Save the University of Dundee
DUCU Position Paper, 11/12/2024
Dundee University has a problem hanging onto its Principals. The fact that the second in five years has un-ceremonially resigned with immediate effect, shortly after announcing a funding crisis, raises serious questions about how this university is being run.[i] The University has recently lost not just its Principal but also the Finance Director and the VP for Internationalisation. The University Executive Group has failed to provide any explanation for this sudden turn of events.
£30m deficit out of nowhere
The only explanation provided is that for quite some time now the University has faced a funding crisis which has only just come to light. Dundee University we are told by management is forecasting a £30m deficit for 2024-25 which will lead to bankruptcy in less than 24 months. Those of us with a memory longer than a goldfish will know that we’ve been here before. It was wrong then and is almost certainly wrong now.
The University was due to go bankrupt in 2021. The interim Principal, one Prof David Maquire (now Vice Chancellor at University of East Anglia), produced a paper ‘From Survive to Thrive’ in June 2020, outlining the desperate situation. We had 12 months to turn around a ballooning £16m deficit that would shortly turn into a £54m deficit without drastic action. Fortunately, this has apparently now been postponed to 2026, according to press reports of statements made by a middle level manager at the University of Dundee, parroting what they have been told by senior management.[ii]
Instead of going bankrupt in 2021-22, the University’s nominal income actually rose from £253.3m in 2019-20 to £276m in 2021-22 and to £325m in 2022-23 while expenditure rose from £230.7m to £269.5m and to £320.9m respectively. A 0.9% surplus of income over expenditure in 2019-20 led to a 1.4% surplus in 2020-21 and a 1.23% surplus in 2022-23.[iii] One might suggest that whilst this is not exactly a spectacular performance, it doesn’t sound drastic either.
Annual Financial Reports hide as much information as they reveal and should be taken with a degree of scepticism. Still, as DUCU made clear in a series of reports back in 2021, “[u]ntil 2015 the University was running a small but consistent annual surplus… Since 2016 this has been replaced by a small but consistent reported deficit.”[iv] From 2021 onwards, the University returned to a small annual surplus, which continues to date.
If there does not appear to be a major change in the funding structure of the University, why is there a crisis and is it real? The truth of the matter is that staff cannot tell because almost no information on the University’s finances have been revealed. The unions have been told that cashflow, a key indicator of the University’s financial health, is in decline. But even this raises more questions than it answers.
Cash flow changes
Cash and cash equivalents at the end of the financial year in the University in 2019-20, the year before our last predicted bankruptcy, was £27.9m and in the 2022-23 Financial Statement, the year prior to this latest prediction, it was reported as £74.4m.[v] Current projections are suggested to lead to this falling back to levels of 2019-20. Yet in 2019 we were not going bankrupt and now we are?
Tuition fee income had risen from £74.1m to £117.6m between 2019-20 and 2022-23. In addition, a further £40m payment had been received for the sale of the spin-out company Exscientia in 2021. Between 2020 and 2024 there is evidence of over £100m additional income coming into the University compared to pre-2020 levels, yet then we were not facing bankruptcy, but now we are.
Is it possible to identify areas of cash flow that are causing problems for the University finances?
The consolidated statement of cash flows over the period shows two main elements of change, one as previously pointed out by DUCU as fictious but the other real. Accounting for pensions costs due to Government regulation FSR102 has an enormously distorting effect on headline figures for cash flow in the accounts. This does not mean money leaves the University, just that it is counted against the asset base, if it were ever to go bankrupt. So, in 2019-20 pension costs added a deficit of £32.4m to operating activities but a year later in 2020-21 these reduced to just £1.9m. The following year this same activity created a surplus in cashflow in operating activities of £50.3m only to return to a deficit in 2022-23 of £18.1m.[vi] These wild fluctuations arise from the fictional valuation methodology adopted in the USS and the UoDSS pension schemes and underpins the reasons for the pension disputes since 2019. They bear no relation to actual costs and are an accounting fiction.
The other significant change in the cash flow within the University is a real change, that of the income derived from the sale of the Exscientia spin-out company in 2021. Here £40.3m came into the University, but this was in 2021, not in the latest available accounts for 2022-23, or we can assume in the forthcoming accounts for 2024-25. It may be the case that the £48.7m increase in fixed assets across the two years 2021-22 and 2022-23 was largely funded through the sale of Exscientia rather than it being ringfenced, as previously suggested? Whatever the truth, cash flow changes are derived from the strategic decisions of senior management, or, as the departure of the current Principal suggests, strategic mismanagement.
Staff costs which are the focus of the University’s recovery approach cannot explain the sudden financial crisis across the period 2019-2020 through to 2022-2023. Staff costs (excluding pension costs) were 53.3% of expenditure in 2019-20 but have fallen to just 41.7% by 2022-23. The main area of increased expenditure is the rise in what is referred to as Other Operating Expenses, which rose in 2022-23 by £23.6m and accounted for 72% of the additional income into the University.[vii] At a time when staffing costs were falling, their replacement by Other Operating Expenses will not have improved the student ‘experience’. It is indicative of the University management’s failure to address real workloads, the major factor in the actual learning experience of students.
In conclusion, there is no evidence of a financial crisis at the University up to the last published financial statement. Yet staff are being targeted for redundancy, voluntary or compulsory, based on future projections. In so far as there are changes in the accounts they derive from excessive expenditure in the ill-defined category of ‘Other Operating Expenses’ and the increase in assets over the last two years.
Governance
Losing two Principals of the University in five years and facing two threatened bankruptcies in the same space of time calls into question the capability of management and governance structures of the University of Dundee. The move from elected to appointed management structures has led to a singularly narrow view of its strategy and direction. Universities should be places of debate and contestation of ideas. Instead, we have a toxic top-down view that has seen the hollowing out of the governance structures of Court and Senate, which have become mere rubber-stamping bodies. The fact that, at such a crucial time, Prof Iain Gillespie could not join the latest Principal’s Question Time meeting speaks volumes in this respect.
The current governance model has failed. The lack of student and staff engagement in the decision-making process must be addressed. A new structure of democratic management and governance is required, which puts staff and student participation central to financial transparency and the accountability of senior management. A cultural change is needed which empowers staff and students and facilitates staff and student initiatives for income generation and cost control.
Without such changes, no lessons will be learnt. The prophesies of disaster may indeed be created for real. Time is running out for this failed experiment in management-centred control of the University of Dundee.
We are where we are: Dundee UCU calls on the University Court to:
- Withdraw the threats of compulsory redundancies included in the Principal’s email to university staff on 13th November 2024.
- Fully disclose the financial information under-pinning the university’s financial position.
- Engage in genuine democratic consultation and negotiation on the future of the University of Dundee.
- Immediately move to introduce new governance structures for democratic decision making and transparency within the University.
Without such commitments staff and DUCU can have no confidence in the UEG or its proposals.
DUCU would welcome comments, critiques and other analysis with respect to this paper as part of a genuine consultation.
[i] Prof Andrew Atherton ‘left’ the University in 2019, less than a year after his appointment due to differences in his ‘vision’ for the University BBC, Rent row Dundee University principal Andrew Atherton quits – BBC News 8th November 2019.
[ii] A report of a statement from Rose Jenkins, Head of Estates, quoted in the Courier Staff warned Dundee University ‘could close in two years’, 23rd November 2024.
[iii] University of Dundee, Financial Statements, 2020-21 and 2022-23, p.34 and p.34.
[iv] DUCU, (2021), A £54m deficit turned into a £21m surplus in 12 months. Really?: Time for a fresh look at Dundee University., unpublished report, p.2. available on request.
[v] University of Dundee (2021), Financial Statement, 2021, p.29. In 2021 it was reported to have increased to £105.1m and University of Dundee (2024), Financial Statement, 2024, p.55.
[vi] University of Dundee, Financial Statements, 2020-21 and 2022-23, p.38 and p.38.
[vii] University of Dundee, Financial Statements, 2020-21 and 2022-23, pp.34 & 47 and pp.34 & 47.