That Time of Year (again) - Annual Accounts 2011

The annual accounts as ever make for interesting reading. There's a lot to cover so we'll get right to the point with the key stats/info to emerge:

1) A new phenomenon was encountered this year - contracting income, both in cash terms and in real terms. In cash terms income contracted by some ~1.2%. If one assumes an inflationary rate of ~5% (CPI currently at 5% and RPI at 5.4% but both figures have been high since the initial slump in both output and demand post-banking crash, as the Bank of England has pursued a policy of devaluation) then this equates to a real terms contraction of income of ~6%.

2) In spite of this a historic cost surplus was preserved (just) at £0.3m, which is a fairly impressive achievement given the fairly large contraction of income that has hit the University. We would envisage that this was preserved at least in part by a reduction in staff numbers and some quite broad and detailed campus-wide policies for creating savings. Preserving some kind of surplus can have important implications for the University's relationship with its creditors so this is a key statistic.

3) It appears a large chunk of the lost income is explained by a reduction in HEFCE grant - some of this seems to be because the University was fined for under-recruitment, although we cannot be certain of this.

4) The fiscal restraint has been primarily achieved by keeping growth of key expenditure (staff costs & other operating expenses) well below the rate of inflation.

5) From August 2010, "staff pay rises" were a mere 0.4% - we will have more to say on this point below.

6) Professor Hall's emoluments are a mixed bag. On the one hand, his notional salary and pension contributions have risen roughly in line with the rest of the University's staff - his salary is declared as increasing by a mere £1k to £192,000, with pension contributions increasing by the same figure. We do expect that these are 'rounded' figures and, with regards the salary at least, this is roughly the 0.4% pay rise afforded to all other staff. On the other hand, he received 'benefits in kind' totalling some £4k and a 'merit award' (presumably a bonus by another name) of some £8k. All in this amounts to an increase in total emoluments of some £12,000 - or roughly 5.4% year-on-year. This is roughly in line with the current Retail Prices Index and has meant that Professor Hall's salary has effectively been 'proofed against inflation'. It must be considered in assessing this figure that it has been an extremely intensive year for the University so there is at least an argument in favour of a performance-linked 'merit award'. One of the benefits of such awards is that they usually do not have to be accompanied by a corresponding increase in pension contributions, whereas a simple increase in salary usually would, which helps keep the overall emolument figures down. That said it is obviously the case that Professor Hall's total emoluments have been inflation-proofed and those of the rank and file have not. We leave it to others to decide upon the morality of this discrepancy.

7) The number of staff within the '£100k+' club actually fell year-on-year to 11 (including Professor Hall himself). One member of staff is said to have received a severance payment of £112,000 and pension contributions of some £82,000. The only high profile member of staff who left suddenly that we can immediately think of is Professor Alistair Alcock, but there is obviously no obvious way of determing to whom such a large sum was awarded.

8) The method of presenting 'other operating expenses' has been revised (again). We wouldn't wish to venture as to why. Most of the expenditure is quite innocent (which we did anticipate when we commented upon last year's accounts) but as ever there are opaque sub-headings describing the divestiture of enormous sums of money - "Professional and Other Fees" still accounts for some £9.935m (~5% of operating income!) and 'Staff Travel and Subsistence' dispenses with some £3.5m. We now have a point of reference thanks to the Freedom of Information Act what these enormous sums incorporate - legal fees, consultants, air travel, rail travel, hotels etc are the principal contributors. Without seeing the detailed breakdown, we doubt much has changed year-on-year.

9) Commercial loans obtained by the University have run to some £39.5m - still a relatively 'safe' level of operating income although we would be tempted to add into this ostensible liability the lease arrangement with Peel Holdings for the use of the campus facility at MediaCityUK (which, to 2014, would add a further ~£6m to the total liability - we will not speculate beyond 2014 as the lease arrangement is thereupon due to be renegotiated and so the cost of the lease may be subject to variation).

On the whole, we would agree entirely with the University's description of its own future risks. The primary risks as we see them are the simultaneous tightening of visa restrictions, and the likely cascading effect on non-EU recruitment levels, as well as the 'core and margin' element of the Higher Education White Paper, which will almost inevitably lead to a loss of UK/EU student places. Our sources tell us interest from non-EU prospective students has contracted markedly on the previous year - a product no doubt of central government policy. Whatever way one tries to look at it, income will at best stagnate in cash terms but, in our opinion, is more likely to fall both in cash and real terms in the short to medium term.

So what for the forthcoming year? We suspect that this is actually the worst possible time to have incurred liabilities to creditors and to have entered in to high cost lease agreements - neither of these are optional commitments and regardless of what happens to operating income these costs are going to have to be met. This will create even further pressure to make savings elsewhere and we suspect the temptation for the University will be to dispense with departments and/or courses that are likely to perform poorly under the unflattering spotlight of the government's 'Key Performance Indicators' statistical data (which are intended to measure the financial prospects that graduates of a particular course might look forward to) and which are not an effective bastion of international recruitment. Similarly those that attract no HEFCE subsidy (band C and D subjects) are likely to suffer. We would anticipate that this will mean the University makes a shift to even greater emphasis on its considerable assets at MediaCity, and away from the Social Sciences and Humanities.

Is this a crisis of funding or just turbulent times ahead? It will depend on the effect the new HE funding policy has on recruitment, coupled with how much of a deterrent/filter the new visa restrictions prove to be.

Minute Precision

The latest minutes of University Council never fail to make for interesting reading.

It would appear Eric Healey - 'Daffyd' Austin's replacement as the Chair of the Audit Committee - was parachuted in in something of a rush. The 30th June 2011 meeting was Mr Healey's first appearance at Council and he was immediately appointed Chair of Audit. Perhaps they were in a rush to dispense with the services of our old friend Ian?

Vice-Chancellor 'Marty' Hall postulates that the HE White Paper looks gloomy for Salford. He calls the University part of the "squeezed middle" (trampled bottom, surely?) that is likely to lose substantial funding under the arrangements.

Finances don't seem to be looking too healthy either and the University have introduced means of mitigating the possibility of the end of year accounts showing a budget deficit (including a freeze on discretionary expenditure - more on this another day).

In what it calls a "cautious approach", Council has anticipated a drop in Home/EU student recruitment, as a result of the HE White Paper/Fee Change, of 21%, as well as declining retention rates thereafter. This itself will put further pressures on operating income. "Asset disposal" was described as a future possibility in order to help try and alleviate the anticipated financial pressures, although the budget agreed to includes no assumptions that this will be necessary.

Yet another fall in the league table positions was finally discussed - Professor Hall yet again claiming that it's a numbers game as well as a quality game (now when did we last hear him say that?). Naturally the method of calculation was blamed rather than the University's performance - a Marxist explanation if ever we heard one.

Of interest is that the University has taken a position of outright opposition to plans for a private Student Accommodation complex (non-affiliated with the University we presume) to be build on Adelphi Street.

Perhaps the most interesting detail in the minutes is that the University's statutes are set to be amended to prevent staff members from being able to elect candidates for membership of University Council. The official explanation given for this was to ensure members were competent rather than popular. So much for transparency!

There is some discussion of the new - much despised - logo, which the Salford Star are claiming cost a whopping £170,000.00. Much attempt is made to intellectualise what is largely seen as a pretty shoddy finished product. To her credit, current Students' Union President Caroline Dangerfield asked for it to be noted in the minutes her opposition to the rebrand.

Success!

A little over a year ago a publication by the name of Private Eye asked, pensively, "How much longer can Ian Austin last as Chair of the University of Salford's Audit Committee?"

Quietly, and without a fanfare, the University have finally answered this question - just over a year, it turns out.

Yes, 'Daffyd' Austin no longer presides over the Audit Committee, his role as Chair now having been filled by one Eric Healey (a Chartered Accountant we think - and seemingly quite a good one at that).

We are quite sure that Daffyd's departure in no way relates to revelations in The Lawyer that he is currently fighting off a claim by Halliwells' administrators BDO to repay the £21m reverse premium he - among others - secretly pocketed whilst serving as Managing Partner.

The three main 'tranches' of the High Court Claim by BDO have been listed by 'The Legal Week' as being:

"breaching Halliwells' partnership deed by failing to act in good faith and parting with the LLP's property "otherwise than in the ordinary course of business"; breaching their fiduciary duties to act in the best interests of the firm, not to make a "secret profit" and not to prefer their personal interests over the firm's; and breaching the Limited Liability Partnership (LLP) regulations 2001"


We are naturally quite sure that Daffyd's ongoing attempts to mediate away the High Court case will not inhibit his capacity to continue serving on the Audit Committee.

We do wish him all the best for the future.

"We're Sorry" Say Amnesty International

Internal emails seen by UoS have revealed that graceless Irene Khan - Chancellor of the University of Salford and former Secretary General of Amnesty International - has made quite the stir in the corridors of her former employer's HQ after she "negotiated" the sum of over £500,000 in a compromise agreement.

The emails describe Amnesty International as being "very shocked and upset by the payments" and explains that Peter Pack, the former head of AI's International Executive Committee (the body which approved the payment), has "stepped down" from his role over the fiasco.

An internal review - due to be made publicy available in October - conducted at AI has been led by former HM Inspector of Prisons, Dame Anne Owers, and has concluded both that "the payments were excessive" and that "mistakes, bad judgements and poor systems" led to the decision.

We are sure that will come as cold comfort to AI's generous supporters.

You Khan't Be Serious

University Chancellors are symbolic roles which historically fulfill the function of representing the Sovereign at degree awarding ceremonies. At places in touch with their history (Cambridge, for instance), when the Chancellor confers a degree upon a student, the student kneels before the chancellor, clasps their hands together (as if to pray) and the Chancellor places their hands over those of the student. This is a ritual of Feudal Homage, although at more 'progressive' Universities such as Salford, a simple handshake usually does the trick.

Unfortunately, for Irene Khan, the University of Salford's ceremonial figurehead, recent events have left her looking less than divine.

When appointed as Chancellor of the University, she was - on the face of it - a highly regarded public figure as Secretary-General of Amnesty International. In the subsequent two years, she has left AI and has since scaled to the dizzying heights of Consultant Editor of the Bangladeshi newspaper, The Daily Star.

She seemingly didn't leave AI without a fight, pocketing a tidy £533,000 sum upon her departure - a figure which puts even former UoS Vice-Chancellor Michael "Didn't we do well" Harloe to shame.

Mercifully she has since resigned from her role as a Board Member of the UK's Charity Commission. Yet she still clings on at UoS.

She must feel right at home there.