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The University has too much money?

November 18, 2010

A paper being considered by the University of Leeds Council today, and already made public within the University, indicates that the University now risks having too much  cash flowing, and projects that the University is capable in the short term of going over its current cash reserve capacity level. That maximum capacity level is speculated to be a figure of around £150,000,000.

University of Leeds Finances

A University of Leeds finance manager - artist impression

The University is forecasting a significant surplus of many millions for the current financial year, even after their plans to spend millions on staff restructuring.

The University appears to have so much money that it seems to have stopped lending money ‘overnight’ (see note below). This results in earning a lower rate of interest on our reserve. Why would the University management choose to earn less interest on our reserves than we might? Because making any more than they already do could prove embarrassing? Overnight money is very profitable for any organisation, and part of any competent fiscal arrangements. Are university management not using ‘overnight’ money because they want to reduce the rate at which the surplus is accruing?

Weren’t we in dire financial straits? Wasn’t an Economies Exercise crucial? Is it not that case that over half of the University is currently in review? The University’s VCEG seem at times to be uncertain about how healthy the University finances are. In a meeting in the School of English, which is under review, the Deputy Vice-Chancellor this week was asked if the School actually had the kind of budget projections that would justify or initiate a review. His answer was, astoundingly, “I don’t know”. Clearly, the answer could not be ‘yes’, to receive such a response.

The UCU woud like to draw your attention to a paragraph from the March 2010 report by the European Services Strategy Unit report on our University’s finances.

“as a result of pressures imposed from above in the budget forecasting process, expenditures are invariably overestimated, while income is underestimated. The consequence is that the eventual outturn yields an unplanned surplus, which can then be distributed as if it is a windfall, when in fact it is produced by the efforts of cost centres (Schools and Services) to cut spending and boost income.”

University of Leeds Finances

University finances buoyant

The university embarked last year on a restructuring plan for the entire university, beginning with the Economies Exercise. That seems clear from the events of the last year and the outcome described in the council report. Clearly, such a ‘plan’ must include a written projection or concept of how the university will look when the ‘restructuring’ is complete. Either (a) no such plan exists – which invites legitimate questions over competency –  or (b) the plan exists and is being kept secret. The UCU would like to ask the University management to advise the University members and stakeholders what shape that plan takes.

Note: Overnight money: Any organisation has, at any one time, temporary money held in current accounts. This is used to pay contractors, research grants, and for other such purposes. On certain days, this current account balance can be many millions – the day before you pay the builders for the swimming pool, for example. Overnight money is a well established method to get profit from the money in current accounts. During the night, your broker invests in safe stock market investments, an activity underwritten by the broker’s insurance. At the end of the night, the money goes back into the current account to pay the bills for the next working day in the UK, and you keep some of the trading profit.

2 Comments leave one →
  1. LeedsStaff permalink
    November 18, 2010 12:34 PM

    I’m a senior manager in an area under review, so I shall remain anonymous. The University needs to declare which of its reviews are based upon financial projections, and which have been manipulated into review by misleading projections that employed unsound assumptions (staff costs increased by 5 times the actual figure two year in a row, for example) and which are really about restructure, to the advantage of certain groups of staff and the disadvantage of other groups and possibly the students. Who has control of those restructuring agendas? We need more transparency, as this post above indicates.

    The University is clearly in a financial position that does not require the number of reviews currently underway. Professor Fisher’s response as reported here is very telling.

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