ait financial results board of trustee meeting 28 march 2007

AIT Financial ResultsBoard of Trustee Meeting

28 March 2007

AIT - Key Operating Units

Fund 10

Schools

Central Administration

Fund 21

Non Academic Support Services

Fund 30

Sponsored Projects

2004 2005 2006 Budget 2007 Act 2 mths 2007

-200

-100

0

100

200

300

400

500

600

700

475 448506

553

197

562 580514 514

65

-86-127

-13

30

Total RevenuesTotal ExpendituresNet surplus (Deficit) after non-operating items

FUND 10

2004-2006 Actual v 2007 Budget v YTD 2007 (Feb)

Financial Situation of AIT upon Assuming Presidency and Actions Taken

• Assumed Presidency of AIT on 1 July 2005.

• Large deficit recorded in 2004 and projected deficit for 2005.

• Briefed the Chairman of the Board and Chairman of the Executive Committee.

• Extraordinary meeting of the Executive Committee (resident members) convened on 28 July 2005.

• Efforts to immediately inform the community about the prevailing situation in a coordinated, systematic and unified manner so as to work together in better tackling the situation.


• School visits and meetings with units. Instructions for a 10% minimization of annual costs to be implemented in the second half of 2005 announced. Action plans that would result in the savings – cost-cutting and / or revenue increase received. Efforts to increase intake in January 2006.

• Review of budget procedures and processes –actual results often short of targets – efforts to instill greater accountability.


• Institute-level working groups set up with representation of faculty, staff, students and alumni, along with inputs of external resource persons, to look into areas where there could be cost savings as well as towards improving revenue generation. New and potential countries as target markets – Central Asia, China, India, Indonesia, Middle East, Russia.

• Cancelled planned meetings of the Executive Committee and Academic Advisory Panel in Vietnam and Sri Lanka – venue shifted to AIT.

• Overseas members of the Board, Committees and Panels requested to cover the airfare portion of their travel expenses.

Analyses of Net Deficit Trend Observed in July 2005

• Tuition and other Fees as well as AIT Fellowship : fee reduction and change in semester effected in August 2003 not brought in desired results. Discounts or fellowships offered without true understanding of actual costs and correct break-even levels.

• Research Grants and Contracts : insufficient and non recovery of institute direct and indirect costs.

• Promotional Strategies: lack of coordinated and clear promotional strategies to realize revenue targets

Analyses of Net Deficit Trend Observed in July 2005

• Accountability of Budgets : need to increase budget accountability and transparency as well as awareness of financial status at all levels. Mechanisms to follow up on budget variances and clear performance evaluation indicators.

• Cost Management : concerted cost management measures had not been initiated prior to July 2005

• Financial and Student figures as well as Staff Headcount: Information systems not fully integrated


Fund 10

Schools


Fund 21


Fund 30

Sponsored Projects

SCHOOLS

FUND 10

SET - School of Engineering and

Technology SERD – School of

Environment, Resources and Development

SOM – School of

Management

SET

SET

05

SET

06

SET

07 B

udge

t

SET

07 A

ct Y

TD

"

SERD

05

SERD

06

SERD

07

Budg

et

SERD

07

Act Y

TD

'

SOM

05

SOM

06

SOM

07

Budg

et

SOM

07

Act Y

TD

-150-100

-500

50100150200250300

155174

208

73

171

216233

8765

90 103

35

144122 122

17

130110 123

1655 51 59

610

5386

41

107 110

1039 45

-101

-420

-57

36 35

-31

10 15

Revenues ExpensesNet Results Net Results after OH allocation

FUND 10 2004-2006 Actual v 2007 Budget v YTD 2007 (Feb)

School Performance

SERD SOM

05 05 0706 0506 0607 0707 07 07

Budget Budget Budget2 mths 2 mths 2 mths


Fund 10

Schools


Fund 21


Fund 30

Sponsored Projects

CENTRAL ADMINISTRATION

FUND 10 President office

RESResearch & Education

Support

ERCO External Relations &

Communication Student

office

Finance

Infrastructure HRO

2004 2005 2006 2007 Budget Act 2 mths 2007

0

50

100

150

200

250

300

167 172155 136

22

95 10183

88

10

2619

Salary Non Salary Right Sizing Contingency

FUND 10

Central Administration Expenses

20042005

2006 Inclu

de Right s

izing

2006 Excl R

ight s

izing

2007 Budget

Act 2 m

ths 2007

050

100150200250300

0%10%20%30%40%50%60%70%

262 273 265 238 243

32

55%61%

52%47% 44%

Central Admin expenses % to F10 Revenue% to F10-F30 Revenues

FUND 10

Central Administration Expenses % to Revenue

20042005

2006 Inclu

de Right s

izing

2006 Excl R

ight s

izing

2007 Budget

Act 2 m

ths 2007

050

100150200250300

0%10%20%30%40%50%60%70%

262 273 265 238 243

32

55%61%

52%47% 44%

23% 24% 22% 20% 20%

Central Admin expenses % to F10 Revenue% to F10-F30 Revenues

FUND 10

Central Administration Expenses % to Revenue


Fund 10

Schools


Fund 21


Fund 30

Sponsored Projects

Non AcademicSupport Services

FUND 21 AIT

Community School

Academic Centers

Conference Center

AIT Extension

InfrastructureStaff Housing, Motor pool

etc

Student Accommodation

Outreach Building

InterLab

Fund Raising

2004 2005 2006 2007 Budget Act 2 mths 2007

0

50

100

150

200

250

300

350

274298

272

321

57

259 269248

282

4311

32

1941

22

Total Revenues Total Expenditures Net Surplus (Deficit)

FUND 21


2005 2006 2007AITCVresult + 9 M -5 M +5 M

-10

0

10

20

30

40

50

60

70

13

60

34 37

9

40

15

411

65

36 34

7

23

14

2

-5 -2

3 2

17

1 4

Revenues Expenses Net Results

Operating Results 2006 Key Units in Fund 21FUND 21


Fund 10

Schools


Fund 21


Fund 30

Sponsored Projects

2004 2005 2006 2007 Budget Act 2 mths 2007

-100

0

100

200

300

400

500

394 373

439

350

48

401370 365

350

63

-6

3

74

0

Total Revenues Total Expenditures Cash surplus (deficit)

FUND 30


Operating surplus from completed Projects F30 = 15 MCash Surplus from ongoing Projects = 59 M

Fund 23Reserve Fund

Operating Results of Fund 10, 21 and completed projects of Fund 30 will be closed to the Institute Reserve Fund (Fund 23)

Fund 10Schools &

Administration

Fund 23Reserve Fund

Fund 30Completed Sponsored

Projects

Fund 21Non Academic

Supporting Units

Movement of Reserve Fund

2002 2003 2004 2005 20060

50100150200250300350400450500 462

459

288

42 60

Reserve Fund

FUND 23

Includes AITCV 42 M

Decrease due to Operating Losses and Capital Investments

Million

Dec 03 459

Dec 04 288

Dec 05 42

Dec 06 60

• Operating deficit F10 125 M• Fixed Assets investment 55 M

F10 2003 40M + F10 2004 86 M Key Impact

• Operating deficit F10 128 M• Fixed assets investment 56 M• Construction of Students dorm/AIT

Community school Bldg 110 M

• F10 & F21 net results + 6 M • F30 completed projects + 15 M • F50 recovery + 16 M• Fixed Assets investment - 20 M

Includes AITCV 40 M

Includes AITCV 49 M

Includes AITCV 42 M

FUND 23Movement of Reserve Fund

2007 BUDGET

2004 2005 2006 2007 Budget

-200

-100

0

100

200

300

400

500

600

700

475 448506

553562 580514 514

-86 -127 -1330


2004 2005 2006 2007 Budget0

50

100

150

200

250

300

350

274298

272

321

259 269248

282

11

32

1941


2004 2005 2006 2007 Budget

-100

0

100

200

300

400

500

394 373439

350401

370 365 350

-63 74

0

Total Revenues Total ExpendituresCash surplus (deficit)

FUND 10

FUND 21

FUND 30

Non Academic Support UnitsSchools & Central Administration

Sponsored Projects

SET; 208; 38%

SERD; 233; 42%

SOM;

103; 19%

Central Admin; 8; 1%

2007 Budget: Revenues

Salaries & Benefits; 377; 69%

Materials & services; 72; 13%

Contracted Services; 20;

4%

Travel & Commu-nication; 11; 2%

Utilities & insurance; 48; 9%

Contingencies; 19; 3%

2007 Budget: Expenditures

2004 2005 2006 2007 Budget

-200

-100

0

100

200

300

400

500

600

700

475 448506

553562 580514 514

-86 -127 -1330


FUND 10

OH recoveryreceived fromF21 33 Mill(reduce F10 exp)

Schools & Central Administration

2004 2005 2006 2007 Budget0

50

100

150

200

250

300

350

274298

272

321

259 269248

282

1132

1941


FUND 21

2007 Budget: Revenues

2007 Budget: Expenditures

Academic Centers; 34; 11%

AIT CV (Vietnam); 61; 19%

AIT Com-

munity School; 15; 5%

AIT Ex-tention; 20; 6%Infrastructure; 81; 25%

Institute (Sec-onded); 60; 19%

InterLab; 6; 2%

Stu-dent Ac-

com; 44;

14% RES; 2; 1%

Salaries & Benefits; 79; 28%

Materials & services; 65;

23%Contracted Services; 24; 8%

Travel & Com-munication; 12;

4%

Utilities & in-surance; 10; 4%

Seconded; 60; 21%

OH Paid to F10; 33; 12%

Non Academic Support Units

2004 2005 2006 2007 Budget

-200

-100

0

100

200

300

400

500

600

700

475 448506

553562 580514 514

-86 -127 -1330


2004 2005 2006 2007 Budget0

50

100

150

200

250

300

350

274298

272

321

259 269248

282

11

32

1941


2004 2005 2006 2007 Budget

-100

0

100

200

300

400

500

394 373439

350401

370 365 350

-63 74

0

Total Revenues Total ExpendituresCash surplus (deficit)

FUND 10

FUND 21

FUND 30

Non Academic Support UnitsSchools & Central Administration

Sponsored Projects

BUDGET Consolidation

F10-F30

2004 2005 2006 Budget 2007-200

0

200

400

600

800

1000

1200

1400

1143 11191215 12241222 1219

1125 1146

-80 -84

80 71


Consolidated Fund 10, 21

and 30

Actual 2004-2006 v Budget 2007

For F30, includes Operating surplus from completed Projects = 15 M andCash Surplus from ongoing Projects = 59 M

Present

Asian Institute of Technology

Past Futureand

• As you all know in years 2004 and 2005 Fund 10 made losses of about Baht 86 million and Baht 127 million, respectively

• These losses dried up Institute reserves to the extent that we have not been in a position to invest in new strategic areas and / or maintain / upgrade existing activities as we would have liked

Past

We need to rectify our weaknesses by changing ways we manage our finances

The indications are that collective efforts of faculty, staff, students, Executive Committee and Board have halted decline in the financial health of the Institute, however, we are not yet out of the “woods”

Present

• For 2006, we had net operating loss of Baht 13 million in Fund 10 which was significantly improved from the net loss in year 2005 and 2006 of Baht 86 million and Baht 127 million respectively

Present & Future

• In the coming year 2007 , the focus should be more on increasing revenues from all sources in addition to continued cost awareness. We need to make selective, strategic investments

Future

• But this need can only be met if we have collective surplus and positive reserves

• Therefore budget for 2007 is formulated with a surplus of baht 30 million for Fund 10. This surplus is achievable provided we remain committed to our financial goal

Future

We also need to think about building Institute reserves in the coming years

Future

• The following are broad guidelines for year 2007 budget:

Future

1. Schools are expected to maximize revenue from fields of studies and make every attempt to earn sufficient revenue to cover all expenditures

Those fields of studies which fail to meet the financial viability standard are being identified and corrective measures will be taken as soon as possible

Guidelines for year 2007 budget

2. Schools should continue to recover correct amount of overhead and faculty time from Sponsored activities. Exception should be kept to minimum and permitted only where there are other compensatory factors

All Academic Centers must contribute 20% on direct revenue and operations of these Centers should breakeven at the least on a yearly basis, and not drain resources of the Institute


3. The budget for payroll includes additional positions considered necessary but should only be filled in relevance to the financial viability of fields of study


4. The expenditure budget for non salary items are dependent on achieving the target of revenues from tuition and fees and contribution from sponsored activities.

The expenditure budget allocation is the maximum amounts that could be expended, but will be adjusted during the year by maintaining a constant percentage to budgeted revenues


5. The non-revenue generating and Support/Servicing Units are required to exercise utmost care in utilization of resources.


AIT Institutional Assessment by KPMG Sweden

Report of AIT Institutional Assessment by KPMG Sweden

Summary • The KPMG assignment is actually divided into two sub-

assignments. The first assignment was performed at AIT in Bangkok during the first week in December 2005, and 9 – 20 January 2006, and was reported to Sida and AIT 6 April 2006

• The first assignment contained reviews of: organizational structures and the delegation of authority; work performed by working groups within AIT; financial management;

program management; management information systems; employee and compensation structure; and the new business plan process


Summary (continue)

• The second assignment of the institutional assessment contained support in development of an Implementation Plan, and training to implement agreed plans. The

assignment was performed during 13 – 17 March 2006. The draft report was submitted to Sida and AIT 30 April 2006, and the final report 12 July 2006.


Summary (continue)

• Since the first assignment, AIT has discovered that the financial situation of the institute is severe. The institute has taken a lot of measures to deal with the situation. For

instance, new budget restrictions, and the establishing of task forces dealing with specific issues based upon the work performed by the previous working groups. The new AIT Five-year Strategic Development Plan contained a lot of new initiatives regarding core values, aims/themes, governance, ownership, and financial sustainability etc.


Summary (continue)

• This third assignment is a follow up of the other assignments, and was conducted 24-27 October 2006. A Management Response from AIT covering our two previous

reports was received 20 December 2006. The two reports from KPMG have been dealt with at both the 30 October 2006 AIT Board of Trustee meeting, and the 27 November 2006 AIT Executive Committee meeting


Main Conclusion

• The AIT Management Response is of high quality and expresses a true will to reform the administration. The initiatives cover a wide range of issues and will have a positive effect on the operations, but also the financial situation. The initiatives cover the new structures of the organization, new strategies in the Strategic Development Plan, and extensive initiatives regarding AIT’s different processes.

It is obvious that AIT’s situation has changed to the better, and we assess that the new strategic planning process is of great importance.


Main Conclusion

• The presented initiatives in the Management Response are extensive, and many of the initiatives will be

implemented during the year. Our follow up can therefore only be a part in the continuous AIT reform process. The process needs follow up, and AIT has proved its capability to do this on its own.

The risk that AIT handles the external funds in an inefficient and non transparent way has diminished since our last report and we therefore cannot withhold our previous recommendation not to pay out research grants.

2004-2005

2006 2007 2008

ait financial results board of trustee meeting 28 march 2007

Documents

ait fellowship

budget accountability

budget v ytd

budget variances

set school

prevailing situation

revenue increase

school visits