Investigators from the Government's financial watchdog are looking at the University of Auckland's controversial purchase of a $5 million Parnell mansion.
As revealed by the Herald in January, the university bought the four-bedroom property as a home for incoming Vice-Chancellor Dawn Freshwater to live in.
The student union called the "frivolous" purchase a "slap in the face", and the Government said it was up to the university to defend its actions.
Now Freshwater has told staff in a group email sent yesterday that she had recommended the university sell the home to help pay down debt.
The Auditor-General's Office, meanwhile, confirmed it was also "looking at aspects of the purchase" in its role as watchdog charged with keeping an eye on the finances of organisations receiving taxpayer money.
"We had seen media coverage and were interested in establishing the facts," a spokesman for the office told the Herald.
Concerns about the expensive purchase by the partly taxpayer-funded university grew as the Covid-19 pandemic hit.
The university had now forecast a $48m drop in revenue by 2023 as it faced an unknown period without its lucrative overseas students.
About 2000 existing students and "a large number" of new students were waiting to enter New Zealand to study at the university, Freshwater told staff in yesterday's email.
To cut costs in the meantime, the university was offering staff the chance to take voluntary redundancies.
Freshwater also recommended the university's board consider selling the controversial Parnell home, located near Sir John Key's St Stephens Ave mansion.
The university paid $5.06m for the house, located near Sir John Key's St Stephens Ave home, in December. That was $1.5m above the council valuation.
The university said the home, which boasts manicured gardens and a lap pool, would have several uses.
"It will be rented from the university by the incoming vice-chancellor for accommodation and will also be a venue for university-related events and hosting," a spokeswoman said.
However, Freshwater yesterday said that due to restrictions on social gatherings during the Covid-19 pandemic, the home had not been able to be used for fundraising and other university events.
A university spokeswoman denied the decision was linked to the Auditor-General's review.
"It is the right thing to do, not something the university has to do," she said.
However, NZ Union of Students' Associations vice-president Sam Smith said the purchase should never have happened in the first place.
"It's a $5m house in a nice suburb at a time when you have students living in poverty - and it is those students who are essentially paying for that house through their fees and course-related costs," he said.
He called the potential sale of the home "a logical choice".
Students were worried Covid-19's economic fallout would lead to cuts to services and "a lack of staff who play critical roles supporting students", he said.
"It would be wrong for the university to keep that house while also cutting those services students need," he said.
Auckland University Students' Association acting president Emma Rogers also welcomed any potential sale, while taking aim at executive perks at universities.
It's unclear how much Freshwater was being paid in her new role, but she was earning A$1.095m ($1.13m) with the University of Western Australia in Perth in 2018, according to media outlet Times Higher Education.
Outgoing University of Auckland vice-chancellor Stuart McCutcheon was understood to be one of the nation's highest-paid university heads with a salary of between $760,000 and $769,999 in the 2017/18 financial year.
It's also unclear whether Freshwater followed the lead of Prime Minister Jacinda Ardern and other politicians and public sector chief executives, who announced in April they would take 20 per cent pay cuts for six months.
Ardern said the pay cuts were made in solidarity with the economic pain Covid-19 caused ordinary Kiwis.
The university's spokeswoman said Freshwater and other senior leaders had "made significant and ongoing donations to the student and staff welfare funds" in response to the Prime Minister's lead.
"However, this was at their own discretion and is a private matter, so we will not be publishing figures," she said.
"A number of Aotearoa New Zealand's vice-chancellors used the opportunity to take the pay cut to donate to student hardship or staff hardship in some way."
New Zealand universities were already crying poor even before the Covid-19 pandemic hit, however.
The had said they were struggling to meet their educational commitments due to chronic Government underfunding.
McCutcheon last year responded to the Government's Budget by saying New Zealand's universities were funded below the OECD average.
"Already we are having to restructure our operations to cut costs, and we will inevitably see that process accelerated now with further cuts in staffing," he said.