by JAMES GUTHRIE

Financial results

The University of Wollongong’s annual report sets-out a negative net result of $48m in 2020 compared to a positive result of $26m in 2019.

However, this is an accrual number, and the UoW is a complex financial operation like most other public sector universities and very large financially. Like the others, it also built up its cash holdings during 2020.

UoW’s cash and investments were valued at fair market of $967 million in 2020, up from $806.5 million in 2019. The increase of $161 million in cash holdings at the end of the year was “primarily a result of additional borrowings completed in late 2020 to facilitate the termination of the student accommodation partnership project in early 2021” (UoW Annual Report 2020: 61).

This significant change involved financing and ownership of the student accommodation and has involved changes to the balance sheet structure and movements in investment and financing cash flows.

The notes to the financial statements state that “in late 2020 to facilitate the termination of the student accommodation project. The restructuring of the project is expected to service the cost of the additional borrowings and reduce payments to the project partner, thereby saving jobs that might otherwise have been lost,” (Annual Report p 63)

A further footnote states, “based on the University of Wollongong’s assessment, the Public Private Partnership (PPP) which commenced in 2014 falls in the scope of AASB 1059. The arrangement involved the construction, refurbishment, operation and maintenance of new and existing student accommodation, and to maintain and operate the student accommodation for 39 years. In return the operator is compensated by contractual payments directly by the University of Wollongong.” (Annual Report)   It is not apparent whether contractual payments were made while the accommodation was empty.

Finally, while valuing this activity is challenging, the Annual Report does include a total service concession asset of $218,326,000, much of which could cover student accommodation. Another footnote states that an asset constructed for the University of Wollongong (as a public-sector grantor) and upgrades or major component replacements for existing assets of the University of Wollongong by private operators, are recognised as a service concession asset when the Group (grantor) controls the asset.

As mentioned, UoW reports a negative net result of $48m in 2020 compared to a positive result of $26m in 2019 – a turnaround of $74m.  This looks bad – but there is much volatility in the line items.

* International student fees dropped by $27.7m

* investment income deteriorated by $58.1m

* borrowing costs increased by $4.3m

* depreciation and amortisation expense increased by $21.0m

* employee related expenses increased by $27m

These give a total “big hits” on the income statement of $139m. There was a fall in income from consultancy and contracts but a substantial increase in “other revenue” and in Commonwealth financial assistance. Other expenses also fell by $35m.

There was a drop in investment income from $72.7m to $14.6m in 2020, with no real explanation.

I note that cash flows generated from operations fell from $67m to $17m. This is due almost entirely to the drop in student and other fee income ($50m) and an increase in payments to “suppliers and employees” of around $25m.

UoW’s cash and investments were valued at $967 million in 2020, up from $806.5 million in 2019. The increase of $161 million in cash holdings at the end of the year was “primarily a result of additional borrowings completed in late 2020 to facilitate the termination of the student accommodation partnership project in early 2021” (UoW Annual Report 2020: 61).

Maybe the intention here is to invest these funds to earn a higher rate of interest than the cash borrowed to cover the student accommodation loans. This would make it a financing transaction.

As the student accommodation weighs heavily upon the finances of UoW I call upon the the NSW Auditor-General to undertake a performance audit review of these matters. Her colleague in Tasmania has done such a review of Tasmanian universities student accommodation.

Employment

Concerning 2020 lost jobs in the University. As I have pointed out previously in CMM, public sector universities in Australia are not transparent when it comes to counting their staff and more importantly how many people have lost work during the pandemic. But UoW’s charities commission report 2020  is available. It demonstrates not much movement in full-time or part-time staff. However, there was a significant movement in casuals, down 1500 employees from 2019. I assume many of these were in service jobs, research jobs and teaching jobs.

UoW 2020

Full time employees: 2074

Part time employees: 685

Casual employees: 3368

Total headcount: 6127

Full-time equivalent staff (FTE): 2,971.41

Estimated number of volunteers: 0

UoW 2019     

Full time employees: 2046

Part time employees: 625

Casual employees: 4880

Total headcount: 7551

Full-time equivalent staff (FTE): 2634

Therefore, loss of jobs for University of Wollongong employees 7551-6127= 1424 people.

Some comparative figures published by the Federal Department of Education provide details from earlier years and demonstrate the rubbery nature of reported employment figures. For example, the FTE employee figure reported by the Federal Government for 2019 is 2,425 positions. In contrast, the figure cited by the Charities Commission is 2,634, while the UoW 2020 Annual Report states the figure is 2,934.

Although we know around 185 positions have been made redundant over the last 18 months, it is impossible to determine this from the reported figures in the 2020 annual report. Given that its reported figures to the public and the Federal Government for 2019 vary by almost 500 positions (!), this is unacceptable.

Different employment figures are common in official reports on Australian universities. This requires state and federal government intervention to standardise employment reporting in annual reports, charity commission reports, and official statistics, especially in the current climate.

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Distinguished Professor James Guthrie AM, Macquarie U Business School