities and provide information on job opportunities for newly graduated students. University Gadjah Mada

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IPR policies

‹ FH JOANNEUM: There are no investments in startups, when a prototype is developed there is no serial production, there is no commercialization of products.

‹ University of Alicante:

adopted a general policy of management of R&D in line with the requirements established according to the funding program, all these aspects being included in the consortium agreement.

‹ University of Saarland: In cooperation agreements the following principles shall be respected: ° In industrial cooperation intellectual property rights are generally not freely transmitted to respective industrial partners. ° Normally, a transfer of IPR arising during a project is carried out against an upfront fee and/or net product sales for commercial exploitation. In addition, an inadequacy condition be agreed on. ° The cooperation partners are in principle granted a royalty-free, non-exclusive and non-transferable right of use for the duration and for the implementation of the cooperation when the project began on existing IPRs (so-called. Background). For purposes outside or after completion of the project licenses can be granted in individual cases on market terms. ° In projects where the university bears its own economic risk (i.e. where the project is not settled with full overhead plus profit margin), a transfer or licensing of the intellectual property rights incurred during the project to the partners at market conditions takes place.

‹ Naresuan University: aspires to be a place of innovation. The university encourages all faculty members to conduct innovative research and produce inventions with the freedom of creativity and create mechanisms for a better understanding of governmental and private sector problems. Academic knowledge should be analyzed and applied to solve problems and create innovations for social, commercial and global benefits.

Policy of Transfer Technology and IPR Service:

1) Establish academic networking with industry and private sector to promote cooperation for further development. 2) Establish academic networking with industry and private sector in search of cooperation and knowledge utilization. 3) Transfer the university’s academic works or innovation to the community for social and economic improvements in private sector. 4) Study and analyze the market and introduce the university’s intellectual property to the private sector.

‹ Kasetsart University: 1) Relay technology to the industry. 2) Reinforce outside cooperation both locally and internationally.

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3) Follow the agreement between stakeholders, including the university, (office of academic services, faculties or division, inventors or researchers) and external partners.

‹ Universiti Putra Malaysia: UPM research policy

‹ University Teknologi MARA: will follow the requirement ы stipulated by each partner in the research project. It depends on the percentage contribution on the project.

IPR Valorization Policies

‹ FH JOANNEUM: There are no IPR valorization policies.

‹ University of Alicante: Different technology and know-how research groups are established. Each group responsible of carrying out the research is also in charge of preparing the offers both in Spanish and in English following the standardized structure of the proposals. The structure is similar to the existing technology transfer that is used internationally in offices and networks. Indicative offers consist of the following: title, summary, technical description, advantage, innovative aspects, current state of technology, IPR rights, application sectors, collaboration sought, keywords / references, research group, profile, contact information. Sometimes additional material is prepared as videos, fact sheets, brochures, press releases, etc. These results are disseminated through institutional and various national and international platforms (Red EEN, Innoget, NineSigma, Innoversia, APTE, etc.) Technology Portfolio. Promotion through visits to companies, events, fairs, specific forums, etc.

‹ University of Saarland: Once an invention has been claimed and a patent application has been made, the process of invention marketing begins immediately by the university’s patent agency (PVA). The respective recovery strategy is developed by the PVA and coordinated with the inventors. Subsequent licensing negotiations are carried out in close cooperation between Saarland University, PVA and the inventor. Saarland University is open to various patent and technology licensing models, as long as they comply with market conditions. In addition to licensing technologies to existing enterprises, Saarland University promotes start-ups in particular as an alternative recovery strategy. In this case, all intellectual property rights are usually transferred to the company, as this is often required by funding. This takes place under a contract similar to a license, which includes no further fixed components apart from a reimbursement of previously incurred costs of patenting (excl. a premium for the inventor's compensation). A fair share for University of Saarland in subsequent transactions is mandatory.

‹ Naresuan University: The university supports innovations in all industries and private sectors as follows - 30 MOU created and 80 projects conducted per year for transferring technology to the private sector. The university focuses on the twelve Industrial Products and Services branches of the ASEAN Economic Community Agreement: Argo-based Products, Rubber-based Products Wood-based Products, Fisheries, Textile and Apparels, Automotive, Electronics, IT, Healthcare, Tourism, Air Travel and Logistic. About 120 projects per year are conducted for innovation to solve fundamental problems facing the people of our area (Lower North of

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Thailand) and our country etc.. Health Improvement, Aging Society and local economic development.

‹ Kasetsart University: The market price is set by considering the cost along with the market value. The price needs to be accepted by all stakeholders, including the university, inventors and external partners.

‹ Universiti Putra Malaysia: Licensing and outright sale of IPR.

‹ University Teknologi MARA: UITM applies for copyright on behalf of the staff and part of the royalties is paid to the university.

‹ University Gadjah Mada: IPR is coordinated by the Directorate of Business Incubation and Development.

Number of Patents

‹ FH JOANNEUM: 3 patents ‹ University of Alicante: portfolio of over 200 patents, namely 222 in the portfolio of Spanish patents. However, only a dozen have been extended to foreign patents. ‹ University of Saarland: ~ 45 (granted patents; 2015), ~150 (Patent families; 2015) ‹ Naresuan University: 230 patents ‹ Kasetsart University: 688 patents ‹ Universiti Putra Malaysia: 617 patents (since 2001) ‹ University Teknologi MARA: 0 (Year 2016), 4 (Year 2015), 10 (Year 2014), 7 (Year 2013) ‹ University Sumatera Utara: 19 patents ‹ University Gadjah Mada: 117 patents and 3 IPR Agreements

Annual Revenues from marketing Patents or other IPR

‹ University of Alicante: 44.893,58 € ‹ University of Saarland: 174.000,00 € ‹ Naresuan University: 28.000,00 € (annually) ‹ Kasetsart University: 285.805 € ‹ Universiti Putra Malaysia: 11.629.769,00 € (since 1990) ‹ ‹ University Teknologi MARA: 2.093,17 € (2016), 2.434,52 € (2015), 2.940,00 € (2014)

IP Management Unit/Office

‹ FH JOANNEUM: the university does not have an IP management unit.

‹ University of Alicante as a specific area for issues of intellectual and industrial property within the Service Management Research and Technology Transfer - Office of Technology 43

Transfer (SGITT-TTO). There all necessary procedures and formalities are coordinated to protect the results and capabilities generated by university staff.

‹ University of Saarland: a business segment called PVA of the Contact Centre for Technology Transfer (KWT).

‹ Naresuan University: innovation and Technology Transfer Unit, Academic Service and Assest Management Division.

‹ Kasetsart University: office of Academic Service.

‹ Universiti Putra Malaysia: Putra IP Division, Putra Science Park, Office of the Deputy Vice Chancellor (Research and Innovation).

‹ University Teknologi MARA: there is one office responsible for the IP Management.

‹ University Sumatera Utara: Kantor Urusan HKI / USU IPR Office.

‹ University Gadjah Mada: the university does have an IP management office.

Intellectual property rights (IPR)

‹ FH JOANNEUM: License, patents, licensing of protected know-how.

‹ University of Alicante usually protect results by patent or utility model. Intellectual property is also used for software and databases that are developed within the university.

‹ University of Saarland: mainly patents, copyright, sometimes trademarks and design patents. We are using a TTO-Management-Tool and web-platforms for exploitation activities (i.e. invention store from the Technology Alliance).

‹ Naresuan University has the following 4 types of IPRs: Petty Patent, Patent, Copyright and Trademark. The tools which are used to apply Intellectual Property Rights are IP Thailand Database, WIPO database, EPO etc.

‹ Kasetsart University: Patent, Petty Patent, Copyright, Trade mark.

‹ Universiti Putra Malaysia: IPR: Patent, Copyright, Trademark, Industrial Design and Layout Design of Integrated Circuit.

‹ University Teknologi MARA: Patent / Copyright /Trademark.

‹ University Gadjah Mada: Patent and Intelectual Property Rights.

44

Good Practices and Case Studies

Sustainable Financial Management – a Good Practice by FH Joanneum – University of Applied Sciences – Austria

Authors: Klaus Kinzer, Thomas Schmalzer, Christian Friedl

I. DESCRIPTION BLOCK

1. Title of Good Practice (GP)

MULTIANNUAL BUDGETING AND PLANNING: a Good Practice by FH JOANNEUM – University of Applied Sciences Graz, Austria

2. Start year of Good Practice

2011

3. Keywords

List 5 Keywords that identify the Good Practice:

• Budgeting • strategic management • financial planning • university management • performance based budgeting

4. Circle management strategic direction that are applicable

Strategy Processes People Products Alliances - links and resources Customers and users

Leadership Results

5. Stakeholder

• university and its operational units; all organizational units responsible for strategic planning and budgeting (managing director, rector, head of department, head of institute, heads of administrative units) • representatives of owners, supervisory board

II. RESPONSIBLE INSTITUTION AND CONTACT PERSON

1. Details of the institution responsible for the Good Practice 45

Name: FH JOANNEUM

Address: Alte Poststrasse 149, 8020 Graz, Austria

City: Graz

Region: Austria

Phone: +43.316.5453-0

Website: http://www.fh-joanneum.at

2. Details of the person responsible for the GP

Name: Klaus Kinzer

Position: Director of Finance and Controlling

Unit: Department of Finance and Controlling

Email: [email protected]

Phone: +43.316.5453-8839

Website: http://www.fh-joanneum.at/aw/home/leitbild/organisation/

Zentrale_Services/~euu/fco/?lan=en

III. GOOD PRACTICE

1. Description of Good Practice

The following case description presents a good practice implemented at FH JOANNEUM University of Applied Sciences in the area of budgeting and strategic planning. A multiannual budget planning process has been implemented in 2011 replacing the previously used annual budgeting approach.

The aim is to develop a strong incentive and contribute significantly to performance improvement of the university and its operational units through: (i) top down definition of target values, (ii) through the development of a multiannual (3 year) perspective and (iii) the establishment of new rules and regulations of budgeting and budget implementation.

The multiannual system of budgeting and planning consists of 5 components. One of these components, the so called “IT System - Corporate Planner”, shifts budgeting and budget implementation as well as budget controlling to a new web based application supporting the process.

The system proves to be of great importance to support the actual planning process in each of the organizational units as well as on the level of the finance and controlling department. Factors that support the implementation of the new system are strong leadership (a clear

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communication and commitment of the managing board) and a well-planned process for the change in the organization. It is crucial to provide thorough support to middle managers and plan sufficient time for implementing and applying the IT tool. Challenges for future development will be of technical (automation of all the processes involved and unifying existing teaching planning tools with the budget planning process) and organizational (rationalize and streamline organizational structures) nature.

2. Initial Situation

Originally FH JOANNEUM followed a static annual Budget planning cycle. Departments prepared budgetary values as first estimates based on operational planning and historical controlling and budget data. As a second step the individual budgets at the organizational unit level were scrutinized by the management board and director of the financial and controlling department. The revised budget figures were then aggregated to create the total budget of the university. Steering and overall target definition was limited and less structured in this process. Furthermore there was little flexibility on the organizational unit’s level as regards individual budget items and changes in these items. Responsibilities were on a detailed level of aggregation. Targets set as well. This lead to reduced focus and a static cameralistic perception of the organizational unit.

With growing pressure of reduced public funds for the operational budget a revision became necessary.

The following chart provides an overview of relevant key facts with relevance to the process of changing the organization of a complex financial organization:

Illustration 1. Institutional situation in financial management (structure 2012)

Source: FH JOANNEUM

3. Context of Good Practice

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Established in 1995, FH JOANNEUM is a University of Applied Sciences (FH) situated in Graz, Austria. With more than 40 degree programmes and 25 institutes in the areas of Applied Computer Sciences, Engineering, Health Studies, Building, Energy & Society, Media & Design and Management it is one of the leading universities of applied sciences in Austria. The Province of Styria is majority shareholder of FH JOANNEUM Gesellschaft mbH.

Due to shrinking public budgets an efficient financial management of the university and cost savings are essential. Flexibility in planning and implementing at institute level while at the same time reaching overall long term financial targets (top-down) are necessary.

4. Objectives of the Good Practice

The following goals should be achieved with the implementation of the new financial management system:

• Easier implementation of total university budget reduction into organizational units level • Performance improvement and efficiency gain in the operational units • Longer term planning perspective to work with decreasing public funds • Rolling controlling and adaptation of budget values • Focus on the “important” objectives and changes necessary • Increase responsibility and accountability of middle managers to achieve desired results

Creation of management flexibility within the organizational unit to identify and exploit synergies.

5. Actions taken for the implementation of the Good Practice

A new system of multiannual budget was developed to meet the objectives. The key components of this system can be described as the following:

a) Target values for organizational units b) Annual budgeting and performance meeting c) Quarterly Reporting & controlling Cycle d) IT System – Corporate Planner e) Awareness building and training

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Illustration 2. Implemented shares / impacts – Budgeting over years

Source: FH JOANNEUM

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The following sections will briefly explain each of the 5 components of the multiannual system of budgeting and planning at FH JOANNEUM: a) Target Values

For each organizational unit a target value for specific years is defined that has to be achieved in the budget planning process as well as in reality at the end of a fiscal year. The calculation of the target value follows the following approach:

Illustration 3. Calculation of the target value

Without allocation of indirect costs ! TARGET Value - Calculation + Funding from state + Income from R&D activities + Other income - Operating costs for personnel, material costs, depreciation, etc.

+/- income/charges from internal services (teaching and R&D only) = operating result = TARGET Value of department Sum of all target values have to be covered by province funding

Operating result = result being influenced by head of Dep artment

This target value is under direct control of the head of an organizational unit (academic or administrative alike). This is one of the quantitative performance indicators against which the manager’s performance is matched every year. Through setting these target values the managing board can implement savings plans in a simple and clear manner leaving flexibility at the departmental level intact. The following chart shows that the target value is simply the sum of the budget templates. Target values are set 3 years in the future and the templates also provide historical data for comparison. The domain of flexible planning and responsibility at the organizational unit’s level is quite extensive in this model.

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Illustration 4. Example – Department Budget

Department "N.N." - TOP DOWN VALUE for Budget

Budget Forecaast As Is PREVYEAR Budget Plan Plan ACTUAL YEAR ACTUAL YEAR Jul 2010 - Jun 2011 Jul 2012 - Jun 2013 Jul 2013 - Jun 2014 Jul 2014 - Jun 2015 Jul 2011 - Jun 2012 Jul 2011 - Jun 2012 Y -1 Y + 0 Y + 0 Y +1 Y +2 Y +3

State funding 504 510 490 Other income 15 0 0 Income from R&D 63 25 30 Total revenue 582 535 520 Personal cost 722 726 699To be thereof fixed employees 546 548 544 therof freelancers 176 178 155planned by Other costs 69 37 33 Accounting for internal services -7 0 -5Head of Total direct costs without allocation of 784 763 727 indirect costs allowance planned für services -202 -228 -207department rendered Investments 44 124 110

Allowance planned (CASH) -246 -352 -317

Depreciations 43 62 50 Investments 44 124 110

Result planned for profit and loss account (TOP DOWN) -245 -290 -257 -160 -163 -166

Figures shown are just symbolic

Information about previous and actual results Target values for Budget planning

Source: FH JOANNEUM b) Annual Budget Meetings

Every year the heads of organizational units meet with the management board and the finance director to go through the Budget planning details. The meeting starts with a full account of the performance of the previous year and an overview for the upcoming planning periods.

The head of department prepares the budget according to the example in Chart 4 above in advance to the meeting. The details are discussed during the meeting and checked for feasibility and target value match. Additional performance indicators on quantitative and qualitative levels are jointly defined for the organizational unit and documented. The performance appraisal of the middle manager is also part of this meeting.

The outcome of the meeting is the finalized budget for the upcoming fiscal year including forecasts for year 2 and 3. The finalized data from all meetings can then be aggregated and extended by indirect costs and other overall cost to form the global budget of the university. c) Quarterly Reporting

An integral part of the system is the integrated controlling cycle. On a quarterly basis all accounting data is consolidated on the level of the organizational units (and higher aggregates) to provide managers at this and higher levels timely access to information of whether the actual expenditures are in line with the budget plan or whether corrective action has to be taken. The 3 months period at which this takes place ensures any deviations can be addressed early on and the organizational information is extremely current and transparent. d) IT System – Corporate Planner 51

Corresponding to the change in processes and approaches to budgeting and planning a new IT tool was necessary to support the new system. A dedicated third party software, named “Corporate Planner” was purchased to perform this task. The main features are that it allows via a web interface direct access of all involved managers on the various levels to obtain and enter data to and from the system in the budgeting planning and reporting process. Planning data is directly entered and consolidated and aggregated in real time to provide the higher level managers (finance director and managing directors) with transparent and current information. The following image shows a screenshot of “Corporate Planner” in the data entry mask for budget planning of an organizational unit.

Illustration 5. Corporate Planner

Source: FH JOANNEUM

e) Awareness and Training

The new processes, tools and IT systems utilized in the budgeting and planning procedure required active participation by all involved managers. This meant that managers had to be trained in the use of the tools, and awareness as well as willingness to engage in the new processes and procedures had to be created.

Training on the IT system and selected tools was provided by internal experts. Single coaching during the actual budgeting process was also needed to facilitate the first implementation run. Awareness creation and general information was provided by the managing directors as well as the financial director to all heads of organizational units. f) Time plan of the implementation of the new system

For implementing change in the organization a well-planned process was necessary to effectively reach the objectives. An internal project should be planned and executed accordingly. The following chart provides an example on the time plan of the implementation of the new system of budget and performance planning at FH JOANNEUM.

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6. Human, technology and other material involved in the Good practice

Human: The new processes, tools and IT systems utilized in the budgeting and planning procedure required active participation by all involved managers. Training on the IT system and selected tools were provided by internal experts. Single coaching during the actual budgeting process was also needed to facilitate the first implementation run. Awareness creation and general information were provided by the managing directors as well as the financial director to all heads of organizational units

Technology: A new IT tool (IT-system “Corporate Planner”, a third party software) was necessary to support the new system. This was implemented by an external subcontractor.

7. Results obtained from the application of the Good practice

The newly implemented method and system provides more flexibility for organizational units in their detailed budget planning and at the same time allows for tighter steering and control on the overall university level. The multiannual approach allows for longer term forecasts and rolling adaptations replacing the previous static perspective at the university. On an overall level it benefits strategic planning and management processes on various management levels. Since its implementation financial targets could be very well met both on institute levels and on the aggregate university level. Departments and Institutes appreciate the internal flexibility of managing their budget during the fiscal year focusing only at the overall target values for the contribution margin. An additional effect is that owners can be informed about midterm future financial results and therefore financial needs can be better estimated. Public owners can improve their planning concerning future financial contributions to the university.

8. Evaluation system of the results

The system of evaluation is based on target values, annual budgeting and performance meetings, quarterly reporting and a controlling cycle (see III.5 Actions taken – components of the new system). Quantitative performance indicators such as the financial statement for 2012/13 (the fiscal year of FH JOANNEUM starts 1 st of July and runs until 30 th of June the following year) prove that the target values have been accurately achieved and that the new budget system works in a high effective way: The operating result has been achieved very well (with a minimum deviation of 0,17 %) and the operating expenses could even be reduced by 1,76 % compared to the calculation.

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Illustration 7. Financial statement 2012/13

Transfer of operating result TEUR TEUR Planned operating result according to budget 4th quarter 2012/13 accumulated 28.812,0 Reduced income by state -136,2 Operating result R&D (Turnover and changes in inventory below plan) -252,4 Other income 339,1 Operating result by 30th June 2013 28.762,6 28.762,6 Overall deviation -49,4 Overall deviation in % -0,17%

Transfer of operating expenses TEUR TEUR Planned operating expenses according to budget 4th quarter 2012/13 accumulated -46.109,0 Reduced expenses for staff costs fixed employees 91,5 Reduced expenses for staff costs external lecturers 150,5 Reduced expenses for other material costs (assets etc.) 252,1 Reduced expenses for other services (licenses, membership fees) 387,9 additional depreciations -82,4 Operating expenses by 30th June 2013 -45.309,3 -45.309,3 Overall deviation 799,6 Overall deviation in % 1,76% Operating result without fundings by the Province of Styria -16.546,7

9. Innovative nature of the Good Practice

• The new systems allows for mid-term forecasting and rolling adaptations of the budget. • By providing general target values for contribution margin and delegating the implementation to institute level, the subsidiarity principle is applied. • A modern IT tool is applied for budgeting and controlling.

10. Sustainability of Good Practice

• due to integration in regular annual planning cycles and approval of supervisory board this practice is standard in the institution and will be used for the foreseeable future • The evaluation results showed the success of the GP. Therefore it can be seen as long term process and system for budgeting.

11. Reproducibility of the Good Practice in other institutions

The GP is highly transferrable give the following preconditions:

• Organizational structure is developed and stable • Management style allows for delegation of budget implementation to institute level • Use of modern IT tool applicable in organization, IT tool has to be compatible with accounting software used (SAP or other) • University is open for organizational change • Necessary financial planning & IT competences on the level of heads of institutes and departments

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12. Factors with positive impact on the results

The critical success factor of any large scale organizational change project such as this is the clear communication and commitment of the management board of the organization. Strong leadership is needed to overcome organizational inertia and implement new procedures and instruments.

Secondly a well-planned process for implementing change in the organization is crucial to effectively reach the goals. An internal project should be planned and executed accordingly.

13. Obstacles or difficulties encountered in the development of the Good Practice

Among the challenges faced in the implementation process it can be stated that the willingness and IT competences of middle managers to use a new IT tool in their budget planning could have been addressed even more intensely than actually done. It turned out that this target group requires a more thorough support (even individual support) in first time use of the IT tool.

Secondly more time to prepare and implement technical aspects of the planning system and its tools would have been beneficial. Some adaptations could not have been made in year 1 of the project and had to be moved to later stages.

The challenges for future development of the system are on the one hand of a technical nature and on the other hand organizational.

The technical challenges concern mainly the implementation of further automated planning and data collection in the budgeting process. Currently staff planning data is not fully automatically updated in the IT system, which it could and will be in the future. This will reduce sources of errors and increase speed and efficiency during the planning process. In addition the technical integration of internal service charges between different cost centers would benefit the planning process greatly.

Another important challenge is to unify existing teaching planning tools and processes with the budget planning process, where at the moment several databases and planning procedures for different purposes exist within the university. Efficiency gains and elimination of sources of errors or discrepancies will be the major benefits of such an extension of the new system.

A third challenge is to further rationalize and streamline organizational structures to create additional efficiency. In the concrete case this means organizational aggregation of academic organizational units into faculties. This would lead to a reduction of annual budgeting and performance meetings from currently 40 per annum to around 21 for the remaining top level organizational units (academic and administrative).

14. Commitment

For additional queries or more information please contact:

Name: Klaus Kinzer 55

Position: Director of Finance and Controlling

Department: Department of Finance and Controlling

Email: [email protected]

Telephone: +43.316.5453-8839

Website : http://www.fh-joanneum.at/aw/home/leitbild/organisation/

Zentrale_Services/~euu/fco/?lan=en

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Sustainable Financial Management – a Good Practice by University Alicante – Spain

I. DESCRIPTION BLOCK

1. Title of Good Practice (GP)

Project Diversification and Fundraising: a Good Practice by UA – University of Alicante, Alicante, Spain

2. Start year of Good Practice

2003

3. Keywords

List 5 Keywords that identify the Good Practice: • Fund diversification, • Projects, • Fundraising, • Research and Development. • Institutional Strengthening

4. Circle management strategic direction that are applicable

Strategy Processes People Products Alliances - links and resources Customers and users Leadership Results

5. Stakeholder

• Researchers • Students • Administrative staff

II. RESPONSIBLE INSTITUTION AND CONTACT PERSON

1. Details of the institution responsible for the Good Practice

Name: University of Alicante

Address: Crta San Vicente del Raspeig s / n

City: 03008 Alicante

Region: Valencia

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Phone: + 34 965 90 97 18

Website: http://www.ua.es

2. Details of the person responsible for the GP

Name: Roberto Escarré Urueña

Position: Director

Unit: International Project Management Office

Email: [email protected]

Phone: +34 965 90 9718

Website: http://ogpi.ua.es/

III. GOOD PRACTICE

1. Description of Good Practice

To promote the internationalization of the University of Alicante, and the involvement of the university community in international projects and networks, the Project Management Office (OGPI) was created in 2003. OGPI is the part of Management Service of the Research and Technology Transfer (SGITT). The office is based on the activities carried out in the international relations office starting from 2000.

Since OGPI was created, University of Alicante has significantly increased its participation in international projects, becoming one of the European universities with the highest number of projects in various programs. The institution has benefited a lot, as it was developing in different directions such as: raising additional financial resources, staff training, networking, marketing and global promotion of the institution. Not forgetting the image and prestige it brings.

2. Initial Situation

Prior to the creation of the Project Management Office, international staff and different university centers carried out project activities in an 'Ad-hoc' manner: with no strategy, no planning and, even more, with no institutional support and backup.

Taking into account that participation in projects and internationalization became strategic axes of the university, and in its turn, the complexity and the ratio of the success in attracting the projects, its management and justification were increasing, the direction of the UA decided to form and make more professional stated activities by creating a support service specially for the university community - the OGPI.

3. Context of Good Practice

Participation in international cooperation projects is getting more important for universities. Apart from funding itself, projects provide important benefits to higher education institutions (HEI) that are involved in these projects. Some of such benefits are: international positioning and visibility, training of HEI staff of, the recruitment of high level students and teachers, networking and strategic contacts, etc. Undoubtedly, international cooperation presents a strategic hub for excellent HEIs. 58

There is a multitude of sources and funding programs that can benefit HEIs from all over the world: ALFA, FP7, Erasmus Mundus. What is more, there are worldwide organizations like: the Inter-American Development Bank, the World Bank and development agencies of different countries: AECID, Iberoeka Spain, AIDS Sweden, DAAD Germany, USAID; and other foundations.

The activities that can be developed through projects are varied, from institutional strengthening projects (for example SUMA project, funded by the ALFA program EU), R&D+i projects (like those funded by the7th Programa Marco of the EU for R & D; IBEROEKA), and master's degrees or doctorates and student exchange programs (Programs financed before by Erasmus Mundus and Marie Curie and in the future Erasmus +).

To take advantage of these opportunities, Universities must move towards a strategic approach, with well-defined processes and protocols, and professionalized internal support services.

4. Objectives of the Good Practice

The objective of this GP is to point out an example of a university that managed to become leading in its country in the field of acquisition and management of international projects, through a strategic and targeted approach. The professionalization of staff and their dedication only to projects (non-academic ones) has been a key to its success.

5. Actions taken for the implementation of the Good Practice

It is essential to develop a strategic plan to increase participation and success rate of IES in international projects. The plan should include the following steps:

a) Analysis: Identifying strengths and weaknesses of the institution.

• SWOT analysis (Weaknesses, Threats, Strengths and Opportunities) of the institution about their activities and resources. It is important to have high quality activities and services to attract funding. The areas of excellence are those that can 'sell' the projects of mobility, academic cooperation and R & D + i in the best manner. However weaknesses are relevant to the cooperation projects in the case of direct beneficiary.

• Identification of institutional strengths and priorities of development in the medium and long term.

• Analyze the prospects for attracting the resources from activities that develop the institution, such as teaching, research, transfer and other activities.

• Study the university relations with its immediate environment (companies, local government, etc.) to analyze possible ways of collaboration with possible international funding.

b) Market research: Identify potential funding sources: international projects and funding organizations, foundations, other sources such as benefactors, ex-alumni.

c) Institutional Strategy: identify priority cooperation lines, have a clear profile of the strengths and weaknesses of the university in the field of R & D or cooperation, establish strategic lines, assign responsibilities and resources.

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• Identify the offer of R + D and of possible cooperation projects eligible for international funding through online surveys with researchers;

• Ensure the support for the strategy at a management level of the university and publish the strategy on a website accessible to the university community (eg.Web). d) Functions and Structure: Establish responsibilities and create a structure to capture and manage international projects with a staff trained to help researchers and HEI direction in raising funds in international calls. Differentiate this activity from others in the field of internationalization of universities (mobility, etc.) to give coherence and strength to the idea.

• The functions of that office should include: monitoring opportunities and calls published, understanding the mechanisms and language of donating agencies to interpret calls and evaluate them, communication and dissemination of opportunities for management, research staff / teachers, students; establish participation strategies, communication with potential partners, help in proposal developing, etc.

• Human Resources & Training: training managers (project managers) and researchers of universities in the management of programs, processes, keys and procedures of proposal presentations. Get a staff that dominates foreign languages, especially English. The practical training can be done through courses and coaching offered by institutions with more experience in the area. • Promotion and marketing: it is important to develop the awareness of the functions and services offered by the office. Especially at the beginning it is recommended to make broadcasting events, offer researchers workshops on topics of interest, and publish news on the website of the university and / or other common media. However, these activities should be periodic to ensure the proper impact. e) Internal processes to facilitate cooperation, including fund management of nontraditional sources:

• Is important to understand that the main part of the cooperation is through co-financing, i.e. universities must have administrative, technical and infrastructure support to participate in projects. Under the principle of co-financing, universities that participate in projects undertake the duty to provide their own resources to the project, which can be just working hours and staff time already hired. Therefore, it is important to participate in projects that are in line with the objectives and activities of the institution.

• The rigidity of financial management in many universities (especially public ones) hinders participation in projects, in particular resource management and implementation of these projects that normally require things like: autonomy of financial management to be able to allocate funds to projects to run travel expenses, diets, organizing events, staff recruiting, justification of expenditure, double accounting, etc. f) Networks and Networking: It is necessary for universities to develop strategic partners in various parts of the world, those with whom they have confidence and can collaborate with added value. Successful cooperation projects are mostly due to collaborative networks and consortia that have a common goal.

• Collaborative networks should include all types of entities: government, business, intermediaries, non-governmental organizations and other universities from many different countries and / or sectors, according to the policy areas. • A good way to make contacts is to assist to relevant events, participate in forums and specialized social networks (eg. groups in Linked-in).

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Based on the above methodology developed, the initial steps of any HEI may include the following:

1. Create a profile / history of the project, in which one should collect existing projects, the ability to generate international initiatives (departments / key staff), contact with the office responsible for project management. It includes the identification of the most active research departments and those with the highest international projection.

2. Develop a document / a webpage that presents the university and its main axes in English.

3. Identification of potential donators that might be interesting for HEIs. Develop a list of donating agencies, web links of published calls to be able to make tracing.

4. Establish a network of contacts with institutions from other countries with an experience in the project participation.

5. Positioning the HEI between international financing agencies.

6. Start to participate in different projects as partners, to learn how they work and to gain an international position to lead projects later.

Example of OGPI functions and activities:

The Project Management Office (OGPI) of UA is part of Management Service of Research and Transfer and offers the following services to researchers:

‹ Information on international calls and announcements.

Actually, agencies that are financing international R & D + i activities are very different today. The OGPI provides a daily update of the current calls on its website, an alert service by the area of knowledge in departments, and the possibility to provide personalized information to the researchers who have specific lines of research.

‹ Partners search. Assistance in training consortiums. • Through our own contacts and previous collaborations. • Attending information sessions (“info-days") and specific working days, both in Brussels and within the national territory. • Network of national contact points (NCPs). • Entities and networks of support and advice for participation in 7PM • Participation in so-called "Technology Platforms" and other initiatives involved in the influence of thematic programs in a "bottom-up".

‹ Preparation of proposals.

The OGPI offers a comprehensive service that aims to make the researcher only worry about the scientific part in the process of preparation of the proposal, letting OGPI do all the administrative and coordination arrangements with other consortium partners. Even in the scientific writing, OGPI has the possibility of giving a focus to a researcher, giving advice and coaching for its improvement and easiness of reading, covering the necessary points and other technical problems.

‹ Services during the implementation of the project

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The implementation phase of the project is the one that involves more administrative procedures at the UA. OGPI tries to simplify and streamline these processes so that the researcher can focus on the implementation of the scientific part of the project. To do so, there are proposed various formulas for administrative project management in a function of:

a) The management workload that is supposed to be needed in the project

b) The ability to manage this by the departments involved.

After the negotiation with the investigator it must be decided whether the project management is located in the department or in OGPI itself. In the first case OGPI would offer advice to the administrative manager in the department.

‹ Project closure assistance.

OGPI will keep the original contracts and it will keep a complete file record during each and every phase. What is more, it is responsible both for the closure of the project and the possible audits, collection of the partners´ documentation and the termination of the payments and reports. The key to success of OGPI is the diversity of its scope. Besides offering services mentioned above, the office also proactively presents projects without the direct involvement of the researchers, and based on the proper experience. Therefore diversification of the sources was achieved. Thus it currently favors the sustainability of the office, allows it to be fully self-financed and also generates additional resources for the institution. Being self-financed service and generating resources clearly shows the success of Good Practice.

6. Human, technology and other material involved in the Good practice

Human resources are central to ensure the success of good practice, although it is difficult to make a selection of this kind of specific personnel, since the great part of necessary skills is only gained by working in this sphere and only some countries have a necessary specific training. Usually, project management is a part of a separate educational program (usually a small part of it) rather than a separate one.

In case of the University of Alicante, human resources consist of people from different countries with a wide range of knowledge and training, and who speak several languages (English being the main language of work, and Spanish is the language of the communication between partners in the office).

• STAFF: 16 people

• Nationalities: Tunisia, Guatemala, China, Austria, UK, Italy, Spain

• LANGUAGES: English, French, German, Arabic, Chinese, Italian, Spanish

• ACADEMIC QUALIFICATIONS: International Relations, Economics, Translation, Public Relations, Marketing, Law, Sociology, Education.

The job profiles within the OGPI go as follows:

• Directorate

• Project Managers (Junior & Senior);

• Among Managers there are specialists in proposal writing; 62

• Administrative / Financial Managers (justification, administrative management, audits)

• Specialists in IT

It is recommended that the team counts with the following capabilities:

• Looking for opportunities: networking skills, lobbying, marketing, public relationships, communication, web management, social networks and databases.

• Proposal writing: experience, planning capacity, good command of project planning methodologies, good nonscientific writing skills;

• Project management: good command of project planning methodologies, leadership, planning and organization, communication, social skills;

• Knowledge management: good command of dissemination methodologies, results exploitation, valuation (rating), intellectual property.

7. Results obtained from the application of the Good practice

Since the creation of the office, University of Alicante has significantly increased the participation in international projects, becoming one of the European universities with the highest quantity of projects in some funding programs.

So far UA, through the OGPI, participated and managed more than 120 projects in collaboration with about 500 partners in more than 100 countries around the world and a funding of about 36 million Euros.

The institution has a lot of benefits that include attracting additional financial resources, staff training, network establishment, marketing and promotion of the institution at a global level. The visibility of the university and its prestige has been positively affected by OGPI activity.

8. Evaluation system of the results

OGPI activity is evaluated annually by an institutional management team, through the number of indicators: number of submitted proposals, number of obtained projects (success rate), funds raised, and other benefits transferred to the institution (such as personnel involved and formed, organized events, etc.).

Moreover, within the office there goes a constant work on the resources invested in the opportunities search and the call rating. If the effort appears to be more than the benefit, the service is not carried forward.

9. Innovative nature of the Good Practice

Service creation of fundraising and project management is relatively recent in many countries. Depending on the context of each country, these services are focused on fundraising through donations from different organizations, ex-alumni or financing programs.

The innovative aspect of the OGPI is acting as consultancy or company (self-financed, based and result-oriented) although it forms a part of a public institution. It is governed by institutional rules, but manages to act within certain flexibility, thus being able to stretch barriers and turn them into opportunities. Moreover, it has an innovative policy of 63

professionalizing project management. Other institutions with the same offices usually have an academic staff that dedicate only part of their time to projects. In the case of OGPI, people spend 100% of their time to the projects, searching, capturing and managing them.

10. Sustainability of Good Practice

The sustainability of GP is highly demonstrated. In OGPI case, it is already constituted over 10 years and has always been self-sufficient. The funding it gets serves both to pay expenses and salaries of the office staff. A key aspect to succeed is the constant motivation, and the pro-activity of management and staff to get more projects and to explore new opportunities. Another key factor is a good administrative management and transparency in the use of money. Where resources and the work done are well justified for each project in terms of real hours and wages, and it is entirely legitimate and practical.

11. Reproducibility of the Good Practice in other institutions

Replication of this good practice is possible in other institutions. Many universities in Europe have services similar to OGPI. Each of them has a slightly different structure and operation, depending on the context of the projects they are involved in. Thus, their approaches on fundraising vary as some specialize in working with ex-alumnus; others work with foundations and others with International organizations. However, it is beneficial to explore various courses of action.

OGPI has already provided training and coaching services at several universities in Europe and Latin America to initiate and strengthen the cooperation area and successful fundraising.

The key point of a successful functioning of this type of organizations is the analysis and the identification of the opportunities in every specific context for each university. There is a multitude of funding sources and opportunities that require a strategic approach to perform them.

12. Factors with positive impact on the results

Factors that had a positive impact on the result:

• Constant institutional support • Motivating the personnel to continuous search of new opportunities, • Capacity and composition of the team • Leadership and vision of the direction

13. Obstacles or difficulties encountered in the development of the Good Practice

OGPI didn’t seem to face a lot of difficulties. Probably the biggest challenge is to manage this kind of diversity of backgrounds that appear subject to different funding rules (depending on the body and funding program), and large and complex projects in a public institution.

Every day, the challenges for the implementation of OGPI activities are of constant improvement and adaptation to the internal management processes to facilitate administrative and financial management of the projects, constant support of the governing bodies, and what is more, the proper context of projects and funding programs change frequently. 64

To avoid the transformation of existing difficulties into barriers, OGPI makes a constant effort to streamline internal procedures and find solutions in the cooperation with internal services of the university.

14. Commitment

For additional queries or more information please contact:

Name: Roberto Escarré Urueña

Position: Director

Unit: International Project Management Office

Email: [email protected]

Phone: +34 965 90 9718

Website : http://ogpi.ua.es/

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Financial Management at Saarland University at a Glance – a Good Practice by University of Saarland – Germany

Author: Ákos Barna et al.

The following description illustrates the implementation of a new currently introduced financial management model at the Saarland University, which is used in the area of budgeting and strategic planning. The Saarland University has developed a multi-year budget planning process in 2015, which replaces the annual budgeting system previously used.

Initial situation

The Saarland University is the only University of the State of Saarland. The Saarland University was founded in 1948 as the "European University". The Saarland University offers its 18,000 students (including 3,200 international students) 128 study courses partly with double and triple degrees. Saarland University employs 286 professors and round about 4,700 people. The Saarland University is a leader in the field of computer science; another focus of the area NanoBioMed and a strong European focus. In the direct environment of the university campus are 19 research institutes located. Furthermore, the Saarland maintains its international relations with partner universities in 52 countries. Finally, the university supports its founding willing students and staff with an extensive range. More than 300 start-ups in 15 years are a remarkable success.

Framework

Due to declining contributions of public funds, the University board has developed a strategy to meet the reduced subsidies. The aim is to develop in addition to fulfilling the savings rates and strong incentives to contribute significantly to improve performance of the University and its operating units:

• By definition of agreed objectives, • by developing a multi-year budget plan (5 years) • to establish new rules and regulations of financial management. • Consistent data basis for medium-term financial planning and annual budgeting

An efficient financial management and cost savings for the continuation and development of the university are therefore imperative.

Development process

The planning process proved to be first major challenge, as were each organizational unit compiled the claims and matched in many discussions. The tuning process with the faculties took about 1.5 years. The coordination process with the central facilities is nearing completion. The claims of the faculties are composed of the appeal negotiations of professorships and historically developed commitments. In the appeal of the agreements professorships amount of human and material resources will be negotiated and enshrined.

Building on the coordinated claims budget values were determined for each organizational unit. The demands on staff positions are calculated using average rates in budget values. Tangible means have already been received in euro amounts. These were summed to each discipline level and determined with individual savings rates by the University board. In addition to the provision of individual savings each organizational unit had to provide a non- 66

response rate of 5%. In this way, target budgets were determined, which then firmly put the University board.

The financial framework of a faculty, that means the annual budget which is a faculty available, consists of the following components:

1. Target Budget 2. Income of the current year 3. Deposits of the previous year

In future be checked in target and budget discussions in the 4th quarter of each year, the agreed targets, new targets agreements for the following year and the target budget for the following year due to intra-year changes or modifications negotiated.

Objectives of the new budget model

Along with the introduction of the new budget model was also the transfer of budget responsibility. In the past, all budgets have been distributed by the central administration of the organizational units of the Saarland University. Personnel budget that have not availed fell back to central administration, while unused material resources budgets could be transferred.

To provide the faculties incentives while creating planning security, but on the other hand to ensure research and teaching, the following basic rules apply in the future:

• The faculties get the financial framework at the beginning of the year fully allocated. • The calculation and billing of the staff carried out over the faculties and organizational units by known at the University of average rates. These are reviewed annually determined. • Deposits are transferred in future completely. • Greater flexibility in the management of resources. • The appeal negotiations must be respected and guaranteed by the faculties. • The specified in the appeal arrangements ask for scientific staff are still decisive for the capacity of the students.

Additional budgetary rules give the faculties themselves.

Transparency

The second major challenge is the information needs of deans and financial managers. In the area of budget monitoring the faculties and the central administration still share particularly tasks. In addition to comprehensive information on all financial-related processes be data on all resources such as personnel, facilities, budget, etc. provided. The personnel-related information, all relevant financial information are provided for the current and coming years crucial for planning purposes.

Organisational changes

Along with the shift of budget responsibility and the strategic plans of the University board, the number of faculties of currently 8 faculties is reduced to 6 faculties.

Again, close coordination between the existing faculties and their managers is necessary. This applies to the organizational processes within the existing faculties and committees as well as the technical adjustment in all administrative data systems.

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Best practice for financial management and disbursement of government budget – Naresuan University – Thailand

The key mechanism used to administer government budget is regulations set forth by the Budget Act 1959 and the Charter of Budget Management Act 1959. This is relatively in line with the Government Fiscal Management Information System (GFMIS), designated by the Comptroller General, to serve as the efficient tool for disbursement of government budget. Such the two important folds in administering and disbursing budget can be described below:

1. BUDGET ADMINISTRATION

Naresuan University has implemented guidelines to effectively administer and manage budget once approved by the Parliament. The Bureau of the Budget is in charge of allocating granted budget to the university based on its proposed plans and activities. This allocated budget is indicated in the Annual Budget Act effective from October 1 of the year to September 30 of the following year as defined in the Charter of Budget Management Act 2005 and its supplementary. The Division of Finance is responsible for budget disbursement review and ascertains that it is in accordance with rules and regulations announced by the Ministry of Finance and relevant bodies. This approved amount of budget is required to be spent based strictly on the specified plans and activities.

Budget transfers and readjustments

Transfers and readjustments of university budget have to be undergone in accordance with the Charter of Budget Management 2005 and its supplementary. Such actions need to comply with transfer, readjustment, and remaining budget requirements as specified in GFMIS system; careful consideration has to be done by the head of the university.

In case the university wishes to proceed with budget transfers/readjustments, and the approval is beyond the authority of the head of the university, it has to seek approval from the Bureau of the Budget. When budget transfers/readjustments complete, the university will need to submit the report electronically to the Bureau within fifteen days after the transaction.

Budget control

Budget has to be carefully reviewed before disbursement based strictly on the approved projects/activities and in line with the Annual Budget Act and designated supporting documents varying from projects to projects and categories to categories. Remaining budget has to be reported to the university in order that it can prioritise a list of pending projects requiring urgent supporting fund to move on.

Report on budget transfers and readjustments

The Charter of Budget Management Act 1959 (Section 4, Article 25) specifies that a report must be submitted (through the Form d. 241) to the Bureau of the Budget and involving agencies within fifteen days after budget transfers/readjustments complete stipulated that if the University to transfer any budget changes. The quarter report (through the Form d.301), on the other hand, must be sent within the first fifteen days of the next quarter.

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2. DISBURSEMENT OF GOVERNMENT BUDGET

Disbursement of government budget must strictly comply with regulations set forth by the Comptroller General, relevant bodies, and other involving government agencies to expedite and monitor the disbursement of funds in accordance with the cabinet resolution in each fiscal year. In fiscal year 2015 (October 1, 2014 to September 30, 2015) Naresuan University was awarded the University of Excellence in Financial Management (Disbursement Dimension for the third time).

Diagram of Government Budget Administration and Disbursement of Naresuan University

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Budgeting of Thai Autonomous University: Case Study of Thaksin University – a Good Practice by Kasetsart University – Thailand

Author: Wasan Kanchanamukda

Thaksin University, Songkhla, Thailand

[email protected]

ABSTRACT

The study context considered the subjects of: universities as specific institutions; the origins and operations of Thai universities; specificities of the South of Thailand (where Thaksin University is located); modernization of the sector, and university budgeting and financial management. Upon being proclaimed autonomous in 2008 the Thaksin University Council appointed a Vice President for Finance and Budgeting to introduce corporate financial systems. The experience of that appointee who is also the researcher informs the five-year narrative in this work, which is complemented by a survey of users of the new systems, and interviews of senior decision-makers at two other autonomous universities, one at a similar stage to Thaksin and the other created de novo as autonomous.

It was found that budgeting in traditional public universities in Thailand is unresponsive to fiscal and educational needs. In addition, the true cost of staff employment is hidden if pension and welfare costs are not shown in university budgets and this can bias personnel decision-making. It was also found that the creation of independent entities within government universities can lead to financial irregularities and loss of academic quality control, and that such problems can be remedied within a full budgeting and monitoring approach. The five-year implementation process was judged as successful, and possibly as quick as is possible when entrenched staff behaviours are considered.

The questionnaire of users within Thaksin University revealed that the allocation of the majority of funds to functional units was welcomed by staff, as were central allocations to personnel development, research and welfare provisions although central control over expenditure on capital items was criticized. The processes of the new system and their introduction were ranked highly and most considered that functional units had generally worked well within approved budgets.

Overall the variations between systems employed in autonomous universities do not indicate one being uniformly superior to others, and all indicate the benefit of communication in the continuous improvement of any budget planning and monitoring. Autonomous universities now offer a useful benchmark for government universities with their higher accountability and budget-aligned plans, which are major tools for enhancing a university’s quality and its sustainability.

INTRODUCTION

The 1990s decision of Thailand to transition some public universities towards autonomy retained overall accountability for government allocations while internal university matters were to be left to University Councils. An autonomous university in Thailand is defined as a government agency that receives a block grant, operates outside the government bureaucracy and is overseen by the Minister of Education. This includes freedom to 71

determine salaries and staff benefits. The policy objective is to allow flexibility to increase fiscal and academic efficiencies. The process of moving from a finely detailed and flexible government department budget to one managed according to a strategic plan requiring skilled planning. This was the process studied. The study context considered the subjects of: universities as specific institutions; the origins and operations of Thai universities; specifically concerned with the South of Thailand (where Thaksin University’s main campus is located); modernization of the sector, and university budgeting and financial management. Upon being proclaimed autonomous in 2008 the Thaksin University Council appointed a Vice President for Finance and Budgeting to introduce corporate financial systems. The experience of that appointee informs the five-year narrative in this work, which is complemented by a survey of users of the new systems, and interviews of senior decision-makers at two other autonomous universities, one at a similar stage to Thaksin and the other created de novo as autonomous.

LITERATURE REVIEW

The reviews literature that provides some background to the origins and operations of the Thai university sector, particularities of the Southern Region of Thailand, recent approaches taken to modernize the Thai University sector and specific aspects of changes necessary in the budgeting and financial management of individual Thai universities.

Recent University Reforms in Australia 3

The resultant Unified National System again brought focus into the benefits of differentiating between institutions and to encouraging mergers of small institutions to obtain supposed economies of scale. This required State legislation, which dutifully followed the Federal funding model. However, it is important to note that throughout all periods, universities were autonomous in their internal management, a factor enhanced by their founding State legislation. But accounting for funds required specific management systems to be developed, and Federal requirements increasingly demanded demonstrations of efficiency. This has led to complex formulae that aim for efficiencies in each defined output in teaching, research and management and has been part of the top-end of Australian universities ranking above peers in comparable OECD countries. However, a 2008 review noted that ‘without significant reform and additional investment, current performance is unlikely to be sustained (OECD 2008a, Vol. 2, p. 36).

One outcome of the focus on cost-efficiency within Australian universities has been increased reliance on casual employment of qualified academics, defined as ‘any higher education instructors not in tenured or permanent positions, and employed on an hourly or honorary basis’ (ALTC, 2008, p.4). With up to 50 per cent of lecturers in some institutions being casual, staff income security, unpaid workloads and loss of collegiality are said to be undermining staff motivation (Brown, Goodman and Yasukawa, 2008). Furthermore, succession planning and the tradition of the elite of a generation taking over from those of the previous generation is under threat as younger academic staff are more likely to be casually employed such that ‘the use of flexible and casual working arrangements disproportionately affects younger academics at the start of their careers and might serve to discourage young researchers from entering or remaining in the academic profession’ (Kubler and DeLuca, 2006, p.6).

In the paper, ‘A Fair Chance for All’ (DEET and NBEET, 1990) the increased equality of access and equity in higher education was seen as necessary, which was addressed through various social support programs and a Commonwealth Scholarships Program for

3 Australia University case is just for literature review 72

low income families. James (2008) found school completion rates of 59 percent compared to 78 percent for low socio-economic students as against high socio-economic status students, which as it reflects findings in other developed countries (OECD 2008a, Vol. 2, p. 36) raises the question of the role of universities in supporting social equity. Australia also faces some specific challenges that may not apply generally, including only about 12 per cent (in 2007) of all students, including both domestic and international students being enrolled in regional institutions (DEEWR, 2008). The sparseness of Australia had earlier (1986) led to the suggestion that a minimum population catchment of 500,000 was needed to make a university viable and that less than 5,000 students would not be cost-effective for a university (Hudson, 1986). Such policies and local factors reflect the diversity of influences on universities even when operating autonomously for their own affairs.

Autonomy and Academic Freedom

University autonomy and academic freedom are said to be fundamental to quality, yet as the above illustrates, government continually intervenes in both (Russell, 1993) and universities have not acted consistently with their rhetoric (Encel, 1965) usually being willing to compromise if incremental funds are offered. The debate in Australia seems to have been confused by linking autonomy and academic freedom when they are in fact quite different principles. Academic freedom relates to scholarly independence unfettered by outside requirements, while autonomy relates to the university’s independence of governance and management (Brubacher, 1977).

Autonomy is interpreted to mean that only scholars can understand the complexity of university management and hence must administer universities. This is an ideal, and is not accepted by funding agencies, nor is it in evidence in the higher performing universities, which employ competent specialists in administration to work beside academic managers. In the Seventh Report of the Higher Education Council, Australian Universities indicated that they felt their autonomy was compromised by: government requests for information; curriculum demands from professional associations; government policies on foreign students, and special incentive funding (Higher Education Council, 1993). Such facts indicate that, in contrast to being truly autonomous, universities in Australia enjoy certain freedoms under their respective Acts of Parliament, but remain responsible for detailed financial budgeting and accountability. It is this aspect of sound financial management for optimal educational outcomes that define the adoption of aspects of the Australian system by Thailand, notwithstanding the distinctly different origins of the Thai university system.

The Meaning of ‘Autonomy’ in the Thai University Sector

Adapting to globalizing free trade in higher education has been difficult for Thailand (OHEC, 2008a) because it is a culture based on consensus, national needs and a minority language. The language has some utility in neighboring countries, but their low educational status does little to enhance that of Thailand, and much of it is offered as a form of development assistance. From that insulated environment, Thailand’s agreement to include education in the GATS multilateral schedule, the ASEAN Free Trade Agreement, and bilateral free trade agreements with Australia, Bahrain, China, India, and New Zealand (and possibly Japan, Mexico, South Korea, Switzerland and the US) has placed a burden of change on the sector that has in turn increased concern within Thai universities (Suwanwela, 2005). At the same time as changing to suit global systems, Thai universities are expected to continue to meet political ends such as expounding the philosophy of a self-sufficient economy (OHEC, 2008a) and to ameliorate violence in the Deep South. It is through such a window that the Thai version of ‘autonomy’ may be viewed. Thai universities 73

leading to an increased interest and activity in research (Liefner and Schiller, 2008). As elite performers within the Thai university system noted the advantages of being part of an international knowledge fraternity linking research to education, old critiques of universities being sluggish bureaucracies that were inflexible and incapable of sustained research and graduate training supported moves for increased autonomy (Kirtikara, 2004). One critical outcome of these developments was a recognition that budget processes were a constraint on innovation and motivation (Fry, Wisalaporn, Lertpaithoon, Sinprasert, Peerapornratana and Larpkesorn, 1999)

Budgeting Transitions for Autonomy

In 2002 when autonomous institutions were possible, the then Ministry of University Affairs (MUA) changed from an expenditure-driven funding system to block grants for autonomous universities (West, 1999). Built on the relative funding model introduced earlier, the following principles guided government implementation (West, 1999):

• use of a ‘base model’ for resource allocation related to the educational service budget but not including research, health services, capital or other parts of the budget

• progressive inclusion of the recurrent research budget into the base model

• simulations of the application of the proposed model to past years

Budgeting and Financial Management Approaches in Universities

Autonomy in academic, personnel and financial management are aspects of university autonomy. Academic autonomy is to be limited in the Thai case, while autonomy over personnel management has faced much apprehension and some militant resistance among staff that have become dependent on bureaucratic rules and civil service conditions. Nevertheless, the use of improved financial management has allowed monetary distinctions to be made in employment conditions, with incentives for those outside the civil service conditions if they perform well as academics. Thus financial management becomes an important tool for overall autonomy, including innovative academic measures, particularly at post-graduate level. Such autonomy requires increased responsibility and accountability, which is foreign to many Thai university personnel who have enjoyed freedom without responsibility and accountability under university regulation, and so improved university council governance must be accompanied by improved financial management. Performance evaluation of faculties, functional units as well as senior administrators are needed to be carried out by a university Council. Acting in the public interest for use of government funds has been perfunctory for most past university councils in Thailand. In an autonomous university, the council is supreme in:

• setting the vision and direction

• formulating policy on education and research

• overseeing the personnel system which formulates policy and regulates personnel management, but not the operations of the system.

• budgeting and finance

• performance evaluation, faculties, functional units as well as senior administrators.

• internal audit (in addition to the external auditing of the Thai National Audit Office). 74

As reporting, internal auditing and assessment become more regular features of university councils, increased transparency and accountability become indicators of good university governance (Kirtikara, 2002).

Models for Budgetary Autonomy

Budgeting and financial management are central to the move towards autonomy in university management. The systems in place in Australia, from which much of the initial Thai policy had been informed, differ significantly from what is the case in Thailand. In Australia, universities enjoy a higher level of autonomy under their own individual parliamentary acts, established under State rather than national parliaments in general. Government block grants based primarily on undergraduate student numbers with research funding channeled separately under competitive conditions and capital allocations following its own variable formula allow much internal university flexibility. In most universities, it is expected that undergraduate allocations subsidize other essential activities. Universities are self-accrediting under their own legislation and receive public funding from the national government with much autonomy over that funding. Thus not all aspects of the Australian model apply to the Thai situation. This system is analogous to that of Thailand, as is to be expected from the history of Thai universities as introduced earlier – but this does not provide a basis for the transition to budgetary and financial management for an autonomous institution, and illustrates the need for specific new knowledge of the implementation process for budgetary autonomy within a Thai autonomous university. The increased responsibility required of autonomy points to the need to consider the methods employed in the corporate sector. Conceived in this manner, budgeting based on submissions to government with restrictive allocations and acquittals does not allow its use as a management tool to effect organizational change. Motivating collective action through allocation of available financial resources according to a long-term strategy as is routine in business (Jongbloed and van der Knoop 1999) is therefore essential to the process of moving toward autonomy. Following this model leads to a formal document that specifies the level of resources allocated for the ensuing year being directly linked to specified academic, research and personnel outputs.

METHODOLOGY

To investigate the transition from public to autonomous university within the Thai system requires a parallel qualitative approach, Qualitative and quantitative methods can be integrated in three different forms, which for convenience we call parallel, sequential, and iterative. In parallel approaches, the quantitative and qualitative research teams work separately but compare and combine findings during the analysis phase (Rao and Woolcock, 2003), because the transition itself follows various paths according to the personalities of management, the order in which different aspects of change are acted on and the starting point of an institution.

Data collection instruments follow conventional methodologies (Gillham, 2000), with the following approaches adopted to add to the knowledge base presented in the Literature Review:

1. Narrative – from experience of the researcher within Thaksin University over a four year period

2. Interviews of key policy makers and users in two other autonomous universities in Thailand

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3. Questionnaire of key users of the system during the transition period at Thaksin University

Results from each of the four qualitative approaches are then considered in the final Discussion and Conclusion. This means that the final analysis includes inputs from:

• The four years of experience within Thaksin University presented in narrative form by the researcher. • Questionnaires of users in the Thaksin system through the transition period for all Deans or Equivalent (17), Vice Deans or Equivalent (25) and Heads of Administrative Divisions (23) – a total of 65 persons. • Interviews with experienced persons in a university adopting the autonomous systems on a timetable similar to that of Thaksin University – involving the President, Vice President (Finance) and the Head of Budgeting. • Interviews with experienced persons in a university newly established under the new autonomous legislation – involving the President, Vice President (Finance) and the Head of Budgeting. • King Monghut’s University of Technology, North Bangkok does not have a Vice- President (Finance) so only two interviews were conducted, one with the President and one with the Head of Budgeting.

RESULT

Increased Personnel Costs

The study revealed that the proportion of expenditure on personnel in total budgets was relatively high at 40 percent. This had resulted from government policy specifying that no positions of a civil servant ‘officer’ would be provided for autonomous universities. Rather, staff of autonomous universities would be engaged as general employees. This has the effect in the total salary budget having to rise substantially since salaries for general employees are set higher than those of governmental ‘officers’. For example, academic staff are paid 1.7 times that of an equivalent person in a government university; for support staff the ratio is 1.5. The reason for this difference is that the full employment cost of staff is to be carried by autonomous universities whereas in government universities unfunded benefits of whole-of-family health insurance and retirement cost do not appear in a university’ grants because they are managed centrally for all civil service ‘officers’. In addition to this shift to full accounting for the cost of personnel and its concomitant budgetary impact, autonomous universities are at liberty to employ personnel at salary rates higher than government scales in order to attract higher calibre staff, particularly academic staff. As all such additional costs must be funded within the autonomous university from its combined governmental and other revenue, it presents an ongoing management challenge in accurate budgeting, balancing revenues to outgoings and in developing a sustainable financial future. Some recognition of this challenge by government may lead to supplementary funding to autonomous universities but, if received, it is unlikely to be long-term. It is therefore critical for an autonomous university to quickly adjust to professional levels of commercial accounting and to move to enhance revenue generation to cover these additional costs, and so achieve the essential sustainability.

Central or Dispersed Financial Management

Despite similarities, the universities studied demonstrate differing modes of budget administration. Universities that are in transition from being governmental to autonomous administer their budgets on a block grant basis, probably as a legacy of experience. In 76

general this means that budgets are allocated to faculties and functional units that are then authorized by the central university to administer their allocated budgets themselves. This is different from universities that were autonomous from the beginning, such as Walailak University in this study. At Walailak University, a ‘Centralized Services and Coordinated Mission’ unified budget is administered centrally. This process is conducted under the auspices of the central university for all steps with functional units working with a centre to create the single overall budget. The budget is administered as agreed and any unspent funds are retained centrally. By way of contrast, universities that are transitioning to become autonomous are enabled to allow unspent funds to be retained by the concerned functional units. The difference between the two approaches means that the university is created as autonomous from the outset so could accumulate significant savings centrally for and from major investments, whereas retention by functional units produces dispersed savings and does not encourage efficiencies of use of capital or use of the university’s most skilled financial personal. In all cases, capital and other investments are required to obtain approval of the University Council in order to limit risks to survival or sustainability. Overall, even autonomy in Thai universities is essentially conservative compared to that in other nations with more mature university sectors and the relative difficulty of simply copying foreign models is well recognized (OHEC, 2008a).

Flexibility in Budget Administration

In all three cases studied, it is concluded that the budgetary contexts in an autonomous university allow much smoother operation than is possible in a government university. This is due to the flexibility possible in formulating the overall budget in the first place, aligning functional units demands in a unified plan and the ability to adjust and transfer funds during the year according to justified demands. As this flexibility extends across all budgetary units, it makes overall management a more professional and efficient task since unused government income is not returned to the Thai Budget Bureau by autonomous universities but is a requirement of government universities. This need for government universities to return unspent funds to the government creates anomalies when circumstances change or new initiatives arise. For a university to engage energetic and well-qualified lecturers, such a lack of flexibility limits the capacity of government universities and thereby provides a potential advantage to autonomous institutions that are well managed. Such good management requires unified university budgetary management complete with regulations on finances, budgets, academic requirements including quality and personnel developmental matters. To be able to manage such matters without seeking to allocate individual tasks to predetermined government expenditure categories allows smooth and independent operation that is more transparent and accountable. Ultimate accountability is maintained by every university being subject to inspection by the Office of the Auditor General of Thailand, which is an independent organization that verifies external accounts and reports to the Office of the Higher Education Commission of the Ministry of Education for some more recently ungraded universities. The flexibility allow for autonomous universities is not absolute, however, as for example in purchasing and the hiring which must follow regulations and criteria set by the university to be in line with Cabinet Resolutions. For purchasing and hiring expenditure above two million baht procedures must conform to the supply regulations prescribed by Prime Minister’s Office. This constraint on autonomy affects all such universities and in the case of Thaksin University means that it is not fully independent in areas where it must follow governmental criteria. Flexibility in budget administration is also a tool to meet government policy in areas of ethnic and religious diversity (OHEC, 2008b).

CONCLUSION

User Perspectives

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After the detailed narrative of the process of implementing changes at Thaksin University, which is based on subjectivity as a result of the author’s own direction of the year-on-year changes, the views of users of the system as it has evolved to that of 2013 comes important. The questionnaire of users administered across major users within Thaksin University reveals that the allocation of the majority of funds to functional units was welcomed by staff (79 percent), as were central allocations to personnel development (59 percent), research and welfare provisions (62 percent in each case) although central control over expenditure on capital items was criticized by 50 percent of respondents. Processes of the new system and their introduction were ranked highly (94 percent) and most considered that functional units had generally worked well while not (only 47 percent) managing to work within approved budgets.

This feedback from users is largely consistent with perceptions of budget planning, which is here suggested to be primarily due to the process of introducing the new system involving users in feedback sessions each year. This is an important conclusion for the introduction of new budgeting and planning systems where old habits must be changed. The iterative and consultative aspects of the process used at Thaksin University are considered to have been major determining factor in the successful introduction of the new system. Continuing improvement of the processes will necessarily involve similar involvement of stakeholders.

Budget Administration Processes

As illustrated in Table1, the administration processes of budgets in the three universities studied contain both strong and weak points. For example, Thaksin University’s budgeting seems to be overly complicated compared to others’ possessing several detailed procedures and criteria compared to that of Walailak University, which is quite simple and straightforward. On the other hand, the budgeting process of Walailak University lacks the flexibility of Thaksin University because of if its centralized control and unwillingness to allow budgetary administrative independence. The differing origins of the two universities explains the possible difference and it is concluded that the system employed by Walialak University is not suitable for Thaksin University.

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Table 1: Budget Process at three Universities

Thaksin University Walailak University King Mongkut’s University Technology North Bangkok Concept of Budgeting “Block Grant” Style “Centralized Services and “Block Grant” Sty le Coordinated Missions” Budgeting is administrated Style University budgeting is centrally by the university arranged by the centre and and budget allocations are Budgeting is more highly allocated in the block grant block grants to faculties and centralized than in the style. In this university, sections as their budgets. different block grant authority is allocated to Faculties and sections are approaches. Faculties as faculties and sections with authorized to independently well as sections propose the intention that they will be administer their allocated their budget requests to the independently administer budgets in line with their pre- university’s central section in their allocated budgets and determined strategies and order that all such requests that their strategies and their plans. The central university can be considered at the pre-approved plans establishes budgeting same time to effect correspond to their criteria and retains some efficiencies and savings in a administration of the revenue for such matters as overview of the whole allocated budgets. Twenty savings, central expenses, university budget. Next, their percent of the overall public utilities, protection faculty and section requests revenue is taken off the top and security, personnel will be prioritized according before allocations to the development and research to their pre-agreed strategic faculties and sections to be before allocating the rest of plans and current used by the university’s the overall budget to necessities within the central section for central faculties and sections. This limitations on budgets. All costs. Significantly, the means that some 53% of such requests are taken into faculties and sections are revenues are allocated to account by the university required to accept faculties and sections for before final allocations are responsibility for all of their academic matters. made to the faculties and expenses (compared to sections. these being handled centrally in the Thaksin University case. Budget Administration All Deans and Heads of Deans and Heads of Deans and Heads of faculties and sections are faculties and sections are faculties and sections are authorized to administer not authorized to transfer or able to transfer or adjust budgets with flexibility to adjust allocated budgets. If budget allocations. transfer or adjust any budget they would like to do so, However, they are not items and expenses within they must submit proposals allowed to make the approved general to the University President adjustments that are not strategic plan of the faculty who will consider requests consistent with agreed or section. on their merits. strategies and plans. Approval is required from the University President.

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Thaksin University Walailak University King Mongkut’s University Technology North Bangkok Savings of Surpluses Each faculty and section is Faculties and sections are With the central university’s permitted to employ their not allowed to manage their permission, faculties and surpluses as savings with surplus budgets. Any sections can retain the objective of using such savings made within a surpluses as their savings. savings in the enhancement faculty or section becomes This is allowed so long as of management of teaching, the property of the central savings are employed to learning and research. university. The budgets are improve the faculties and the However, the university administrated centrally by sections’ teaching, learning administers all savings the university and any and research. The central belonging to the faculties revenues generated are the university administers all the and sections on a combined property of the university for savings as a whole. Any basis and retains income its allocation as it sees fit, revenues generated from generated from such guided by the overall such administration are administration. university strategic plan. regarded as the property of the central university. Budget Monitoring The university’s planning A committee responsible for A committee responsible for section is responsible for monitoring expenditure of monitoring and enhancing following the budgeting budgets is established with efficiency of expenditure is process to determine the University President as appointed with the University conformity with the pre- the Chair, which monitors President with him as Chair. determined plans. It then budgets every academic The expenses are monitored reports to the Finance and term with this rising in for every academic on the Assets Committee of the frequency to monthly in the basis of budgeting and University Council. This final term of a year. expenditure effectiveness process has been found to Monitoring is conducted on with the aim of increasingly be less successful than this basis to encourage aligning expenditure with intended because a number conformity between the pre-determined plans. of budgets have not been budgets, expenditure and spent according to the plans. agreed plans, and to A case in point relates to the progressively increase the difficulty of monitoring effectiveness of the construction budgets. budgeting and expenditure.

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Comparative Analysis Study by Universiti Putra Malaysia – Malaysia

COMPANY SUMMARY

Universiti Putra Malaysia (UPM), a premier institution of learning, is made of various faculties, research institutes and centres in Serdang, Selangor as well as Bintulu, Sarawak. Over the years UPM Bursar had expanded its operation by having Bursar several offices across the campus including its campus in Bintulu. The client of UPM Bursar are administrative staffs, academics at various faculties, researchers that serve at various research institutes, contractors and sub-contractor that provide services to UPM as well as hundreds of vendors that supply research equipment and products.

By 2010 UPM Bursar faced a fast growing amount of claim invoices exceeding thousand invoices per year. Hence, managers were looking for ways to better handle invoice processing while hoping for a better control and transparency. Generally, the accounts department was overwhelmed with the manual processing of claim invoices. In some cases, a single invoice could take 2-4 weeks to be approved which led to frequent payment delays. With no automated centralized claim invoice management system, which can automatically tracks the details of each claim, duplication of data entry was common. Since UPM Bursar had many remote offices with their own registers, data synchronization was almost impossible. As a result, approval and payment processes were far from being transparent. In some cases UPM Bursar was unable to track key vendors credit limits.

Realizing the escalating problems of the Bursar’s invoice claim management, UPM highest authority requested UPM Bursar to look for a system that would automate all claims invoices from various parties. The automation of claim invoices would call for streamlining and accelerating the claim invoice process. Specifically, UPM Bursar was looking for a flexible solution which business flow could be customized to meet the unique organizational’s accounting rules. The new invoice management system must also be able to integrate with the existing financial reporting and inventory control systems. All of these changes were aimed at gaining centralized control of the invoice claim process.

SOLUTION

UPM searched for a flexible solution that would meet its unique business and IT infrastructure requirements. The system must also be able to fully and seamlessly integrate with its accounting system as well as quick and effective implementation in all of the remote offices. After a rigorous evaluation of, the UPM Bursar selected a system known as the E- Claim.

E-Claim system is expected to consolidate all types of incoming claim invoices and transform them into a consistent electronic format. In order to meet this challenge, E-Claim specialists analyzed thousands of claim invoices, adapted all UPM vendors profile details and thus improved the recognition accuracy. As a result, E-Claim is able to extract the required data from invoices, recognize and match it against the data in the system. Additionally, the automated invoice matching within E-Claim helped eliminates duplicate data entry (invoices, vendor profile details, etc.). In order to ensure authentication, whenever an invoice was routed to the Bursar from relevant individuals, E-Claim provided them with email notification for verification purposes. This notice also tells the individual that the claim process has started.

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E-Claim processing routes were programmed according to the business rules of UPM Bursar but with little modification to minimize redundancy of approval. It automates invoice processing and dramatically reduces the approval time. Moreover, E-claim is a web-based application which provides a single point of entry for invoice processing at all of the offices and departments. It is easily accessible, hence, claim invoices process, can be remotely implemented in all UPM Bursar offices at various locations at the same time.

Additionally, E-Claim provides supervisors with process visibility by its Key Performance Indicators (KPI) dashboard that visually represents claim invoices critical data. In the E- Claim system supervisors can track invoice processing through online (real time) reporting. The system is managed by outsourced specialists supervised by the E-Claim technical team since UPM Bursar has no in house-IT staff.

LITERATURE REVIEW

Computerized accounting system

Ulric et al. (2015) defined computerized accounting system as a system that uses computers to input, process, store and output accounting information. Meanwhile, accounting system refers to a system that records all transactions. It specifically deals with events that affect the financial position and performance of an organization. A similar definition is also given by Michael and Miller (2005) who described a computerized accounting system as a system that is used to record, organize, summarize, analyze, interpret and communicate financial information to stakeholders. They emphasized that in these system computers and other related systems such as accounting software are used. This system supports financial information inflows and automates accounting tasks.

Accounting system can also be referred to a set of interdependent elements that together accomplish specific objectives. It must have organization, interrelationships, integration, and central objectives (Sugut, 2014). In summary, computerized accounting system is a system that automates the manual accounting process as it relies on accounting software packages to record, process, analyze and produce financial information to its users.

Contingency theory

Heeks (2002) proposes a contingency model to understand failures of information systems (IS) in developing countries. This model is based on the ideas that situation specific factors for each IS determine its success and failure. The model offers both country context and hard-soft gaps as significant risk to IS failure. He stressed that local conditions in developing countries are often neglected in the design of IS, implying a considerable design-actuality gap (DAG). DAG enables researcher to determine the gap between the current state and the planned future. Heeks (p. 8) identified seven dimensions to DAG namely, “information (data stores, data flows, etc.) ; technology (both hardware and software) ; processes (the activities of users and others) ; objectives and values (the key dimension, through which factors such as culture and politics are manifest) ; staffing and skills (both the quantitative and qualitative aspects of competencies) ; management systems and structures ; and other resources (particularly time and money).”

Based on his analysis Heeks found various reasons for IS failure in developing countries. One of them is failure caused by country context gap. This failure is caused by local environment which does not support IS design imported from industrialized countries. In the quest to be closely developed behind industrialized countries, if not at par, developing countries exported ideas, systems, designers and consultants from foreign countries. The designers and consultants brought their own context with them and have poor understanding of local conditions. He emphasized that this problem may occur even if the designers were locals. This problem occurs due to importation of ideas by designers who 82

studied in the west and indoctrinated into an industrialized country mindset by the western education system. As a consequence the designs they made for their countries are Western inspired designs.

In order to reduce or close DAG and have successful Is in developing countries, Heeks suggested local improvisation of IS design via actuality improvisation. It is a process of changing local actuality to make it closer to IS design. Reducing or closing DAG may also require improvisation of the imported design. This is a process where the IS design is altered to bring it closer to users actuality.

Local improvisation in itself may not successfully close the gap if there is disparity between system applications that require or impose a strong set of processes, values, competences, systems, etc. and the local context, users and infrastructure that populates it, and the intended future design. He quoted applications used in a decision support system as an example and stressed that since these applications “required or imposed a series of rational design inscriptions: about the objectivity of information that is present in the system ; about the formality of processes and management involved; about the skills and role of people ; about the presence of organizational strategies ; about the rationality of organizational culture ; about the absence of organizational politics ; etc.” He named this problem as design imposing application or deep inscription.

Another factor which may affect IS success in developing countries is what Heeks called “shallow design inscriptions” which according to Heeks is found in “actuality-supporting application”. However, this problem is less critical than the previous problem as it only creates a smaller initial DAG as they require or impose few systemic components. He cited word processing application which makes some design assumptions about skills, technical infrastructure, and a cultural values related to technology and documentation as an example.

Another factor which Heeks believed has impact on success of design improvisation is the explicit and implicit components within the design. By explicit component he means factors external to the stakeholders such as the total cost or the type of computers to be used. This component can be easily changed. However, implicit component which refers to factors internal to the stakeholders such as designer assumptions about the values or knowledge of local users is not something that can be easily altered. Improvisation is also affected by the divisibility of the design. If the design comes in divisible sub-elements, chances for successful local improvisation are bigger.

Last but not least, Heeks also stressed that lack of local capacities particularly what is called hybrid “people with technical skills able to work in user areas doing a line or functional job, but adept at developing and supplementing IT application ideas"(Earl, 1989) may hamper local improvisation of design and actuality, hence affect success rate of IS in developing countries.

Efficiency Theory

Efficiency is derived from the Latin word efficiens that can be historically traced to the Latin verb ex facio which means ‘to obtain something from’. De Soto (2009) cited Xenophon who commented based on Socrates that efficiency theory had been used in economics by the ancient Greece to explain economics as “a branch of knowledge of a sort by which men can increase estates”.

Based on Socrates idea of economics De Soto divided efficiency into two classes namely, static efficiency and dynamic efficiency. Static efficiency refers to sound management of available or given resources to avoid waste. Meanwhile, dynamic efficiency refers to creating and increasing wealth via entrepreneurial actions. De Soto commented that in the 83

age of technology there is a striking similarity between the notion of technology efficiency and static economic efficiency.

Impact of Accounting Information System (AIS)

In many researches involving information technology the researches look for answers regarding the impact of AIS from the perspective of static efficiency. For example Basel et al (2016) investigated the effects of the AIS success factors on bank’s performance. They looked at information quality, data quality, service quality and system quality, as determinants of organizational performance. They found that there is a positive and significant relationship between the information quality and organizational performance. Service quality is positively and significantly correlated with organizational performance. Data quality is negatively and insignificantly correlated with organizational performance. System quality is positively correlated with organizational performance.

Altarawneh (2015) made an assessment of the effectiveness of the AIS used in finance unit at Mutah University. His aim was to investigate the effects of the AIS success factors which are information quality, data quality, service quality and system quality, as earlier outlined, on organizational performance. He found that employee satisfaction and reduction of resistance are achieved by allowing users participation in the preparation and development process. Users’ acceptance is also caused by the fact that the system allows multiple users at a given time.

Similarly, Appiah et. al. (2014) found that the benefits of AIS include speed, accuracy, cost reduction, increase customer satisfaction and employee motivation. They studied the conception, motivation, assessment, benefits and challenges surrounding AIS in Ghanaian state owned enterprise.

According to McBride (2000) cited in Sugut (2014) computerized packages can quickly generate all types of reports needed by management for instance budget analysis and variance analysis. Data processing and analysis are faster and more accurate which meets the managers need for accurate and timely information for decision making. Computerized accounting systems ease auditing and have better access to required information such as cheque numbers, payments, and other transactions which help to reduce the time needed to provide this type of information and documentation during auditing.

A computerized accounting system involves the computerization of accounting information systems which is established in order to facilitate decision making. These are associated with a numbers of benefits like speed of carrying out routine transactions, timeliness, quick analysis, accuracy and reporting. Effective and efficient information flow enhances managerial decision-making, thereby increasing the firm´s ability to achieve corporate and business strategy objectives (Manson et. al 2001).

Sulub, Saed & Ahmed, (2014) investigated the impact of computerized accounting information systems (CAIS) on reducing costs in Somaliland business companies; a case of Telesom Company and Shaam Construction Factory. The study findings showed that there is a significant impact for computerized accounting information systems on reducing costs at Telesom Company and Shaam Construction Factory. It illustrated a positive correlation between each item of accounting information systems (Human resource, Hardware and Equipment, Software, and procedures) and the reduction of costs at Telesom Company and Shaam Factory.

El-Dalabeeh et al. (2012) identified the role of computerized accounting information systems (CAIS) in reducing the costs of medical services provided at King Abdullah 84

University Hospital. The study findings showed that there is a significant role for computerized accounting information systems in the reduction medical services costs at the hospital. It illustrated a positive correlation between each component of accounting information systems (human resources, hardware and equipment, software, databases, and procedures) and the reduction of medical services costs at the hospital.

Emmanuel (2015) discovered the following effects when he investigated the impact of CIS implementation in Ghanaian Banks. There is a relationship between the application of the computer and manual system in the accounting system of the banking industry. This was found to be true because the application of a computerized accounting system in banking operations aids quick customer services decision making process and quality performance than in manual accounting system. Also, the installation of accounting software in the computer, processes data and creates reports much faster than manual system which is slow.

It was evident that the impact of computerized accounting system enhances higher turnover and profitability in banks. Through this was corroborated by the test carried out, it was observed that some rural banks are yet to take advantage of the excellent benefits provided by it, as such this reports from banking operations carried out have remained uninterested and unreliable.

Finally, computerized accounting system is an effective means of keeping accounting records. This is because computerized accounting system provides a means for them to record; very high volume of transactions with the great speed and financial and prepare a wide range of detailed financial report. It also provides management with current account balance information since balance is posted as the transactions occur.

RESULTS

Claim invoices processing has been significantly streamlined, replacing the manual paper- based process with a robust solution. Since implementing the E-Claim system, invoice approval time is reduced from 1week to just 3 days, and payment delays have been eliminated. Further benefits of E-Claim include reduction of labor costs, since fewer number of supervisors are needed to verify the invoices.

The use of E-Claim, made invoice processing predictable, smooth and transparent, providing unified and synchronized data across various offices of UPM Bursar. Supervisors monitor the efficiency of their business using the KPI dashboard and reporting and thus easily track the approval process and payments. Training cost for the Bursar staff on maintaining the system is also reduced because E-Claim vendor maintains the implemented E-Claim software and improves it from time to time to better meet customer’s needs.

E-claim introduction and implementation in UPM Bursar has transformed the claim invoices process efficiently. This success is consistent with findings from past studies that have looked at the impact of Accounting Information System (AIS) implementation to an organization. For example, as a result of AIS implementation, Basel et al (2016) found a positive and significant relationship between the information quality and organizational performance. Service quality is positively and significantly correlated with organizational performance. System quality is positively correlated with organizational performance.

Altarawneh (2015) made an assessment of the effectiveness of the AIS used in finance unit at Mutah University. He found that employee satisfaction and reduction of resistance are achieved by allowing users participation in the preparation and development process. Users’ acceptance is also caused by the fact that the system allows multiple users at a given time. Similarly, when Appiah et al. (2014) studied the conception, motivation, 85

assessment, benefits and challenges surrounding AIS in Ghanaian state owned enterprise, they found that the benefits of AIS include speed, accuracy, cost reduction, increase customer satisfaction and employee motivation.

The success of E-claim implementation in UPM Bursar is also consistent to findings made by McBride (2000). They discovered that computerized would lead to faster and more accurate data processing and analysis which meets the managers need for accurate and timely information for decision making. Computerized accounting systems also ease auditing and have better access to required information such as check numbers, payments, and other transactions which help to reduce the time needed to provide this type of information and documentation during auditing.

In general, a computerized accounting system involves the computerization of accounting information systems which is established in order to facilitate the process flow and decision making. These are associated with a numbers of benefits like speed of carrying out routine transactions, timeliness, quick analysis, accuracy and reporting. Effective and efficient information flow enhances managerial decision-making, thereby increasing the firm ‟s ability to achieve corporate and business strategy objectives (Manson et. al 2001).

E-CLAIM FEATURES

E-Claim system is an online claim management system where an employee can submit the claim via a website. Email notification will then be sent to approver for review and comment on the claim application. For instance, should the user incurred an expense while traveling outstation and the user can immediately log the claim amount and relevant remarks into the system, save the claim form, and further update it when more expenses are incurred. Once submitted approver can either approve or reject the claim online. After the approver performed his/her role, the user will get the notification via email or through the system dashboard.

All the setups, roles and functions are pre-defined; reviewer and approver just need to log in to their personal account to perform their related processes. E-Claim Portal provides feature-based workflow, where user can set whatever the features required for their department with its applicable procedure. This module is the heart of complete e-Claim with which complete process flow and other feature are working. These give more flexibility to user to set its own parameter without any technical help.

The following are modules available in the E-Claim solution:

i.Setup Module (for Administrator)

ii.Advance Module

iii.Miscellaneous Claim

iv.Local Travelling Claim Module

v.Overseas Travelling Claim Module

vii.House Moving Claim Module

viiiTransfer Claim Module

vi.Reports Module

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E-Claim Smart Features in Screen Sample

Setup Module

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Module – Claim

Module – Report

REFERENCES

Appiah, K.O. Agyemang, F. Agyei, Y. F. R, Nketiah, S. Mensah, B. J. (2014) Computerised accounting information systems: lessons in state-owned enterprise in developing economies. Journal of Finance and Management in Public Services. 12(1), Retrieved from Researchgate at: https://www.researchgate.net/publication/260202179.

Basel J. A. Ali, Rosni Bakar & Wan Ahmad Wan Omar (2016). The critical success factors of accounting information system (AIS) and it’s impact on organisational performance of Jordanian commercial banks. International Journal of Economics, Commerce and Management, 4(4), 138-158.

De Soto, J.H. (2009). The theory of dynamic efficiency. Oxford: Routledge.

Earl, M.J. (1989). Management strategies for information technology. Hemel Hempstead, UK: Prentice Hall,

El-Dalabeeh, A. R & Alshbiel, S. O. (2012). The role of computerized accounting information systems in reducing the costs of medical services at King Abdullah University Hospital. Interdisciplianary Journal of Contemporary Research in Business, 4(6), 893 – 900.

Emmanuel, O.W. (2015) Computerised Accounting System an Effective Means of Keeping Accounting Records in Ghanaian Banks: a Case Study of the Ga Rural Bank, International Journal of Research in Business Studies and Management, 2(11),111-141.

Altarawneh, G.A. (2015) Evaluation of the computerized accounting information system in the Finance Unit at Mutah University, International Research Journal of Finance and Economics, Retrieved from Researchgate at: https://www.researchgate.net/publication/278679452.

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Heeks, R. (2002). Information systems and developing countries: failure, success and local improvisations. The Information Society, 18(2), 101-112.

Manson, S., McCartney, S., and Sherer, M. (2001). Audit automation as control within audit firms. Accounting, Auditing and Accountability Journal, 14(1), 109–130.

McBride, P. (2000). Guide to Computerizing your Accounting System. Retrieved from http://www.erc.msh.org/mainpage.cfm.

Michael, E. P and Miller .V. E. (2005). How Information Gives Competitive Advantage. Retrieved from www.pcad.ac.

Sugut, O. C. (2014). The effect of computerised accounting systems on the quality of financial reports of non governmental organisations in Nairobi County, Kenya. Unpublished MBA Disertation. Retrieved from http://erepository.uonbi.ac.ke/discover.

Sulub, S. A. (2014). The Impact of Computerized Accounting Information Systems on Reducing Costs in Somaliland Business Companies. SSRN Working Paper Series Rochester: Social Science Research Network.

Ulric J. Gelinas, Richard B. Dull, Patrick Wheeler (2015). Accounting Information Systems. (10th Edition). Stamford:Cengage Learning.

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Sustainable Procurement Management as Part of Financial Management Practices – a Good Practice by UiTM Puncak Alam – Malaysia Authors: Norlida Jaafar, Norliza Che Yahya, Mohd Rahim Khamis, Zaini Abdullah, Poazi Rosdi

I. DESCRIPTION BLOCK

INCREASING INTEGRITY AND ACCOUNTABILITY IN PROCUREMENT MANAGEMENT: A Good Practice by Universiti Teknologi MARA (UiTM)

This best practice has started in 2015 and it operates in parallel with the manual procurement method for continuous improvement while providing awareness of the use of this method to system users among staff .

1. Procurement Principles

Agencies required to ensure that all matters pertaining to government procurement are based on good governance practices in compliance with the principles of government procurement as follows:

• Public accountability - entrusted procurement arrangements shall be carried out responsibly in accordance with the prescribed policies and regulations

Procurement differences: public vs. private

Public Sector Private Sector 1. General Public 1. Shareholders 2. Value for money 2. Profit maximization 3. Monosony 3. Competition 4. Laws and regulations 4. Company policies

• Managed transparently - all procurement policies, regulations and procurement processes shall be clear, understandable and understandable in general and in accordance with the prescribed policies and regulations • The best interest value - procurement management should give the best return for every ringgit spent (figure 1)

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• Open competition - The procurement process should provide an open opportunity for all eligible parties to compete • fair and equitable - Such procurement shall be invited, processed and considered fairly and fairly on the basis of the prescribed policies and regulations

2. Value Management

The concept of value as used in Value Management distinguishes this method from conventional methods of cost review. It achieves this by considering the relationship between function, cot and worth.

Value management is not a review process, but a means to assist in the better management of the procurement process.

Value management essentially aims to produce solutions creatively and economically by:

Identifying unnecessary expenditure Challenging assumptions Generating alternative ideas MUST HAVE Promoting innovation Optimizing resources Saving time, money and energy SHOULD HAVE Simplifying methods and procedures Eliminating redundant items NICE TO HAVE Updating standards, criteria and objectives

3. Accountability

Accountability refers to the obligation of civil servants in carrying out the tasks assigned to them in accordance with the law, the procedures and the prescribed authorities. Accountability is important to ensure that the tasks performed achieve the stated objectives and there is no wastage that affects the public resources.

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Pillars of accountability

• Responsibility – ‘a duty that binds to the course of actions • Answerability – “being called to account” • Trustworthiness ‘ a trait of being worthy of trust and confidence” • Liability ‘ being legally bound to a debt or obligation”

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4. Integrity

Integrity is associated with noble values such as honesty, trustworthiness, transparency, sincerity, fairness and fairness, neutrality and reliability. Public servants who have and practice these principles are not selfish but instead give priority to the interests of the public.

5. University financial management

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6. Stakeholder

University and its operational units; all organizational units responsible for strategic planning and procurement management (rector, bursary, head of department).

II. RESPONSIBLE INSTITUTION AND CONTACT PERSON

1. Details of the institution responsible for the Good Practice

Name: Universiti Teknologi MARA, UiTM

Address: Pejabat Bendahari, 40450 Shah Alam, Selangor, Malaysia

City: Shah Alam

Region: Malaysia

Phone: +60 35544 3390

Website: https://myfinancial.uitm.edu.my

2. Details of the person responsible for the GP

Name: Azmahton Seroji

Position: Chief Deputy Treasurer

Unit: Bursary

Email: [email protected]

Phone: +603 55443399

Website: https://myfinancial.uitm.edu.my

III. GOOD PRACTICE

1. Description of Good Practice

The following case description presents a good practice implemented at Universiti Teknologi MARA (UiTM), in the area of procurement management named as Fine Procurement Plus.

FinePr ocurement Plus was designed to integrate with other modules, particularly the modules for budget, assets or property, inventory, payment and management accounting. Henceforth, FineP rocurement Plus was undertaken in collaboration with an appointed company to undergo four development phases which are: i) Phase One (2012) – Users’ Needs Survey ii) Phase Two (2013-2014) – System Development iii) Phase Three (2015) – Pretesting, System Improvement and Users’ Acceptance Survey iv) Phase Four (2016) – Training 94

FineP rocurement Plus is an electronic procurement system that processes online procurement from the procurement planning, product/services specification, purchase requisition, quotation/tender processing, purchase approval, purchase order issuance, contract signing, invoice processing, product delivery, generation of good received notes and payment to suppliers. McConnell, Doherty, and Ellis-Chadwick (2010) (2009), defines e-procurement as streamlining the publication to payment process by enhancing people input (from paper based system) through the use of technology and the adherence to quality control. According to Davila, Gupta, and Palmer (2003) (2003), public e-procurement has been defined as the use of information and communication technology such as internet, web based system by governments in conducting their procurement relationship with bidders for the acquisition of goods, works, services required by the public sector. They posited that public e-procurement is as an inter-organizational information system, which “automatizes” any part of the procurement process in order to improve efficiency, quality, and transparency in government procurement.

The aims are: the objectives and innovative aims of FineProcurement PLUS is to implement and resolve technical procurement processes. This is based on the principles of public accountability, fair and just, added value, and open competition (Koppenhagen, Katz, Müller, & Mädche, 2011). Aside from that, FineProcurement PLUS is envisioned to include other added values such as to have and inculcate an e-learning environment that is simulated with the procurement functions whilst revolving around the policies and government procedures. Last but not least, FineProcurement PLUS for UiTM’s Bursary is to achieve department goals through the 5E aspects of “Efficient, Effective, Economical, Ethical, and Environment”.

2. Initial Situation

Initially, all procurement for the university was centralized at the main campus in Shah Alam. FineProcurement PLUS is now implemented throughout the system of UiTM.

3. Main Aspect in E Procurement Plus Practice

The process of procurement is governed by:

i. Financial Procedure Act 1957 (Amended 1972) ii. Delegating of Power Act 1956 iii. Government Contract Act 1949 iv. Treasury Directive v. Treasury Circular vi. Treasury Instruction vii. Treasure Contract Circular

This system, the Fine Procurement Plus, has the following features: usability, security, scalability, accessibility, reliability, transparency, interoperability, availability, confidentiality, efficiency, flexibility, public accountability, fairness, real time, value for money, competitive, and compliance to the rules and regulations of the university.

4. Concluding Remarks

This is to ensure that the university practices procurement that gives value for money as well as enhance transparency. This will guarantee the continuous integrity and accountability in financial management practice.

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Accountable Financial Report as Part of Financial Management Practices – a Good Practice by USU – Indonesia Authors: Esther Nababan, Himsar Ambarita, Emerson Pascawira Sinulingga, Ridwan Saleh

I. DESCRIPTION BLOCK

1. Title of Good Practice (GP)

Increasing accountability of reporting process in financial management: a Good Practice by USU, Medan, Indonesia

2. Start year of Good Practice

2015

3. Keywords

List 5 Keywords that identify the Good Practice: • financial report • state university • accountability • integrity • financial management

4. Circle management strategic direction that are applicable Strategy Processes People Products Alliances - links and resources Customers and users Leadership Results

5. Stakeholder

• all operational units within university with budget allocation • all organizational units those generating income to the university

II. RESPONSIBLE INSTITUTION AND CONTACT PERSON

1. Details of the institution responsible for the Good Practice

Name: University of Sumatera Utara, USU

Address: Dr. T. Mansyur 9, Kampus USU, Medan, North Sumatera, 20155

Country: Indonesia

Website: www.usu.ac.id

2. Details of the person responsible for the GP

Name: Ridwan Saleh 96

Position: Head of Financial Administration Bureau

Website: www.usu.ac.id

III. GOOD PRACTICE 1. Description of Good Practice

University of Sumatera Utara is appointed as the Legal Entity State University (PTN BH) based on Law Number 12 Year 2012 on Higher Education Article 97 letter c dated August 10, 2012. Furthermore, the Statute of USU is defined under Regulation No. 16 Year 2014 on February 28, 2014. This provision gives flexibility to USU to encounter the challenges, competition which need to be addressed in the vision and supported by the ability to formulate strategic steps.

In term of financial management, the main consequence of this status to USU is the requirement to provide more accountable financial report in the last 2 years. The expectation to improve the performance of financial services is higher than before. Therefore, since the end of 2014, USU has launched Financial Accountability Information System. This information system aims to increase the accountability of the financial reporting process and to improve the professionalism of its account officers in all organization and operational units within USU.

As USU is a state-owned higher education with funding comes from the government and its self-generated income, the autonomous financial management gives opportunity for USU to be more flexible in planning its annual budget. USU has two types source of funding:

• Non-governmental funds such as tuition fees, revenue from assets management, industrial projects, institutions cooperation and donations. • Public funds from government such as salaries for lecturers/staffs with employment status as civil servant, infrastructure investment and subsidy for overhead costs (direct and indirect).

Non-governmental funds are allocated to every study programs, faculties and academic supporting units with percentage between 65%-85% of their projected incomes from tuition fees.

The amount of USU’s public funds provided by government each year depends on the number of students and last year USU’s Key Performance Index (KPI) set by Ministry of Research, Technology and Higher Education. Management of USU allocates the given public funds to its seven academic supporting units (bureaus, research and community services units) based on the priority programs set by Rector and approved by USU’s Board of Trustees. Monitoring and evaluation for the public funds are carried-out annually by Financial Auditing Body of Republic of Indonesia (BPK).

2. Initial Situation

Initially, all financial reporting were paper based process. As all units have to submit the required documents and receipts through common administration procedure (off-line), this procedure causes backlog and most certainly increase human error factor in the process. In addition, USU’s Financial Administration Bureau is also required to verify and validate the expenses with the planned budget as part of the monitoring and 97

evaluation procedures. Therefore this paper based process will require more time and human resources. The move to shift the process from off-line to on-line condition is to ensure the efficiency and effectiveness in good financial management practices.

USU’s annual budgeting process is organized as follows:

• Faculties and Academic Supporting Units organized within USU are given budget allocation that is calculated based on the number of students, their last year KPI and spending (budget realization) • Based on the allocated budget, Dean of faculty requests each of the study programs within the faculty to submit their annual budget plan. However faculty management (Dean) has the authority to negotiate each study program’s budget allocation based on its last year targeted KPI. • Faculties then compile and review the submitted budget plans from each study program in accordance with the next year targeted KPI. • Faculties and academic supporting units then submit the compiled budget plan online to be reviewed further by Rector with the support from Office of Vice Rector for Planning and Development Affairs. • The reviewed budget plan then submitted to the Academic Senate for feedback • After several revision processes within the highest level of management and considering Academic Senate feedback, Rector then submit the proposed annual budget plan to USU’s Board of Trustees for approval. • Following the approval of the USU’s Board of Trustees, USU’s annual budget plan is submitted and presented to the Ministry of Research, Technology and Higher Education before the public fund/state subsidy can be realized and transferred to USU.

As USU has the autonomy to manage its own financial affairs, the university annual budget and spending is audited by registered public accountants at the end of fiscal year. USU also produce its accountability and performance report at the same time with the financial audit process. Both financial and performance reports are disseminated within the university’s management and to the Ministry of Research, Technology and Higher Education as well as Financial Auditing Body of Republic of Indonesia (BPK). The current financial model provides sufficient flexibility for USU as Higher Education Institution to be efficient in planning its budget and allocate its funding based on the priorities programs in order to achieve the expected KPI set by the Ministry of Research, Technology and Higher Education.

3. Context of Good Practice:

USU is a state university located in the City of Medan, North Sumatera, Indonesia, which is also the oldest state university outside of Java Island. The history of University of Sumatera Utara started with the establishment of Medical Faculty in August 20, 1952 and was inaugurated by the first President of the Republic of Indonesia, Ir. Soekarno to become the seventh state university in Indonesia in November 20 th , 1957. In 2003, USU changed its status from Public University (PTN) into Legal Entity State-Owned University (BHMN). This new status placed USU at the fifth state universities that was transformed into BHMN University. This transformed further by Indonesia Government in 2012 as the Legal Entity State University (PTN-bh). Again, this provides USU with wider flexibility in managing its financial affairs. As the consequence of current status, USU receive significantly reduced public budgets from the government as it is expected USU will generate more income from its business units. Therefore, in order to maintain a healthy budget, USU also require maintaining its financial accountability.

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4. Goals of the Good Practice

The following goals should be achieved with the implementation of the online Financial Accountability Information System:

a) USU becomes good university governance with accountable financial system. b) USU has professional environment within its financial system.

5. Actions taken for the implementation of the Good Practice

USU began building on line web-based system facilitated by Information System Center in 2016 which facilitate software supporting all university operational activities to provide the best and most efficient service to academic community. The main target is to establish an integrated information system supported by reliable management information system software to support the whole university functions in information service management, including transaction processing, decision making, and teaching-learning processes to all stakeholders.

The available Management Information System application software is grouped into four categories. One of them namely: Academic Management System, Knowledge Management System, Resources Management System, and Community Relation Management System; consisting of 14 subsystem modules. Resources Management System consists of some application modules functioning to manage USU resources assets: Human Resource Information System, Finance and Accounting Information System, Asset Management Information System.

Actions to address/ next steps:

As needs have been identified and goals to increase the efficiency and transparency of USU’s financial management have been set, several actions should be carry on by:

1. Carrying focus group discussion involving the planning and budgeting department, the financial department, the internal audit unit and the accounting office to update the much needed policies, rules and regulations.

2. Running workshop for the manager and staffs involve in USU financial management system to enrich their working culture and widen their horizon with training materials that have been delivered to USU team within the Erasmus+ Advanse project.

3. Modernizing the information technology infrastructure within USU’s financial department.

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Figure 1. USU’s Annual Budgeting Process

By realizing the above needs, USU will be able to exercise its autonomous status in financial affairs in oder to reach USU’s academic and research goals as set in University Strategic Planning 2015-2019. Technical modernization within the respected department will increase the effciency and transparancy of USU’s financial management.

6. Human, technology and other material involved in the Good practice

Human: The new online system requires active participation by all USU account officers. Training on the implementation of the system has been carried-out. Training and socialization of the manual procedure to implement the new system has been provided to the respected users.

Technology: Maintenance and improvement of the system will be carried-out continuously to adapt the dynamic financial requirements, rules and regulations from respected authorities and government.

6. Concluding Remarks

This is one of many good practices that have been or will be carried-out to ensure USU hold an accountable and transparent financial system. This will guarantee the professionalism of USU financial officers to realize good state university governance in Indonesia.

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UGM’s Integrated Financial Management Systems (Simkeu) – a Good Practice by Universitas Gadjah Mada – Indonesia

Universitas Gadjah Mada (internationally known as Gadjah Mada University; Abbreviation: UGM) is an Indonesian public stated-owned university located in Yogyakarta, Indonesia, founded on December 19, 1949. UGM is the oldest and largest institution of higher education in Indonesia. Located in Yogyakarta, Indonesia, the 360 acre university comprises of 18 faculties, 68 undergraduate study programs, 23 diploma study programs, 104 master and spesialist study program, and 43 Doctorate study programs.

It has approximately 55,000 students, 1,187 foreign students and 2,500 faculty members currently. Universitas Gadjah Mada has been considered to be one of the most prestigious universities in Indonesia. UGM Human Resources is supported by a total number of 7,580 consisted of 2,409 lecturers and 5,171 Administrative Staffs.

The number of accounting entities which manages its finances independently is around 238. The transaction data is managed by each unit, resulting in the compilation of financial statements takes a relatively long time. The ability and understanding of financial managers (eg. vice dean of finance affair) in each unit are diverse causes the accountability and reporting process is inhibited. Besides, lack of competency of the financial staff causes difference in accounting process that make financial statement inaccurate. Its implication is rector and other users can not make the right decision based on UGM's financial statement.

Financial management is administrative activities that requires implementation of good management principles. Inefficiency on activities performed on treasury activity will affect the next activity, eg. accounting. Implementation of payments is one of the functions of treasury that plays an important role in ensuring the efficiency, effectiveness and accountability.

As a big and complex university, UGM need a solution of the financial management information system that is capable of providing better financial services. The kinds of financial management information system that can produce real-time transaction, access of anytime, anywhere, and reliable manner. By optimizing information technology based systems that are reliable and the application of the verification and also approval mechanisms on line systems, business processes can be run without the limitation of space and time resulting in faster, more transparent and accountable process.

Therefore, since 2008 UGM began building on line web-based system that called UGM's Integrated Financial Systems (Simkeu), and start implemented in 2009. Simkeu linked with others information system in each directorate or department in university and also with UGM’s partners. Simkeu has two main characteristics, namely the integration of internally units of UGM (Intra- organizational financial systems) as well as integration with partners UGM (Inter-organizational financial systems).

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Simkeu Architecture as follows:

Intra-organizational financial systems between Simkeu with others department information systems make better financial business process between department of finance with others units in university. Integrated Financial Systems with others work units in UGM as follows: • with the Directorate of Planning and Development, that using the Performance-Based Management Information System called Simabeka, so Simkeu can use the database of planning activities, performance indicators and budget of the Simabeka.

• with the Directorate of Assets, that using the Asset Management Information System called Simaset can support Directorate of Finance be in the preparation of financial statements.

• with the Directorate of Education and Teaching that implement the Academic Information System (Sireg) can be used in the collect the tuition fees and others revenue from students through Host to Host system. Sireg can also support Simkeu to record the students’s receivable. Recording revenue by on line and realtime through bank partners of UGM can result of real-time reports, the academic process more smoothly (on line enrollment, etc.), and also timely revenue reporting.

• with the Directorate of Human Resources ie Human Resources Information System (HRIS), Simkeu can using as the payment of salaries, honorarium, incentives etc. by online.

• with the unit of Procurement and Logistic that using system of Simpel and Simonef, Simkeu can using its systems as a basis for payment processing purchase of goods and services from vendors.

• with the Directorate of Student Affairs, management of the scholarship may be used in the payment of student scholarships timely.

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• with the Directorate of Research, Simkeu helps in terms of payment of research funds for lecturer. Intra-organizational financial system is very useful in the process of financial management to present financial data in real time, so that if the management requires data to be used as a basis for a decision then the financial data can be served anytime. It's also can serve anywhere because the system run by online and web-based, and also reliable to minimize human error activities. Moreover, the presentation of financial statements can be faster, more efficient and effective.

On the other hand, UGM is also working with the banking industry to integrate both information systems in order to improve financial services better for students, employees, faculty and other interested parties. Through inter-organizational financial system, integration UGM’s Simkeu with UGM’s information systems Partners enables the exchange of data and business processes more easily and quickly. Currently, Simkeu already allows UGM for the acceptance of tuition fee, payments to employees, lecturer, vendors and tax payments online. The following are some benefits that have been earned by UGM on the results of inter-organizational information systems.

• Simkeu integration with partner banks UGM for disbursement of funds can be done through internet banking. Utilization of Corporate Internet Banking (Cash Management System), among others: 1) daily monitoring on the cash position of all transactions on the account of receipts and expenditures, which are revenue of Education, Scholarship fund Cooperation, External Cooperation Project funds, accounts and funds for Program Operations Faculty. 2) management of debt payments through the facilities Cash in Bulk to third party or UGM’s employee salaries. • Structuring UGM bank accounts owned by the application virtual Account (VA). VA is a unique identification number that is used as the storage account income from the receipt of funds, such as the cooperation of industry funds, grants, income other than income from tuition, etc. Using the VA, the receipt of funds from various sources of funds can be managed centralized in the universities. In addition, VA allows UGM manage revenue funds are easier to identify the source of the funds, reducing the risk of errors and can provide immediate income statement.

• Simkeu can also use the corporate internet banking facilities in terms of tax payments to the government via e-Tax. Tax payment through e-Tax greatly streamline the time and also the accuracy payment to the government treasury. 103

In general, it can be concluded that the application online at UGM’s Simkeu have a positive impact on the financial services. Implications for financial performance is a performance improvement of financial services in the form of the real-time financial data updates, financial services practice in one day payment, enables the payment process via the internet anywhere and anytime.

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