Program Costing in Canadian Higher Education: Challenges and Practical Responses
Author
Jianyuan(Andy) Hu
Context
Leveraging unregulated international student tuition and largely unrestricted enrolment from the provincial ministries, balancing budget has not been much questioned since mid 2000 for many Canadian universities and colleges (Financial Ratios for Universities: A Feasibility Study, Tuition in Canada: Modest increases and widening gaps, 2025/2026). Starting around 2022, an immigration tightening policy triggered a myriad of major financial setbacks for higher education sector in Canada (Canadian Universities Feel Impact Of Drop In International Student Numbers). With structural deficit and viability concerns hanging over the higher education sector across the board, soul searching moment is now justified. “Program costing” has never been more popular among senior administrators in the higher educational institutions. That said, “program costing” isn’t exactly an EpiPen, as in, not a plug and play tool to implement and see the results immediately. It requires deliberate planning, calibrating execution, and ongoing commitment to be successful. In this article, I would like to raise 5 common challenges facing “program costing” for higher educational institutions and some suggestive responses to these challenges:
Unclear purpose and mandate
Unclear costing methodologies
Inconsistent costing methodologies
Overestimating available data and data readiness
Lack of long-term vision and ongoing commitment
Analysis
Unclear Purpose and Mandate
You probably noticed that so far, I have been air-quoting “program costing”. The reason is, there can easily be a convoluted set of goals tied to “program costing”. At this point (this is why I highlighted macro-environment in “Context” section first), “program costing” is triggered by a stressful institutional financial bottom line. One must ask, is the real goal to understand the cost of programs or to understand “program profitability” to address the current budgetary stress? Ultimately, through the “program costing” campaign, what exactly is that you are looking to achieve for you and your institution?
Therefore, a proper scope exercise and a clear understanding of the value proposition for program costing are essential.
Unclear Costing Methodologies
Continuing from the above, when purpose is unclear, costing methodologies suffer along. Even just within the costing scope, what costs interest you through “program costing”? Full cost? Delivery cost? Or perhaps, direct personnel cost? Each has their own merits, serving their own distinct purposes. For example, full costing and delivery costing require very different lens on faculty compensations, which is usually the elephant in the room for program costing. If methodologies are unclear, then “program costing” will deliver misinformation at its very best, a typical garbage-in-garbage-out scenario.
Therefore, it is important to understand the context of program costing. Costing methodologies are tailored to the needs of educational institutions and stakeholders’ (i.e. program owners) needs. There isn’t one costing methodologies fitting for all educational institutions.
Inconsistent Costing Methodologies
In addition, usually for balancing vested interests among faculties, some academic programs are on a lifeline support through other financially better-off programs to appear sustainable. This is usually done by the established budget models and its cost allocation mechanism. The question now becomes, while the institutions are dealing with a financial crisis head-on, can we still afford to use the ongoing budget model and its methodologies to assess program costs?
Therefore, it is essential to become highly aware of the existing biases, frictions, and purposes in costing allocation/analyses before bringing any over to program costing exercises. It also echoes the previous point, that, given the context, costing methodologies should be tailored to program costing.
Overestimating Available Data and Data Readiness
Program costing ties a broad range of data, student enrolment, student financials, general ledger, budget data, faculty appointment, faculty workload, just to name a few. Most ERP and their peripheral systems are not designed for program costing, but more for reporting purposes. For example, “department” or “program” field in the general ledger system does not necessarily mean the “program” for “program costing” campaign. “Department” or “program” in the HR system means differently between finance and HR systems. Fragmented data systems, siloed data operations, existing data technology and infrastructure debt all make the “program costing” a lot more challenging. That said, there is a can of worms called “data quality” that have not been opened just yet.
Therefore, it is important to be practical and respectful about analytical capacity and data readiness when planning program costing. . It is also crucial to engage cross-functional frontline staff members for a clear understanding of technological needs and improvements necessary for program costing. Program costing can and will expose existing analytics capacity and antiquated business processes, which might lead to a larger investment scope
Lack of Long-term Vision and Ongoing Commitment
Similar to the budgeting process, program costing is a parallel ongoing business processes, rather than set and done. Not only does it raise the level of self-awareness about current academic programming, but it also points out necessary considerations for future program proposals. Given the high demand of data and business processes to sustain the program costing, it is important to understand the affordability of sustaining the program costing practice. It is entirely possible that once the current financial winter becomes a past, so does the program costing momentum.
Therefore, just like any enterprise strategic analytics investment, for a program costing campaign to keep on giving, ongoing commitment from leadership is a must. Strategic investment in business processes and data analytics capacity must also accompany.
Summary
Program costing is a high risk and high reward exercise. Risks usually lie in the unclear or convoluted goals for program costing and underestimating what it takes to execute program costing. It is quite common that “program costing” is to address short-term stern challenges, such as heavy deficit in budget. Also to many, costing a program should be a natural capability of a university or college. Both are misleading. It is important to respect program costing as a skill for an institution to properly develop, practice and sustain. Proper scoping, stakeholder engagement, and strategic plus operational investment in enterprise modern financial analytics capabilities are key to its long-term value sustainment to the higher educational institutions.
References:
Financial Ratios for Universities: A Feasibility Study
Tuition in Canada: Modest increases and widening gaps, 2025/2026
Canadian Universities Feel Impact Of Drop In International Student Numbers
