Uni copped a financial blow in 2006

Dionisia Tabureguci  
The very colourful and carefully worded summary of events and highlights in the University of the South Pacific’s (USP) recently released 2006 annual report could not hide the fact that the institution copped a financial blow in 2006 and its financial affairs ended up on the cutting room floor with a F$3.2 million consolidated loss. 

Higher spending—pushed up by an increase in staff salaries and a maintenance bill that skyrocketed from some F$625,000 in 2005 to F$2.33 million in 2006—was the key element that took the public university to a F$1.49 million operating loss, compared to an operating loss of F$926,718 in 2005.

USP also bit the bullet and wrote off a total F$1.79 million invested in its two subsidiary companies—Clarendon Investments Ltd and USP Solutions Ltd.

They suffered separate ailments despite being founded on good business intentions. 

The multi-campus higher education institution is jointly owned by 12 Pacific islands countries which partly fund its operation through annual grants.

In recent times, it has attempted to adopt a more corporate par academia approach with a view to lessening its dependence on government contributions and to this end, had appointed former University of Queensland Dean of Law, Anthony Tarr, in 2005 on a three-year contract, which he prematurely ended early this year. 

During his term, Tarr rolled the university’s investment appetite mainly into property and IT and one of the results of this was the involvement by USP, through USP Solutions, in Stepstone Pacific, an entity created jointly by USP Solutions and Stepstone Technologies, a US-based software solutions firm brought in by Tarr and headed by a husband and wife team of Darryl and Kate Duke.  

USP Solutions owned 30.8 percent of Stepstone Pacific, while the rest was owned by the Dukes and a Taipei Enterprises Pty Ltd.

Stepstone Pacific’s much publicised ambition was to create a “world-class software development capacity, provide training to local software developers directly and through accelerated learning programmes, to be developed jointly with USP,” according to a USP media release issued on its launch. 

Among its medium term goals was the intention to “employ up to 75 computer scientists within three years who will develop software to be used locally and for export to Australia, New Zealand and the United States of America.” 

While these seemed to be realistic, innovative plans that had been proven achievable in the Pacific by local software development companies, the fate of Stepstone Pacific became blurry after its launch. 

Well-placed sources within USP revealed to this magazine that Stepstone Pacific had been draining money from USP through USP Solutions and failed to deliver. 

It had apparently taken out two loans from USP and had come back for more, at which point USP decided to end the marriage.

By the end of the 2006 financial year, USP Solutions had owed the university F$700,000 on account of its involvement in Stepstone Pacific.

In a paper presented to its highest governance level, the USP Council, at its 64th meeting in Fiji in May this year, USP’s Director Finance Kevin Davis revealed that “the directors of USP Solutions believe the value of the investment in Stepstone Pacific Ltd is now NIL.”

USP also got its hands burnt when it created Clarendon Investments, an entity it set up in 2001 to provide retail services in computers, hardware, software, contract warranties, computer maintenance and publications primarily to USP staff and students. 

In the minutes of the USP Council’s May meeting—a copy of which was obtained by ISLANDS BUSINESS—the council revealed that Clarendon “ran into financial difficulties very quickly and the decision was taken in early 2005 by the Vice Chancellor (Tarr) to end the company’s existing operations.” By then, Clarendon had tallied a loss of F$920,676. 

When the directors of Clarendon finally resolved to voluntarily wind up the company early this year, its loss had amounted to F$1.09 million.

Together, USP’s investments in Clarendon and USP Solutions came to F$1.79 million, a loss that had to be borne by the university’s recurrent reserve. 

The recurrent reserve also had to cushion part of USP’s operating loss for the year and as a result, it dipped from a F$9.9 million reserve fund in 2005 to F$7.68 million in 2006. 

While USP would not elaborate on what went wrong, it expressed regret that the projects did not quite go as planned. 

“Clarendon was set up about five years ago to provide primarily computer hardware services while Stepstone Pacific was seen as an opportunity to get into high-end software development services,” USP’s Media and Public Relations Manager, Bernadette Hussain told ISLANDS BUSINESS.

“The university invested because it saw this as an opportunity to assist its communities and contribute to developing the ICT industry in the Pacific. It is unfortunate that these two ventures did not succeed.” 

Stakeholders in USP were less nonchalant.The discussion on these two investments during the USP Council’s May meeting showed that members, especially government representatives, were very concerned about the losses. 

According to the minutes of that meeting, “assurances were sought that the university would not set up any more companies given its track record to-date and that it would not issue any more loans without the agreement of its Finance Committee.”

In addition, the council noted that “it was most unusual for a university to make loans of the nature it did to Stepstone and it was suggested that the matter should be documented so that it is properly accounted for.”

Was this lack of documentation simply a result of sloppy office work or something worse?

ISLANDS BUSINESS is in the process of seeking a full interview with USP to help shed some light on what transpired in 2006. 

Another unexplained phenomenon was the maintenance work carried out by the institution around its campuses, activities it grouped under “Medium Works”. 

While it spent F$625,790 on Medium Works in 2005, expenses ballooned almost four times in 2006 when it spent a total of F$2.33 million. Of that, a total of F$1.37 million was spent on renovation and refurbishment work at its Statham Campus in Suva.

Known by USP students to be the subject of constantly changing plans, Statham Campus is now host to the university’s MBA programme, a handful of software development companies— minus Stepstone Pacific—and the Australia-Fiji Law and Justice Sector Programme.

USP’s accounts unit did not elaborate on this explosion in renovation work bill. But sources within suspect this was linked to exploratory work done on a spate of property development plans which never eventuated, as well as a major overhaul of the Vice Chancellor’s residence which blew its Properties and Facilities budget and led to the laying off of some workers in its maintenance department.

Also factored into USP’s bleak money matters in 2006 was the increase in the cost of running the university—academic, administration and support services rose from a total cost of F$106.82 million in 2005 to F$122.22 million in 2006.

Of this, salaries and related costs rose from F$53.74 million in 2005 to F$65.09 million in 2006. USP’s income is largely based on yearly government contributions. In 2006, F$50.32 million flowed in from its government members compared to F$44.43 million in 2005. USP’s operation is also supported by student fees as well as aid and donations.

Its member countries are Cook Islands, Fiji, Kiribati, Marshall Islands, Nauru, Niue, Samoa, Solomon Islands, Tokelau, Tonga, Tuvalu and Vanuatu.