The University of Tasmania’s 2019 Annual Report has finally been released.
The university reports on a calendar year basis. The Auditor General signed off the 2019 report in February 2020. The Board (known as the Council) adopted the report in May and sent it to the government as required by its governing Act. It’s been sitting in someone’s in-tray for the last 3 months. Another Covid victim no doubt.
Apart from the financials it’s a pretty skinny report.The overview for the year occupied only six pages. Even then it was a cut and paste from previous offerings, from the now outdated Strategic Plan 2019-2024 dated July 2019 for instance. UTas is “not long-term economically sustainable and being economically sustainable is no easy task…….At an operating level, we break even. Still, there is no surplus to see our facilities renewed for the next generation.” If there were sustainability questions in July 2019, they would have been more evident when the Council signed the report in February 2020. Even more so today in a pandemic world.
Serious as it was, sustainability didn’t get another mention. The rest of the overview degenerated into a public relations pastiche with more proper nouns and acronyms that you could poke a stick at…… The Ways of Working project, the People Strategy and College People plans, the Academic Leadership Development Program, which led to the Lean (sic) and simplification momentum continuing to build across the University via a new process improvement tool called Go-See-Fix, the unsuccessful attempt to satisfy the international Athena SWAN charter atho’ UTas did get a Bronze Award accreditation and is committed to continue commitment to the SAGE initiative. It might as well have been written in Swahili. If a student served up drivel like that in an assignment, you’d fail them. Irrelevant twaddle especially when there are pressing matters of sustainability.
The brief overview concluded with two pages describing UTas’ building program which is fitting perhaps because more than ever UTas is a property developer with a side hustle in education.
The financials confirm this.
UTas has $1 billion of net assets, revenue for 2019 was $777 million and net profit $73 million. So far so good. But its core activities of teaching, research, community engagement and activities incidental thereto produced a loss of $2 million. Non-core activities resulted in a $75 million profit, most prominent being interest and dividends of $14 million and unrealised gains on investments of $60 million. Markets were in a bull stage during the 2019 calendar year.
The cash operating surplus was only $41 million. This is the surplus before capex spending. Beware of entities with operating cash less than profits, especially when they’re spending heaps on capex. In this case it’s because of the unrealised investment gains, included in profits but not cash flow for the obvious reason they are yet to be realised.
In 2019 UTas spent $206 million on capex. That’s almost as much as the State government. Without the Royal Hobart Hospital it would be more than the State government. With operations only generating $41 million, that left it $165 million short….. $100 million came from borrowings, $26 million from investments, $17 million from capital grants, $9 million worth of plant and equipment was sold, and cash at bank was reduced by $18 million. UTas chose to borrow more rather than cash in some of its unrealised investment gains.
UTas’ borrowings jumped from $93 million to $210 million. But there’s another liability on the balance sheet of $123 million described as a ‘grant of right to operate’ which for intents and purposes is a borrowing, and further evidence of UTas’ property development machinations. UTas received a lump sum of $133 million in 2017 for the grant of a right to operate UTas’ purpose built student accommodation for 30 years. Essentially it was a lump sum in consideration for selling the rights to future rents over the next 30 years. The grant is amortised over the term. The amortised portion each year becomes revenue for that year. Rather than take out a 30 year mortgage and use rents to service the loan over the period, UTas has received a lump sum up front from the grantee. In return the grantee will receive guaranteed rents for the next 30 years. It’s just another way of borrowing money. Six of one half a dozen of the other. The deal will come at a cost however. The grantee will be earning a guaranteed rate of return for 30 years. Who is the grantee? What is the rate of return? Whatever it is, it sure to be less than the rate Tascorp would charge. Tascorp, the government’s finance GBE, is UTas’ banker.
It’s a familiar pattern, seeing Tassie’s public institutions emerging from isolation and locking themselves into long term finance deals. Hydro with Basslink, RBF with the Hobart Airport… thus far they’ve all been ill judged arrangements.
When the forward selling of 30 years’ worth of rent receipts occurred in 2017, the service concession deal as it is called, the proceeds were invested in shares and managed funds, taking UTas’ total investments to $420 million by December 2017. At December 2019 the total stood at $442 million. Markets took a knock in March 2020 but have gradually picked up since.
One suspects from the financials that there are more service concession deals in the pipeline, or at least there were before Covid struck. Of the borrowings of $210 million, $71 million is listed as a current liability, meaning it will be paid out/rolled over in the 2020 calendar year. Maybe by forward selling the rents from the Melville Street accommodation. The previous report for 2018 gave some detail about the expansion of student accommodation planned at that time:
“The University continued to plan for additional student accommodation, with an agreement signed with Spark Living for a building to house 422 students on Melville Street, to be completed by 2021. The purchase and conversion of the Midcity Hotel was an initiative to meet increasing demand in the interim. In December, the University announced its intention to purchase the Fountainside Hotel to meet further demand.”
There seems little doubt that expansion of student accommodation has underpinned the UTas model. The damning five year strategic plan issued in July 2019 argued that increased scale was required for UTas to become sustainable. With population increases modest at best, and with the perennial excuses of Tassie’s demographic and health problems coupled with rites of passage which sees many of out best and brightest leaving our shores, the answer was to try and attract more students especially from overseas. The only risk mentioned was getting too many from one country or too many in one course.
From the sidelines it looks awfully like a Ponzi scheme.
· Develop student accommodation
· Search the globe for students
· Lower the grades necessary for students to pass
· Sell off 30 years’ worth of guaranteed rent.
· Buy more property.
· Develop into student accommodation.
· Enrol more students
· Sell off 30 years of guaranteed rent
· And so on
That the whole show might fall over in one fell swoop wasn’t a risk worth mentioning. Just like sub-prime loans in the US in 2008, bundling up crappy loans across a multitude of cities where housing markets were supposedly uncorrelated, was thought to be a foolproof way of handling risk. It wasn’t. The loans all went down together.
Wage costs as a percentage of total expenses has remained relatively stable at around 58 per cent. Most expenses, as one would expect, are wages.
But there has been a slow and steady shift from academic wages to non-academic wages. Over the past 10 years academic wages, which includes teaching and research, has fallen from 56 per cent to 51 percent. Even with scaling up, taking in more international students, the shift of wages away from teaching and research has continued unabated.
Opening the door and peering into the work activities of non academic university staff is something anthropologist David Graeber from the London School of Economics did in his 2018 book titled Bullshit Jobs. On page 55 Chloe recounts what she did:
The reason that my Dean’s role was a bullshit job is the same reason that all nonexecutive Deans, PVCs [Pro-Vice Chancellors], and other “strategic roles in universities are bullshit jobs. The real roles of power and responsibility within a university trace the flow of money through the organisation. An executive or Dean (in other words, s/he who holds the budget) can cajole, encourage, bully and negotiate with departments about what they can, ought, or might want to do, using the stick (or carrot) of money. Strategic deans and other such roles have no carrot or sticks. They are nonexecutive. They hold no money, just (as was once described to me) “the power of persuasion and influence.”
I did not sit on university leadership and so was not part of the bunfights about targets, overall strategy, performance measures, audits, etc. I had no budget. I had no authority over the buildings, the timetable, or any other operational matters. All I could do was come up with a new strategy that was in effect a re-spin of already agreed upon university strategies.
I was given a 75% full-time equivalent Personal Assistant, a 75% full-time equivalent “Special Project and Policy Support Officer,” and a full-time postdoctoral Research Fellow, plus an “expenses” allowance of twenty thousand pounds. In other words, a shed-load of (public) money went into supporting a bullshit job. The Project and Policy Support Officer was there to help me with projects and policies. The PA was brilliant but ended up just being a glorified travel agent and diary secretary. The Research Fellow was a waste of time and money because I am a lone scholar and don’t actually need an assistant.
So I spent two years of my life making up work for myself and for other people.
My very brief stint as Head of Department reminded me that at the very minimum, ninety percent of the role is bullshit: Filling out the forms the Faculty Dean sends so that she can write her strategy documents that get sent up the chain of command. Producing a confetti of paperwork as part of the auditing and monitoring of research activities and teaching activities. Producing plan after plan after five-year plan justifying why departments need to have the money and staff they already have. Doing bloody annual appraisals that go into a drawer never to be looked at again. And in order to get these tasks done, as HoD, you ask your staff to help out. Bullshit proliferation.
So, what do I think? It is not capitalism per se that produces the bullshit. It is managerialist ideologies put into practice in complex organizations. As managerialism embeds itself, you get entire cadres of academic staff whose job it is just to keep the managerialist plates spinning – strategies, performance targets, audits, reviews, appraisals, revised strategies, etc., etc. – which happen in an almost entirely disconnected fashion from the real lifeblood of universities: teaching and education.
It was revealing to glance at the University of Tasmania Act 1992 to check to whom UTas is responsible? The answer is no-one. UTas is literally a law unto itself. Section 12 requires it to give the government an annual report each year which “contains a full account of the income and expenditure of the University for the financial year to which it relates”.
That’s all. It’s not answerable to anyone. It merely has to tell the government each year what it has received and spent. The local BMX Club has more onerous responsibilities to its members.
Little wonder Utas was able to serve up such a disgracefully brief report into its perilous state. The Council ought to ashamed at such a travesty. Perhaps not? After all they can please themselves.
It mustn’t be forgotten that the Federal government is largely responsible for setting the parameters that have pushed universities in the direction all have taken. But it is time to examine the mess that has been created. The height of absurdity was reached when a plea came from one university to open the borders to international students as they are needed to subsidise university research.
The influx of international students has crush loaded city infrastructure, pushed up the price of inner city housing, reduced housing availability for local workers and aided and abetted wage theft in the service economy leading to flatlining/declining wages for locals as well. Nowhere is this more apparent than in Hobart. Despite being a public institution UTas retains its anachronistic status as a law unto itself, only obliged to act with care diligence and in good faith to further the interests of the university.
With the actions of UTas the property developer, having such wide ramifications in the city of Hobart, it is way beyond time to update the governance of such a crucial public body.