Uni finances fail student examination

As the recession lingers, government departments and businesses are keeping a tight rein on wages and cutting costs. But despite the gloom in the public and private sectors, New Zealand's eight universities appear to be enjoying a period of fair weather.

Enrolment numbers are rising rapidly, as students delay their entry into the workforce. Universities continue to receive $700 million in student fees each year.

New Zealand universities are more reliant on student fees than their overseas counterparts. Fees make up a quarter of the institutions' income, but it is difficult to calculate how that money is spent, because each university puts all of its revenue into one pot.

The universities' financial reports, however, show tens of millions are being spent on ancillary expenses like marketing, travel, conference fees and catering.

Last year, Auckland University spent $20.2 million on travel, accommodation and conference fees. On average, each of the university's 2000 academic staff racked up a $10,000 bill. Similar expenses were incurred in the previous two years.

The staff have not been asked to cut back on their spending. The university's management says any reduction in travel costs would not eliminate the need for more hikes in student fees.

"No modern university can function, let alone thrive, in isolation," says vice-chancellor Professor Stuart McCutcheon. "Approval for travel is subject to the same rigorous approval process as before.

It must be budgeted for, and the benefit to the university must be clearly demonstrated. Cutting the university's travel budget would reduce the benefits for students of international contact; academic and otherwise."

McCutcheon believes the university "is not a large spender" on travel. His staff go overseas to present papers, take research and study leave, and seek commercial contracts. The vice-chancellor says travel costs are similar to those of Australian universities. But Darcy Peacock, the president of the Auckland University Students' Association, believes students deserve more bang for their buck.

"It's worrisome that such a large amount of money is being spent on travel and accommodation, and it's disheartening that the university has so much money to work with. Meanwhile, our association is trying to provide services to students which we don't have the resources to pay for.

"We look at a figure like $20 million and imagine what our students' association could do with it, in areas like welfare and student services."

Auckland University's student satisfaction rating has dropped from 91 per cent to 82 per cent in the past two years. In the same period, the university raised fees for most of its courses. Peacock says students should not be asked to cough up more money if there is no corresponding increase in the quality of service they are provided with, "especially if universities are not making effective use of their current funds".

But despite the recession, universities aren't about to cut salaries and perks for their staff. Foreign universities are trying to woo New Zealand's top academics.

Dr Rod Carr, vice-chancellor of Canterbury University, says most universities spend 60 per cent of their revenue on wages and salaries, in an effort to stay competitive and attract new academics. Their salaries are rising much faster than the rate of inflation.

"Australian universities have just announced that they are going to increase their academics' pay by between 18 and 20 per cent over the next three years," says Carr.

"Our academics are mobile. I'm not saying that our late-career academics will jump on a plane and go somewhere else, but we may find it more difficult to retain them. We need to think about how we can protect what we're doing in the long term."

Canterbury University owes $20 million "retirement leave" to its staff. Auckland University does not offer retirement leave, and does not have any liability of that kind. Carr says Canterbury's figure is so high because the university has many long-standing employees, but he wants to make savings in other areas. He recently announced a review of 800 positions at the university, in a bid to cut costs.

Victoria University spent $2.9 million on catering last year. Sixty per cent of the cost was incurred within university hostels, while the remainder was spent on food and ink for university events and functions.

Student groups have called for an end to "preferred supplier" deals with food and drink providers, which have been charging mark-ups of up to 400 per cent on alcohol purchased by the university for social events.

Victoria's vice-chancellor, Professor Pat Walsh, declined requests for an interview about the university's expenditure. In a written statement, he said: "In the current economic climate, all organisations want to ensure that they are financially sustainable, and the university is no exception. Our planning has included reviewing all our operational activities and looking for opportunities to increase our revenue."

Walsh says student representatives are already members of the university council and finance committee. He says Victoria is keen to work with its students to provide clear and transparent information about the university's finances. Last week, the university held a fees forum in conjunction with Victoria's students' association, aimed at "students who are interested in learning more about how tuition fees are set".

It's clear that courses like science cost more to teach than humanities. But the question is, how are those fees actually set, and do they depend solely on the cost of input such as teachers, buildings and learning materials?

The Weekend Herald put that question to the universities. Each vice-chancellor said their university's council determines how fees are set, but none would explain how the figures were arrived at.

Students pay only a third of the true cost of their university education; the rest is paid for by the taxpayer. Universities are given extra government funding based on the quality of their research, not the quality of their teaching or student achievement. Jordan King, co-president of the NZ Union of Students' Associations (NZUSA), says it's hard for students to hold universities to account, because of a lack of information.

"It's very difficult for the average student to track where their money is going, because student fees are used throughout the university. It has also been incredibly problematic for student associations to track that spending. When fee proposals are put up, often they're not particularly robust or transparent. Universities try to put them through without explaining to the student body how the extra funds will be spent."

This year, Victoria University raised fees by 5 per cent; the maximum allowed under the Government's fee regime. It resulted in an extra $3.2 million of revenue, but Walsh says this is still not enough, because the university is facing increased costs. Jasmine Freemantle, president of Victoria's students' association, says the university is attempting some cost-cutting measures which are detrimental to students' learning.

"The university has already made cuts to the pool of money which is used for employing short-term junior academics, such as tutors," she says. "For some courses, that has resulted in fewer tutorials and, in some cases, no tutorials at all. It's having a severe impact on the quality of learning. Universities are being forced to tighten their belts in areas which they are reluctant to, and that's not just due to the recession."

Marketing budgets have been sliced. NZUSA-commissioned research shows that, in 2006, universities spent $28 million on advertising. Last year, that figure fell to $16 million. One of the biggest spenders was AUT, which bought $3.1 million worth of advertising; almost $320 for each new student. But the marketing has helped to woo new undergraduates, which has cushioned the impact of the recession on the university.

This month, universities are setting student fees for next year, which are likely to increase once again. The vice-chancellors acknowledge the effects of the financial crisis, and deny that their universities are immune to it.

But the vice-chancellors are unable to cite examples of how they have attempted to curb non-core expenditure.

Carr accepts that it's hard to make a case for higher fees if there is fat in the system.

"Universities are research-led teaching institutions," says Carr.

"If they were only teaching institutions, they would cost less to run. It's hard for a student to say 'My course fees were used to pay this professor or to buy this equipment'. But rest assured: universities are tightening their belts. We're reviewing what we spend money on and which courses we offer. Now, we need to respond to what the students want."