The financial situation of Irish Universities and Institutes of Technology

Screenshot 2014-04-09 19.32.38Its dire…. Grant Thornton published a report today which is downloadable here :  University finances .  The picture opposite this paragraph is a wordle of the text.  The GT report is done by a bunch of accountants, and it reflects that. As a picture of the state of play of finances in the Irish higher education system its unprecedented in its breadth and scope. They are to be congratulated. As a review of strategic options to fill the holes identified, its not so good, reflecting a curious lack of knowledge of the sector. It would be interesting to know to whom, if anyone, they spoke between the data collection and strategic options formulation.

Lets take the facts first. They are grim. Over the 2007-11 period student numbers rose by 26% while overall income rose by 7%.  The operating surplus of the sector fell by 60%. the state grant has fallen by 25% and as a % of overall income has fallen from 40% to 25%. Research grant income has risen by 16% overall in the sector. Tuition fees now account for 36% of the sector income. Overseas tuition fees (this includes everyone from the french Phd to the Chinese BA btw) are not disclosed routinely except for TCD where they now make up 21m, or some 6.5% of the total income.  The much ballyhooed pension liabilities in universities have doubled, but this is entirely down to changes in actuarial assumptions.

Overall they state that they consider the sector to have reached an inflection (accountant speak for breaking) point. They then suggest some changes. Its here that I take some issue.

They first suggest increasing fees from international students. This is however set against the fact that since 2007 the non-EU market has been falling. This is mirrored in Australia and in the UK. GT suggest no real way to reverse this, beyond adonyne pleas for a better focused international strategy, better focusing, more internationalisation of the curricula (huh?) etc. The stark fact is that we cannot lump 1500 extra chinese students into a university, milk (bilk) them for high fees and expect the system to cope. These are high paying and should be high touch. There is no cash cow here -the cow costs a huge amount to feed and maintain. Much international student flow is determined by the national and institutional reputation. We are weak on all of these. While universities and IoTs cannot solve the national problem, we neither cannot solver our own when the key metrics that drive rankings are deteriorating (such as staff student ratios).

They suggest increasing income from research, which is fine. They do note however that we attract the smallest monetary contribution from firms for research of all OECD. Irish companies, frankly, ride the system. They do not put back. Thats gotta change and its got to be a cultural one. It is desperately dispiriting that, despite the fact that irish universities are world class in many arts and humanities areas the rest of this section is a jumble of platitudes towards commercialisation of the IP platforms to enable blab blab blab. Why do consultants insist on ignoring the areas of strength? Its notable, and worrying, that the word Humanities appears exactly NO TIMES in this document, the same as Arts.

Alumni funding is noted BUT there are no figures. We have literally no idea what if anything Alumni give. But its clear that a) its not a lot, b) its a hard sell and c) the base is so low that it cannot make a meaningful contribution in the medium term.

Asset utilisation (sweating the assets) is accepted to be high by international standards. This is bizarrely then followed by a suggestion to extend the academic year. But if that is done then research will fall off.  If we extend each year will we not decrease the overall amount of years? The suggestion is bizzare and also reflects a worrying assumption that its all about undergraduates. Postgraduate teaching is year round. Plus, this is not costless as it would increase energy, building costs etc, and would result in no extra fees.  In any case, a valuable but unnoted income stream is that of conferences and symposia which take place in the undergraduate down time. It is worryingly clear from this small section that GT really don’t understand what universities and IoT’s actually do.

They suggest academic program review, or in short concentrating on profitable programmes. Thats a great idea but the reality is that the finances of the sector are so constrained that there is zero incentive for (say) a business or law school to work harder and put more bums on seats. Any additional generated income will be taken by the center. GT again seem to misunderstand what is going on on the ground. They also juxtapose unprofitable courses that may be central to the mission with cost containment of same. The reality is that universities and IoTs are not commercial enterprises. Looking at them purely through such lenses gives jarring comments such as those.

They suggest cost controls in several areas. Most of these are the usual pleas for process efficiencies, shared services etc. They suggest elimination of multiple programmes. Again, this fundamentally misunderstands what a university does. For instance we have business taught in every university and IoT. And yet, this is not accounting training, at least in the main. It is instead a mixture of technical skills and critical thinking.  Universities need to be universal in scope and reach. They cannot be if they are pruned and constrained to de jure fads. In addition, going back to the internationalization strategy, we cannot expect chinese students to pay 20k for a degree if they are one of 5k students taking lectures via video in the national conference center from a NUIG or UL lecturer, they having won the contract from the state to deliver that particular course.  They suggest outsourcing services and in what can only be written by someone who has never used a call center state that outsourced services deliver more reliable services. Hmmm…

Overall this is a decent effort. It is strongest in its plain facts. It is weakened by a set of semi coherent suggestions that are internally inconsistent and display a worrying lack of knous about the sector. Its worth reading.

6 thoughts on “The financial situation of Irish Universities and Institutes of Technology

  1. Pingback: Ninth Level Ireland » Blog Archive » The financial situation of Irish Universities and Institutes of Technology

  2. cormac

    Yes, that was my impression too. Is it a given that a competent financial review of the sector can only be completed by agencies who know nothing of the details of the job?

  3. Ronaldo

    What an accountant will miss out, perhaps inevitably, is the messy complexity of the social. You are right to point to the logical deficiencies of the ‘solutions’ offered: a return to market fundamentalism after its sell by date. But I think we need to be thinking much more proactively about how best to create a broad movement committed to higher education as a public good.

  4. dim.tim

    There are two significant things for me in this report.
    First the slapdash approach to regions which is indicative of an overall absence of rigour. They offer no basis why they picked such a whacky way of delineating the country. Avoiding normal approaches (such as provinces, nuts2, nuts 3), they conjure up their own regions without introducing a rationale or even explaining what their regions are. They are ill-defined geographically, by population or economic indicators. If this is the level of analysis at the top of the HEI sector, we are truly lions led by donkeys.
    Second GT played a part in the ugly experience that WIT had at the PAC. A keen eye will note that WIT has generated relatively high fixed assets, much of this without direct cost to the state. It did so using an entrepreneurial and commercial approach to delivering student services (food, drink and accommodation). This approach was unsympathetically ripped apart by the PAC (including McGuinness and Deasy both from WIT’s hinterland) and the Department of Education and whilst there was no finding of wrong-doing the entire experience did considerable harm to WIT and its management. What happened to WIT is a warning to all public sector managers- do not act entrepreneurially or commercially.

  5. Pingback: The financial situation of Irish Universities a...

  6. Pingback: Companies, Tax and the Ouroboros | Brian M. Lucey

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