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QUESTION 3:Financial performance indicators or measurement for public tertiary education institutions
In 2010 financial performance of tertiary education institutions generally improved compared to the previous year. Operating surplus clearly increased and there were slight increases in working capital and liquid assets. Net cash flow was unchanged from 2009.

Indicator Description
Key financial performance indicators for tertiary education institutions – operating surplus; liquid assets; working capital; and net cash flow.
Why This Is Important
The operating surplus of an institution provides it with the opportunity to invest or reinvest funds in further teaching, research and student learning and to provide something of a safety margin against budget variations and other untoward events. It is helpful to express the operating surplus (or deficit) as a percentage of income, to give the return on income or operating margin.

The public tertiary education sector typically produces a relatively low return on income. The level of return varies according to many institutional circumstances, including capitalisation levels, depreciation levels, the extent of plant or equipment leasing, development strategies and overall efficiency of operation. Generally, however, an operating surplus of 3% or more is regarded by the Ministry of Education as an indicator of adequate financial health.

Liquid assets, working capital, and net cash flow are also important indicators of the financial health and viability of tertiary education institutions. Liquid assets, which include the level of cash, bank deposits and readily liquefiable assets held by tertiary institutions, provides a buffer against variability in performance. Working capital ratio is defined as current assets divided by current liabilities. A ratio of less than 100% means an institution has fewer current assets

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