An independent accountant’s report, commissioned by trade unions, which evaluates the past seven years of Bangor University accounts, will be discussed by union members in a meeting today, Friday 18 January.

The report has examined accounts from 2012 to 2018 and looked at the overall financial health of the university, financial priorities and spending.

The university has warned it needs to save £5 million this year and could potentially make up to 60 job cuts as well as closing the Chemistry Department, and has stated it is: “facing a challenging financial landscape as a result of many factors including intense competition both at home and internationally, and a substantial demographic downturn in the 18-20 year old population.”

In the report Andy Green from THP Chartered Accountants, has suggested that spending had been diverted from staff costs to finance building projects, including St Mary’s and Friddoedd halls of residence, the School of Ocean Sciences new building and Menai Science Park at Gaerwen on Anglesey.

The report highlights that the university have spent £139m on its “estate” and there have been significant losses financed by the University in relation to the building projects requiring the university to generate £10m a year to service the debts.

To date, the University has invested £21.4m in capital costs in NWWDC Ltd, which runs The Management Centre. This company has accumulated trading losses of £1.1m as at 31/7/18.

Up to 2018 the University has financed £1.2m in overhead costs in relation to Menai Science Park Ltd markets, which supports and manages the tenants at the science park. Income has started to come in from March 2018.

CASH FLOW

Cashflow from operating activities, ie income from students and other operations less costs, has generated £34.7m over the past 7 years.

The University has spent £139m in that time on its “Estate”, ie land, property and equipment.

This has been financed by £52m in capital grants, £37.56m in PFI (Private Finance Initiatives) loans and £44m in bank loans.

This debt cost £9.9m to service during 2018 alone, which was more than cash flow generated from operating activities. Put simply, the University needs to generate around £10m of excess cash per year from its day to day operations in order to service this debt.

FINANCIAL PERFORMANCE

The reports states the University has achieved reasonable trading results over the past 4 years. Although the level is short of the target of a £20m surplus, a net surplus of £17m, in the context of the extremely challenging sector environment, this must be seen as a hugely positive outcome.

STAFF COSTS

The staff cost ratio, which has been high in comparison to other Welsh institutions, stood at 56% for 2018, down 1% from the level in 2011 and almost 3.5% down from 2017.

Over the 7 years reviewed, income for the University increased by 25.66% compared to a 9.65% increase in staff costs and a reduction in actual staff numbers of 52 on a full time equivalent basis.

Overall student numbers have increased by 0.14% over a 6 year period to 2017, though there do appear to be significant swings within any given year. This suggests that although year on year numbers are volatile there is a consistent level of students attracted to the University.

Where such volatility exists in the corporate sector this can lead to reactionary management decisions to cut costs and “restructure”.

CHANGES IN TOTAL COSTS

Staff and overhead costs have fallen over the 7 years by 1.1%, compared to a 117% increase in depreciation costs and 747% increase in interest and finance costs. This points towards the re-allocation of costs towards the University estate and away from staff and other overhead costs.

WHERE THE COSTS ARE SPENT

A review of total costs by category shows that total costs spent on academic departments, as a % of total income, has fallen by nearly 7% over 7 years.
This reflects the strategic prioritisation of spending towards property and the estate and away from staff costs and support and overhead costs.

PFI (Private Finance Initiatives) AGREEMENTS

There are two schemes in place whereby third party providers financed and then operate student accommodation at Friddoedd Road and St Mary’s.

As the result of these arrangements the University have been able to build halls worth £68.6m. However, there is a longer term liability to repay the third parties a total of £237m. These arrangements present the most significant long term liability to the University.

BAD DEBTS FOR NON-PAYMENT OF FEES

The report notes the there is a provision in the accounts of £1.264m in relation to unpaid residential and tuition fees from students.

Whilst this may well be acceptable to the Council given the University income of over £142m per year, the accountants felt that this item should be highlighted regardless.

MISLEADING

A spokesman for the university described the document as misleading and that it “contains a number of misunderstandings that render many of the comparisons and conclusions invalid”.

He said: “It is also essential to point out that what has happened over the last seven years does not provide much of an indicator as to what might happen over the coming years, which is the basis on which planning and decision making has to be made for the university’s future.”

The meeting to discuss the findings of the report will be held this afternoon, at the same time students will attend a demonstration against the proposed cuts at the university.