Recently released accounts indicate that the University of St Andrews is enjoying a period of financial success, with performance in key areas improving across the board.
The headline figures show that in the year to 31 July 2013, the University’s income increased by 8.0 per cent to £183.9 million, with a surplus of £4.8 million (up from £2.9 million in 2011/12).
Commenting on the results, University finance director Andy Goor explained how the increased income and surplus were achieved:
“The original forecast for the year end was £3.5 million surplus, so reaching £4.8 million is very pleasing. The main reasons why we beat our forecasts involve a cou- ple of year-end adjustments which came through late, and so hadn’t been built into the forecast.
“Right at the end of the year we sold a University property on Gillespie Terrace, a nice little bonus. In addition, there was a techni- cal accounting adjustment over the year concerning the local pension scheme.
“Consequently, between that and the sale of Gillespie Terrace, we gained £1.6 million. We also had a successful summer for conferences, alongside some unexpected gains on foreign exchanges; all of these things worked in our favour.”
Scottish Funding Council (SFC) grants also made up £42.3 million of the University’s income, marginally more than the £40.1 million in the previous year.
Mr Goor said this was because of multiple factors: “The SFC grant is tied to student numbers, and saw modest growth due to better widening access numbers [an increase in the number of students from low socio-economic backgrounds studying at St Andrews] and an increase in ‘Skills for Growth’ places. The Rest of UK (RUK) students are being removed from being funded by the grant allocation, with their funding transferring into tuition fee income. Overall, the growth from additional places was counteracted by this funding retraction, leaving us in a relatively unchanged position.”
Mr Goor also spoke about the possible impact of Scottish independence on SFC funding levels in the future. He emphasised the challenges of the uncertainty surround- ing the current situation:
“It’s quite difficult because there’s not a great deal of information that’s been made available. The financial plan for the University assumes no real change, one way or the other, because we haven’t got the information that allows us to forecast any differently. Across Scotland, most of my colleagues will be in the same position, we just don’t really know, we’re having to carry on as we are. We’re kind of left hanging, which is a slightly uncomfortable position to be in.”
Tuition fee income increased by 10.6 per cent to £63.3 million over the past year, mainly as a result of the continuing introduction of £9,000 fees for RUK students but also because of growth in the number of overseas students. It has been well publicised in recent weeks that principals at other UK universities are actively discussing the prospect of fees up to £16,000 per year. With a seemingly healthy surplus under the current tuition fee structure, Mr Goor was asked whether this would mean that the University would choose not to raise RUK fees, should the option become available:
“It’s not quite as simple as that. The reality is, with inflation, the fee is worth less every year anyway, and that will cause problems if there’s not an increase in fees, because we suffer cost inflation. I certainly think it would be counter-intuitive to reduce fees, because you’re cutting the money you have available to provide the running costs of the university, as well as limiting investment.
“The University has a require- ment to create a surplus, because the surplus contributes towards the investment plan. If you don’t have a surplus, then you can’t invest in the infrastructure of the University, so you get on a downward spiral. I’d prefer to be on an upward spiral, where we can spend more on the University.”
He continued: “We get a very small capital grant from the Scottish government, which was cut this year, so we have to rely on ourselves to generate the funds to invest. However, just increasing fees isn’t necessarily the right answer: it’s that combination across all the income streams. In particular, we work really hard to try and get more philanthropic giving benefitting the University. Most people think universities are part of the education system- they don’t understand that we are independent charities, so it’s not in people’s thinking to give money to our education institutes, not in the UK. We’re trying to catch up with the American culture of philanthropic giving to universities. If someone donated £10 million for investment, that would be a significant game-changer.”
One reliable source of income for the University is from research: 5.1 per cent higher in 2012-13 at £39.2 million, with the value of grants from industry tripling. According to Mr Goor, there are opportunities to be explored in this area:
“You can build long-standing relationships with industry, which works for everybody. We view this as an ideal model for what we want to do looking forward, to build more of those relationships. We’re seeing more EU-funded research activity and a little less reliance on UK research councils. Research does not make money in itself, but its benefits are more to do with reputation. Our renowned reputation attracts top notch academics, which in turn attracts the best students. For our size, we punch way above our weight, and that is because we concentrate on quality.”
Expenditure on staff costs increased over the past year from £96.3 to £102.6 million, and with the recent staff pay disputes still fresh in the memory, The Saint asked Mr Goor what the prospects are for pay settlements in the future:
“If we can keep pay under control and grow our income, then in theory we’ve got more to spend on consumables and equipment. We’d like to see pay between 53 per cent and 57 per cent of income (this year it was 55.8 per cent). Ideally it should be squeezed down because that would free up resources, but the actual level of pay awards is nothing to do with the University, it’s all through national UK pay bargaining.
“One of the dangers is that people look at the University making a surplus, and talk about either cutting fees or paying staff more – both of those will impact upon the surplus and therefore investment. For every one per cent pay award, it’s £1 million extra cost for the University in very simple terms. There’s a misunderstanding that if you have a surplus then you can just pay people more.”
The parlous state of the UK- wide universities pension scheme was also discussed. The scheme currently has a deficit estimated at £7.9 billion, and changes in accounting regulations mean that St Andrews’ share of the debt will be displayed on its balance sheet from 2015. Mr Goor acknowledged this is a problem all UK universities face, adding:
“The critical thing is the recovery plan. The debt is a big figure, based on many assumptions. The difficulty is, and this is seen across all areas, but particularly in the public sector, people are set against changes impacting on their pensions. However, someone has to pick up the tab, we can’t put our heads in the sand. Personally I think the solution will involve a number of things: employees will need to put more in, employers will need to put more in. I think the scheme benefits will have to change too, it’s a generous pension scheme at the moment and that has to be tackled.”
The financial accounts revealed that fees from international students made up around 6 per cent of total tuition fee income in 2012-13, despite this demographic only accounting for approximately 30 per cent of the total student population. This raises questions about whether St Andrews is too dependent on income from international students. But Mr Goor argued that the benefits international students bring are far more than simply economic:
“Financially they’re an important part of the make up of the University, but it’s not just about the money – it’s about the international community of students, which is hugely beneficial for all students. The fees are not that important in terms of attracting students in; it’s the market rate. We’ve done a lot of work looking across at peer institutes overseas, and the fee (£15,60 per year) reflects what the market is.”
The financial report as a whole paints a positive picture, yet Mr Goor concludes by stressing that the overarching message to be drawn from the successful financial year is to understand the unique nature of St Andrews’ position:
“The financial landscape of the University has so many interlinked aspects, and I would like to emphasise that our surplus this year cannot be equated to profit as for a private company. We’re an independent charity, and without this surplus we wouldn’t have the investment which will benefit all of us for many years to come.”
The full reports and financial statements for the year ending 3 July 203 are available to view online at www.st-andrews.ac.uk/staff/money/financialstatements/