Financial Report

March 26, 2006

Contents

1.1. Unaudited FY2005 vs Audited FY2004Unaudited FY2005 vs Audited FY2004

2.2. 2005 – Actual vs Forecast2005 – Actual vs Forecast

3.3. Financial Reporting – Initiatives & Financial Reporting – Initiatives & IssuesIssues

4.4. Measures to Address Financial ResultsMeasures to Address Financial Results5.5. 2006 Revised Budget2006 Revised Budget

Unaudited FY2005 vs Audited FY2004Operating deficit (all funds) Baht 73 mio (improved 5%)Operating deficit (all funds) Baht 73 mio (improved 5%)

Net deficit (all funds) Baht 147 mio (improved 11%)Net deficit (all funds) Baht 147 mio (improved 11%)

Net deficit in Fund 10 (unrestricted fund) Baht 131 mio Net deficit in Fund 10 (unrestricted fund) Baht 131 mio (up from Baht 85 mio)(up from Baht 85 mio)

School results, high salary, large administrative School results, high salary, large administrative structure/headcount are key factorsstructure/headcount are key factors

Results are far from satisfactoryResults are far from satisfactory

Unaudited FY2005 vs Audited FY2004F10 school operating results (revenue less direct costs)F10 school operating results (revenue less direct costs)

SOM Baht 15 mioSOM Baht 15 mio SERD Baht 60 mioSERD Baht 60 mio SCE Negative Baht 3 mioSCE Negative Baht 3 mio SAT Baht 23 mioSAT Baht 23 mio

Total Baht 95 mio (down from Baht 116 mio)Total Baht 95 mio (down from Baht 116 mio)

F10 school operating results (revenue less direct costs plus F10 school operating results (revenue less direct costs plus allocated/indirect costs)allocated/indirect costs)

SOM Negative Baht 26 mioSOM Negative Baht 26 mio SERD Negative Baht 38 mioSERD Negative Baht 38 mio SCE Negative Baht 55 mioSCE Negative Baht 55 mio SAT Negative Baht 36 mioSAT Negative Baht 36 mio Total Negative Baht 155 mio (up from negative Baht 138 Total Negative Baht 155 mio (up from negative Baht 138

mio)mio)

Unaudited FY2005 vs Audited FY2004

• F10 school direct costs Baht 329 mio (up Baht 10 F10 school direct costs Baht 329 mio (up Baht 10 mio)mio)

SOM Baht 55 mioSOM Baht 55 mio SERD Baht 130 mioSERD Baht 130 mio SCE Baht 67 mioSCE Baht 67 mio SAT Baht 77 mioSAT Baht 77 mio

• F10 other indirect costs Baht 258 mio (up Baht 6 F10 other indirect costs Baht 258 mio (up Baht 6 mio) including:mio) including:

Library Baht 24 mioLibrary Baht 24 mio Utilities &insurance Baht 32 mioUtilities &insurance Baht 32 mio Infrastructure Baht 55 mioInfrastructure Baht 55 mio Central admin Baht 147 mio Central admin Baht 147 mio

Unaudited FY2005 vs Audited FY2004

Reserves : Baht 166 mio (-42%)Reserves : Baht 166 mio (-42%)

AIT Baht 33 mioAIT Baht 33 mio

AITCV Baht 79 mioAITCV Baht 79 mio

UNEP Baht 54 mioUNEP Baht 54 mio

2005 - Actual vs Forecast

Forecast made last Aug 2005Forecast made last Aug 2005

Actual results not in lineActual results not in line

Forecasting process needs reviewForecasting process needs review

Accounting provision/accrual procedureAccounting provision/accrual procedure

Prevailing budget spending culturePrevailing budget spending culture

Year-end break & vacationsYear-end break & vacations

Accountability of projections/KPIsAccountability of projections/KPIs

Rolling forecast requiredRolling forecast required

Financial Reporting – Initiatives & IssuesMore detailed reports – monthly, quarterly, More detailed reports – monthly, quarterly,

schools, tuition fees, fellowships, centres, admin schools, tuition fees, fellowships, centres, admin officesoffices

Review balances in restricted funds – F21, F30, Review balances in restricted funds – F21, F30, F42, F50F42, F50

Reclassification of accounts – residual, inter-fund Reclassification of accounts – residual, inter-fund borrowing/lendingborrowing/lending

Year-end closing of F10 & 21Year-end closing of F10 & 21

Year-end balances in Sponsored Program – Year-end balances in Sponsored Program – classify as receivables & payables classify as receivables & payables

Financial Reporting – Initiatives & IssuesAgency fund (F50) accounts – proposed write-off Baht 66 mio Agency fund (F50) accounts – proposed write-off Baht 66 mio

for 30 accounts (further review, possible offset of Baht 13 mio)for 30 accounts (further review, possible offset of Baht 13 mio)

i) Findingsi) Findings

Risk management (FX, fee fixing, contract terms)Risk management (FX, fee fixing, contract terms)

Internal controls (authorization, recording)Internal controls (authorization, recording)

Fund administration (roles of coordinator, office of scholarship Fund administration (roles of coordinator, office of scholarship & finance)& finance)

ii) Appointment of external auditor for independent auditii) Appointment of external auditor for independent audit

Verification of account balancesVerification of account balances

Identification of causeIdentification of cause

Recommendation of improvement in procedures/controlRecommendation of improvement in procedures/control

Financial Reporting – Initiatives & Issues

Review accounting of UNEP.RRC.APReview accounting of UNEP.RRC.AP

i) Status – joint academic centre, AIT i) Status – joint academic centre, AIT employees, comply with P&P employees, comply with P&P

ii) Funding source - 100% externalii) Funding source - 100% external

iii) Fund mandate - restricted natureiii) Fund mandate - restricted nature

iv) Use of reserve – ?iv) Use of reserve – ?

Financial Reporting – Initiatives & Issues

AITCV – Current IssuesAITCV – Current Issues

i) Ownershipi) Ownership

ii) Administrative structureii) Administrative structure

iii) Overhead/cost recovery iii) Overhead/cost recovery

iv) Use of reserve - ?iv) Use of reserve - ?

Financial Reporting – Initiatives & Issues

Bank accounts management systemBank accounts management system

i) Cash pool system (all cash in one i) Cash pool system (all cash in one general bank account) used substantiallygeneral bank account) used substantially

ii) Individual bank accounts to be opened ii) Individual bank accounts to be opened for restricted funds, major donors for restricted funds, major donors

iii) Easier cash reconciliation & monitoringiii) Easier cash reconciliation & monitoring

Measures

Revise 2006 budgetRevise 2006 budget

Monthly reporting & monitoring of academic / operating / Monthly reporting & monitoring of academic / operating / financial data & agreed KPIsfinancial data & agreed KPIs

Quarterly rolling forecasts supported by Quarterly rolling forecasts supported by academic/operating plans academic/operating plans

Fund raising, cash injection – concrete strategic & Fund raising, cash injection – concrete strategic & financial restructuring plans requiredfinancial restructuring plans required

2006 Revised Budget

Necessitated by poor 2005 financial results & declining Necessitated by poor 2005 financial results & declining reserves positionreserves position

2006 budget revision process2006 budget revision process::

• Review latest actual resultsReview latest actual results• Set new cost targetsSet new cost targets• Seek endorsement of new targets from Executive CommitteeSeek endorsement of new targets from Executive Committee• Communicate approved targets at coming Institute ForumCommunicate approved targets at coming Institute Forum• Deans/Heads to revise budgets/strategic plans to achieve new Deans/Heads to revise budgets/strategic plans to achieve new

targets & identify consequencestargets & identify consequences• Submit revised detailed budget for Board’s approval Submit revised detailed budget for Board’s approval

2006 Revised Budget

New cost targets for endorsement:New cost targets for endorsement:

• Reduce direct costs budget (excl F30) of schools by Reduce direct costs budget (excl F30) of schools by

Baht 68 mioBaht 68 mio

• Reduce budget of indirect costs by Baht 52 mioReduce budget of indirect costs by Baht 52 mio

• Reduce capital budget to Baht 25 mio from Baht 45 mioReduce capital budget to Baht 25 mio from Baht 45 mio

2006 Revised Budget

-20002004006008001000120014001600

Op Rev

Op Costs

Op Surplus

Net SurplusOp Rev 1350 1491 1280

Op Costs 1298 1446 1323

Op Surplus 52 -45 -73

Net Surplus -38 -29 -147

2006 Revised 2006 Current 2005 Actual

Thank You