The university coalface gets 28 cents in the dollar!

The question posed last week was how much of the money sent into the university sector at the point of DEEWR\DEST actually reaches the coalface in terms of teaching and research. My best guess answer is about 28 cents in the dollar, with the rest essentially going into admin.

The way to calculate this is more properly explained in this presentation I did for the Australian Conference of Economists in 2011 (Presentation academonomics ACE July 2011), but the simplified version is the use of this formula:

Money to coalface = 100* (1- cut going to DEEWR\DEST) * (1- cut going to uni admin) * (1-%time of acad on admin)

We thus break the calculation into three unknowns: the percentage creamed off by the education ministries itself, the percentage creamed off by university admin, and the percentage academics themselves have to spend on admin.

The first one of these is actually the hardest: how much do the ministries take. In their own yearly accounts, they claim that ‘overhead’ is a pittance in terms of the funds they manage, ie 1.8%. This is not just almost nothing, it is completely unbelievable since it means they count their own activities as directly valuable.

In stead of taking the account numbers on their official overhead as useful, I prefer to simply look at how many people DEEWR\DEST employs. Using the administrative handbook, DEEWR\DEST appears to employ 6000 staff plus consultants and outside agencies. At the going wage of around 68,500 per standard civil servant, plus super, plus the usual 30% on-costs in terms of buildings and a 30% guess as what they pay in terms of non-employees, this means DEST ‘costs’ around a billion dollars. At a total budget of 12 billion going to universities in 2011, this means one should think of DEST overhead as 8%. This does not even count all the state education ministries so is probably an underestimate.

Then the issue of how much time academics spend on administration. I took around 6 published studies on this issue, all based on time-use surveys. At best guess, around 30% of time of academics is spent on administrative tasks like sitting on committees, writing reports, training for the advent of cyclones, presenting in front of visitation committees, sitting on representative bodies, etc. Since it is usually the more highly paid who are doing administrative work, like being on Faculty Boards, the 30% is again an underestimate of the real percentage spent on administrative activities. By all accounts, this percentage is a lot higher than it used to be simply because of the increase in forms being sent out, compulsory training courses, etc.

What does this mean for the percentage ending up at the coalface? We can now calculate the coalface number as 100*(1-0.08)*(1-0.56)*(1-0.3)=28. So 28 cents in the dollar that comes in in DEEWR\DEST actually gets spent on direct costs of teaching and research, i.e. the people and the buildings doing the work. The other 72 cents is overhead.

I would of course advocate someone to be given the resources to do this more properly, though it must be said that one clearly has to ignore much of the statistics given out by both DEEWR\DEST and the universities themselves on the composition of their staff, the nature of their expenses, and the use of their time for they are not reasonable numbers. So whoever wants to do a better job than the back-of-the-envelope calculation I engaged in will need the resources to gather their own data.

All kudos to those who gave a try, many of whom gave numbers chillingly close to mine. DEEWR\DEST overhead statistics for the rest.

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17 Responses to The university coalface gets 28 cents in the dollar!

1. woulfe says:

The term “coalface” might be loaded with a few assumptions here:
the sole vector for student learning is the time that academics spend dealing with them
university resources allocated to non-teaching / non-research do not contribute to the institution’s core activities
Much of a university’s output is achieved by creating rich environments where thinking, learning and discovery will occur. How is this accounted for in a “coalface” analysis?

2. woulfe says:

And why does this comment interface allow me to insert html code and then not display it?

3. Paul Frijters says:

Hi Woulfe,

no idea about the html thing.
Hej, if the government wants to pay 72 cents in the dollar to that great ambiance that many students hardly ever in practise seem to desire (student attandence is low: most of them are out earning money and are merely there for the exams and tutes), then that is a democratic choice. I am just calculating the extent to which we are now paying for overhead, of which I would say not more than maybe a third goes into things a student would think of as helpful. I doubt students ever get to see the expensive paintings lining the rooms of some of the top-brass….

I think you have forgotten the amount of time administrators spend on academic stuff rather than just the amount of time academics spend on administrivia. This is certainly not negligible, and depends on what you want to count as teaching/research vs. admin. For example, some admin staff are employed to read grants (andat some lucky places, they do the budgets of grants also). Is this research or teaching? Other lucky places have administrators co-ordinating some aspects of teaching (e.g., getting assignments, checking for plagiarism etc.). Yet other places have admin people help develop course stuff (e.g., web-stuff etc.). All of this presumably adds up.

• That is a difficult one. Activities that are ‘related to’ teaching and research includes an awful lot. Does checking for things like plagiarism and carrying assignments around constitute teaching itself? Not really, but they are chores related to teaching that academics would rather not do and that one would say is a teaching-related service, true. How easily could the same activity be done when one cuts out all the luxury linings from such ‘services’? Very easily: in stead of having administrators prepared to drag essays delivered at any time in any format, one could have much stricter ‘chuck them in the bag before Monday morning else you get nothing’ rules that involve almost no admin.
In the post, I put all of that in the ‘overhead’ category, which is really where it belongs. How much of the overhead is actually quite useful and improves the final product is another question. Sure not a whole 72 cents worth.

“Very easily: in stead of having administrators prepared to drag essays delivered at any time in any format, one could have much stricter ‘chuck them in the bag before Monday morning else you get nothing’ rules that involve almost no admin.”

Don’t you have student satisfaction/teaching ratings where you work? HTFU went long ago (along with hard courses etc. .) thanks to lowest-common denominator teaching correlating well with ratings . So if you want good ratings, you need someone to do the admin.

“Real help with grant applications is rare”

I know of some US universities where people get a fair bit of grant help (I know of none in Aus). Alternatively, I don’t find the reporting requirements for ARC grants too bad. The thing that annoys me about it are just the crazy categories like “how much my university loves me”, “why my research will change the universe” etc. . As far as I can tell, at least for Discoveries, you basically have about 2.5 pages of real information now and 7.5 of hyperbole.

There’s another topic for you — what proportion of the grant money given out is spent on people trying to get it?

• Paul Frijters says:

student ratings are a great case in point of lots of additional admin with very uncertain real teaching benefits. It clearly is not teaching itself and its effect on teaching is probably negative given all the game-playing that it has lead to!
Given that only 1 in 5 grant applications get up and that your average discovery requires some 30 pages of real text (10 pages proposal, but another 20 with stuff like justification for the budget, the 5 ways in which your previous research can be counted, and how well you are suited for the project), I fear we are already close to the point predicted by economic theory on such things: complete rent dissipation, i.e. a full 100% of the prize is spent on efforts getting it. The winners get a surplus, the losers a loss. However, as you suggest, something for another question!

6. Julie Thomas says:

“What’s the best way to fund research? It’s not the laborious process of grants and approvals required by the Australian Research Council. Universities need more control over their work, argues Mark Fletcher”

• Just read it. Bit amateurish, really. Couple of wrong details (projects get 10, not 8 pages), couple of non-sequiturs (40% success rate supposedly means only a few big agencies join in with pinkage schemes), couple of misunderstandings (ARC not best placed to judge. Sure, that is why it gets reviewers to judge for them), but worst of all is the conclusion. The idea that DVCs would be better placed to hand out research money is worse than the current system. At least linking money to the academics empowers them a bit. Giving even more power to the local hierarchy is bound to worsen research outcomes and increase admin even more. I would guess Mark just penned down the opinion of one of his befriended DVCs without thinking it through. A good example of why I stopped reading New Mathilda about 3 years ago.

The one good thing about the article is that it notes how much waste there is in the system.

7. Migraine says:

There are so many flaws in this article it’s laughable. DEST no longer exists. DEEWR no longer has any responsibility for higher education. The actual number of ‘civil servants’ involved in higher education policy and funding is closer to 600 than 6000 – though they do earn a bit more than \$68,500. Nor does the department actually responsible for these things – DIISRTE, as of last year – skim money off the top of university funding. The operating budget for the department and the money paid out to industry, universities and so on are different things, as is clear from even the most casual perusal of the Portfolio Budget Statements.

On top of those factual errors, the methodology applied here is ludicrous. A university or any other organisation which spent 75% of its funding on administration would soon fall over – this is prima facie so obvious it’s a wonder why you didn’t question your own figures.

“The operating budget for the department and the money paid out to industry, universities and so on are different things”

Given the operating budget for the universities clearly enters the total cost of running universities, I don’t see why you wouldn’t have included it (initially, I didn’t, but I agree with Paul that it should be in there). If you didn’t, this would be like saying that government administrators are free (for everything, roads, health…). I guess it depends where you want to attribute their cost.

“A university or any other organisation which spent 75% of its funding on administration would soon fall over – this is prima facie so obvious it’s a wonder why you didn’t question your own figures.”

It isn’t just administration — there are other things like community service that take away from teaching/research. Also, given 50% of the staff (or more) of Aus universities are admin staff (which I don’t really see as something under great dispute), and most of the budget of universities is on wages, I don’t see why you don’t get to 50% pretty easily (I’m not clear to what extent academics are doing non-teaching/research related things like admin, community service etc., and to what extent admin staff are doing teaching/research — but I assume there is a pretty equal trade-off). If you add the government cost, which you don’t like, onto this, you already getting quite close the figure.

It would be nice to know why you don’t think this is the case rather than just saying it is obvious.

• Paul Frijters says:

Migraine,

excellent. now we are making progress.

On the nomenklature of Dest/Deewr/DIIsrte: as is clear in the post, its a 2011 calculation based on end of 2010 financial reports. So no Diistre then. Also, Dest is a name still used a lot in academia (the Dest points) so the purpose was to make it clear to readers what I was talking about. And everyone clearly did know.

Then, to the substance. 600 you say? Higher paid than average you say? Very interesting. Where is this to be found in the financial reports though? Where should I find the added consultancy reports and the trips of the minister dedicated to higher ed? Me and a lawyer-trained RA went over your budget statements and could not find it at all. It is the fault of the department that its statistics are so opaque that outsiders cannot make heads or tails of it and you need inside information to know this.
So, to make progress: take the linked queensland education budget for instance (which will include a form of overhead I did not even count!) and tell me where the ministry expenses involve in tertiary education are to be found (http://deta.qld.gov.au/publications/annual-reports/11-12/pdf/financial-statements.pdf). The equity statement on the buildings for instance will include not just the buildings in which the civil servants sit but also a lot of buildings in which teaching takes place. The ‘personel costs seem to include way more an just the ministry personel’. And what to make of the ‘for women’ accounts, or ‘grants towards minorities’.

If you think these statements really tell you where the overhead is or even how many employees work for different purposes, go ahead and enlighten me. I would love to be able to update my initial and certainly gross assumption made following an inability to decypher opaque statistics. Let us see if we can find a better number than 6000 civil servants involved in higher ed throughout Australia.

Finally, I am a little sad to hear that you did not already know just how much admin goes into higher ed. Surely that is a crucial number to be on top of if you work in Dest/Deewr/Diistre?

8. Julie Thomas says:

“The one good thing about the article is that it notes how much waste there is in the system.”

Yes, I thought that was a good thing; the more voices there are talking about a problem, the better. Perhaps you could improve the quality of the site by contributing an article outlining your analysis?

I have only just come across New Matilda – it’s been going for over 3 years? lol but I have found a few things worth reading. I’ll keep checking them out for the occasional good idea or interesting approach.

9. john r walker says:

Paul did we ever send you the New Scientist article by Donald W Braben on how a excessively ‘managed/ administered’ approach to creativity innovation and scientific progress has stifled creativity?
new scientist is not free view link is here

otherwise can email a scan.

• john r walker says:

Ps The fact that it is so hard to get reliable figures for public funds spent on admin costs and the near impossibility of determining how many academics are really ‘phantom employees’ of administration type structures is in itself a worrying big problem .

It seems reasonable to think that the federal and state governments do not actually know much about what it is they are paying for.

10. Tel says:

This is not just almost nothing, it is completely unbelievable since it means they count their own activities as directly valuable.

Although there’s no way their activities are as valuable as they seem to believe, also it would be unfair to automatically assign a zero value. The problem is that in a non-competitive system with only one central controller cannot properly put prices on activities. It is even conceivably possible that the value-add is negative (i.e. the coordinating efforts of this central agency actually reduce educational effectiveness below what a completely uncoordinated system would attain), but we really don’t know, because we have nothing to measure against.

• Paul Frijters says:

yes, all true.