(Full) Cost Accounting at German Universities - Necessity, Development, and Limits?

(Full) Cost Accounting at German Universities - Necessity, Development, and Limits? Prof. Dr. Dr. h.c. Hans-Ulrich Küpper University of Munich (LMU) Bavarian Institute for Higher Education Research and Planning

Cost Accounting at German Universities 1. Motivation 2. Management by Accounting 3. Accounting at Universities 4. Structure of Cost Accounting at Universities 5. Prospects and Limits

1. Motivation Changes at European universities European Union Globalization and internationalization Competition between universities more effectivity and efficiency modern management systems

2. Management by Accounting Core elements of management systems dimensions organisation planning, control motivation information coordination specification hierarchy...autonomy bureaucracy...related to the market obligation...incentives related to supply...related to demand plans...target agreement...prices centralized planned economic systems decentralized market economic systems

2. Management by Accounting 2.1. Accounting Systems of Profit-oriented Companies Accounting Systems Financial Accounting Management Accounting Balance Sheet Income Statement Cash Flow Statement Cost Accounting Investment Accounting

2.1. Accounting Systems: Basic Numbers Financial Accounting Receipts and expenditures Cash inflows (pay-ins) and cash outflows (payouts) Revenues and expenses observable and measurable Management Accounting Cash (investment accounting) observable Sales revenues and costs (cost accounting) depend on rules

2.2. Cost Accounting: Components Cost type accounting Indirect costs Cost center accounting/ Process costing Product cost accounting Direct costs Cost measurement Cost assignment Cost categories cost centers/ processes Cost centers other cost centers Cost centers cost object

2.2. Cost Accounting: Cost typologies Direct costs: material, wages, Indirect costs (= overhead cost): depreciation, space, administration, principle of accountability Variable costs: depend on activity Costs of material, telephone, Cost of labor Fixed costs: independent of activity costs of equipment principle of causality

2.3. Cost Accounting: Systems Full Costing Systems Traditional Activity Based Costing Allocate total costs depending on purpose Partial Costing Systems (Direct, Variable, Marginal Costing) Direct Costing Grenzplankostenrechnung Do not allocate total costs Principle of causality

2.3. Cost Accounting: Full costing Direct Costs Cost Tracing Costs Cost Objects Indirect Costs Cost Allocation 10

3. Accounting in Universities 3.1.Characteristics Basics: - non-profit organisation - (partially) financed by the state - non-economic goals Consequences: - need of a special accounting system - different goals in research, teaching and services different performance indicators

3.3. Accounting Systems in Germany Universities Performance Public Institutions Education Research Services individual different diverse excellent Regulations by law Several Performance Indicators

3.2. Developments in Europe United Kingdom: Full economic costing system Expectation of HEFCE: ABC (Activity Based Costing) in HEIs The Netherlands: Preparation for full cost Usual economic principles Relation of costs and performances

3.3. Accounting Systems in Germany Principles of Greifswald (1999): (all research universities) Separation between Basic Statement (only objective data) Special Evaluation Statements (with cost allocation)

3.3. Accounting Systems in Germany Systems of book keeping in German universities traditional (most universities): Cameralistic (only payments) in some universities: Economic double book keeping (with SAP software)

3.3. Accounting Systems in Germany Accounting Systems Financial Accounting Management Accounting Cash Flow Statement Balance Sheet Value Changes Statement Cost and Performance Accounting Investment Accounting

4. Structure of Cost (and Performance) Accounting at Universities Development in Germany: Several projects 1970 Efficiency reform after 1990 Committee on University Accounting since 1997 Introduction of modern accounting systems in several German states European impulses European research programmes Separation of public and market activities

4. Structure of Cost and Performance Accounting (CPA) at Universities - Ideas of the Committee of University Accounting - General framework of cost accounting at Bavarian universities

4. Structure of CPA at universities 4.1. Purposes of CPA Transparency (Short-, medium- and long-term) planning of input Internal control of input Decision facilitation and influencing Monitoring of planning and control

4. Structure of CPA at universities 4.1. Adressees of CPA Society Global information Parliament Ministries University Boards - President Faculty/School Dean Professor Detailed information

4. Structure of CPA at universities 4.2. Components of CPA Basic Pecuniary Record ( Grundrechnung ): undistorted numbers Cost types Cost centers Product costs Evaluating calculations: purpose dependent information

4. Structure of CPA at universities 4.2. Components of CPA Cost accounting Types of expenses resp. costs Multistage direct cost accounting Activity accounting Study and teaching Research Service Success indicators accounting Study and teaching Research Service

4. Structure of Cost Accounting (CPA) 4.3. Basic Pecuniary Record: Monetary Figures Revenues: - Own revenues - Allocation of funds Public funds Public third party funds Private third party funds Others Costs: expenses - Material costs - Labour costs - Service costs costing-based - depreciation - interest - rent

4.3. Basic Pecuniary Record: Non-monetary Figures Teaching Students Courses Tests Places in higher education First-year-students Undergraduate students Graduate students Dropouts... Number of courses Course hours Tests in undergraduate studies Research Junior scientists Postgraduate students Doctoral students Postdoctoral researchers Scientific results Scientific publications Patents Third-party funds Services Libraries Acquisitions Users... Personnel administration Attended persons Recruiting... Tests in graduate studies Graduates From industry From public institutions Student Administration Finance Administration

4.3. Basic Pecuniary Record: Cost centers Scientific Institutions Faculty/ School Department Chair Central Library Comp. Institutions Center Services Head of Administration Administrative Division Administrative Department Others Student services Kindergarten

4.3. Basic Pecuniary Record: Types of Cost Centers Type Final Cost Center Service Cost Center Clearing Cost Center Examples Scientific institutions Services Administration Technical departments Building centers

4.3. Basic Pecuniary Record: Cost objects Education: Discipline (not program of study because of joint production) Research: Third-party funds projects Services: Internal services Personnel administration Students administration International center Financial administration

4.3. Basic Pecuniary Record: Reports Resources: Employees (Professors, academic staff, nonacademic staff, ) Equipment Monetary Figures Revenues Expenses Costs Third-party Funds

4.3. Basic Pecuniary Record: Performance Report I. Non-monetary performance a) Quantifiable performance in education b) in promotion of junior scientists c) in research d) in internationalization e) in affirmative action for women II. Monetary performance a) Available budget b) Direct costs c) Overhead costs

4.3. Basic Pecuniary Record: Performance Report I. non-monetary performance a) quantifiable performance in education 1. number of trained students 2. applicants for a place at university. 5. absolvents per student 6. duration of studies 7. quality of graduats.. b) quantifiable performance in promotion of the scientific descendants 1. number of doctorates - per professor - duration 2. habilitations - per professor - duration... c) quantifiable performance in research 1. number of publications 2. portion of third-party-funds of the budget 3. scientific awards. II. monetary performance a) available budget.. available overall budget b) direct costs.. sum of direct costs c) overhead costs department A subject A... prof. A1... sum...... central scientific institutions ZWE 1...

4.4. Evaluating Calculations Relevance of purposes Full cost calculations Examples: Full costs of a program of study Full costs of one university place Full costs of third-party funds projects

4.4. Evaluating Calculations Major problem: Allocation of fixed/overhead cost Allocation principles: (Empirical) causation not possible Average

4.4. Evaluating Calculations Background of the problem long-term (investment) decisions but short-term cost accounting Interdependencies between education and research ( patient-centered care) between different programs of study, research projects,

5. Prospects and Limits of Cost (and Performance) Accounting Prospects: Necessary information Transparency Incentives by publicity of information Limits: Arbitrariness of cost allocations Purpose dependence of information Empirical interdependencies of activities

5. Prospects and Limits of Cost (and Performance) Accounting Periodical Cost / Perf.- Account. Cost Account. Activity Account. Investment Accounting Potential for Success Accounting Success incidators Short-term Mid-term Long-term