Investigation calls into financial mess sidelined

Elenoa Baselala
While the region’s finance ministers reached a "Pacific consensus" on the University of the South Pacific’s precarious financial position", Tuvalu was disappointed no country backed its call for a proper investigation into the institution’s financial mess.

Tuvalu's finance minister, Lotoala Metia labelled the situation as rather sad.

While chair of the Fiji meeting, finance minister Mahendra Chaudhry of Fiji did not elaborate on USP’s financial situation, this magazine understands the university’s reserves are just enough to sustain it for three months.

The one-day meeting held at USP, Laucala Campus in Fiji, was attended by finance ministers or their representatives who emerged from the meeting room strained and exhausted.

The meeting agreed that member countries contributions for 2008 and 2009 be capped at 2007 levels, meaning the governments would give a total of $49.9 million in grants to USP.

Because there is no definite formula for government grants, the ministers agreed in principle to a draft “Terms of Reference” of a review of the grant formula.

In his opening speech to the ministers, the Fiji interim finance minister revealed his country’s concerns in the way USP finances had been handled and mismanaged in recent years.

Though Fiji is willing and confident of injecting money into USP, Chaudhry warned it must be managed properly.
Chaudhry said the university was living beyond its means and called on it to be more revenue driven rather than expenditure driven, as is the practice now.

“While I do not wish to be negative, USP has shown increasing signs and symptoms of bad governance—more particularly—a bloated salary and wage bill and administrative overheads that have skyrocketed over the years.

“Honourable ministers, I am sure this is not the practice in your countries. Why then should we condone such practice where our university is concerned?

“Let us not hesitate to inject greater transparency and accountability into the administration and financing arrangements of our regional institutions.

“I am told that much of the financial problems faced by USP today stem from decisions made by the previous vice-chancellor, even though in doing so, he acted within his delegated powers,” Chaudhry said.

Chaudhry also asked the ministers to seriously consider:
• Rationalising grants to affordable levels.
• Enhancing coordination between the USP budgetary cycle and governments budgetary cycles.
• Prescribing a cap on student numbers for full time, part time and distant learners to achieve positive financial results for the university and better management of resources;
• Reviewing proposed capital expenditure programmes for the next five years on their necessity and that all such projects must not be started without funding confirmed;
• Revising all remuneration and salary levels of senior and middle management level to be employees comparable to local institutions; and
• Effecting appropriate expenditure re-adjustments for the next five years.

The USP council has been implementing some remedial changes with the removal of the VC powers and the return of senior staff salary levels to 2004 levels.

A consultant will be hired to carry out a study on USP’s salaries and wages to be comparable to other regional institutions.

Whether the university would be able to afford this given its current financial situation is still the big question.
Incoming vice-chancellor Professor Rajesh Chandra said this would be one of his challenges but he was optimistic of the future.

In its May report, the USP Council’s Finance and Investments Committee was concerned with the continued deficits and their impact on the university’s cash position.

While for the first three months of this year the university significantly under spent its budget by $2.1 million, it was not achieving its income target by $853,000.

This was partly due to the reduced number of students, particularly private students,  compared to 2007.

Estimations are that the tuition fee income would be $1.8 million down than what was budgeted for.

While the committee is keeping a close tab on this, it however believes that though "a deficit for 2008 may be sustainable, USP must set a break-even budget for 2009" .

“This underlines the importance of the work of the Budget Deficit Reduction Committee and the need for it to make major savings in the cost of the university’s operations.

“As it is, the committee is monitoring carefully the university’s cash forecast for the current year to ensure it has enough resources to meet its day-to-day commitments,”the committee’s report said.

USP has so far written off over $3 million last year from losses it sustained from failed business ventures. It is understood that a further $1.02 million has been written off from the student dormitory project, which been discontinued.