Open finance initiative

Without finacial transparency and accountability managements co-production rhetoric is hollow. Demand financial transparency and accountablility for staff and students at the school level now.

Our transparency and accountability campaign

Currently circulating is a flyer with key financial data about the university highlighting that Queen Mary generates enough cash from operations to meet staff demands and look after students better as a result.

The idea to demand financial tranparency for staff and students emerged from the QMSU/UCU student-staff forum about the current industrial action. We are focusing on financial transparency at the departmental level because, first and foremost academic work (research, learning and teaching) happens at the departmental level.

This blog does two things:

  • Sets out the key questions and points of pressure to get departmentally level finacial transperancy, and
  • Explain how we calculated the numbers in our recent flyer.

Time for action: what you should do now

To understand the finance of the university, we must first understand what happens in academic schools and departments.

Ask your head of school and ask your reps to ask at SSLC for the following:

  • How much of school income comes from student fees versus research?
  • How much of it goes to direct labour cost?
  • How much of it goes to school non-labour expenses?
  • How much goes to university overhead?
  • How much is surplus (i.e., not local expense or share of university expenses)?

We recommend you copy-paste these questions and email them directly to your head of school and (if you are a student) to your course-rep.

Use these links to find your course reps and heads of school here.

Schools and departments are where the primary work of the university (education and research) happens. Everthing outside the schools is there to enable and support the education and research that happens in schools. While there are essential central services not all of them need to be centralised, and could be brought closer to users.

Students should regard all money that is not spent on education, research or some support service central to education and research as a tax on fee income.

The numbers behind the numbers

In the following FTE means full time equvalent. The numbers come from three primary sources, the 2008/09 financial accounts, the 2018/19 financial accounts and the list of contracts above £25000.

Teaching income has doubled in ten years

Income from fees and grants was £161068000 in 2009 and £321511000 in 2019 (p14 and p, respectively). That is a 99.6% increase, hence we can say almost doubled (98 home students short of doubling numbers).

In making these calculations, we have added tuition fees and funding body grants to get total teaching income. In 2008/09, when student fees were lower, more money came as grants. By 2019, fees had increased and grants had largely disappeared, except for top-up funds for science, technology, engineering and medicine (STEM) home/EU students.

Students numbers of increased by 60% in ten years

Student FTE was 15391 in 2009 and 24687 in 2019. Both numbers come from the published financial accounts (p5 and p12, respectively). To be precise, that is a 60.4% increase.

Payroll hasn’t increased in line with fee income

While fee income has almost doubled, payroll (including pensions and social security costs) has risen less quickly. In 2009 it was £159.7m rising to £269.634m in 2019 (pages 19 and 40, respectively), an increase of 68.8%. Note that the latter figure includes almost £1.5m in compensation for loss of office (redundancy costs).

Staff numbers haven’t increased in line with student numbers

Student FTE rose 60.4%, but staff numbers rose more slowly. In 2009 there were 3218 FTE staff increasing to 4297 in 2019 (pages 20 and 40). That is only a 33.5% increase. This larger increase in the number of students than staff means that each staff member must look after more students, an increase in workload. Each student in turn has less time with staff then their predcessors.

Academic FTE staff has grown faster than staff in total, from 1494 to 2289 (pages 20 and 40), a 53% increase, but again this still lags student growth.

NB: It is possible that 2008/09 staff numbers are reported as headcount rather than FTE, but with no note on the portion of fractional staff, the number would be meaningless. We have to assume that management publishes consistent, and meaningful data.

Income has risen 82.6% over 10 years

Above we reported income from student fees. This is the number that should most concern students, and students should be concerned about how that money is spent.

University staff have a mixture of jobs, looking after students’ education is one of them. Undertaking funded research is another, as is looking after ancilary services (such as accommodation and catering). It is therefore useful to look at total income.

In 2009 total income was £264.974m (p14) rising to £483.857m in 2019 (p26), an 82.6% increase.

Staff productivity has risen by 52.4%

There are a range of ways to think about the value added by staff.

The most obvious is to look at how the income they generate has grown (per staff member). In this case, income has grown from £264.974m in 2008/09 (p14) to £483.857m in 2018/19 (p26), while staff numbers grew from 1494 to 2289 (pages 20 and 40). University income per staff member (FTE) grew from £82341 to £112603, a 36.8% gain.

But that gross number is not really value add, for that we need to deduct staff costs to see how much value staff generated after paying their way. In this case, we deduct payroll costs from income and then divide by FTE. Payroll in 2009 was £159.7m rising to £269.634m in 2019 (pages 19 and 40, respectively). That makes a 52.4% increase in value add. This means that each staff member generated 52.4% more value after paying their payroll costs than they did 10 years earlier. That increase has come from squeezing staff to do more with less.

We could also look at the free cash generated from operations as a portion of payroll. This rose from 5.1% of payroll to 18.1% of payroll. Net cash from operations grew from £8.243m in 2008/09 (p17) £48.8m in 2018/19 (p31). That is a 251% increase.

The final way to look at value add is the amount of free cash that each staff member generates after paying all operating expenses (including their salaries). The numbers we need are above (income – payroll, all devided by staff FTE). This grew from £2561 per FTE staff member to £11362 per FTE staff member. That is a 345% increase in value added!

However you look at this, staff productivity has grown much faster than inflation and much faster than wages. Queen Mary staff are not greedy, but at some point, you can’t keep working harder while receiving a shrinking share of the value your labour generates.

College operating surplus was £25.4m in 2018/19

The financial accounts report a deficit of £42.9m. However, that includes lots of non-cash items. Key is the hypothecited (and contested) valuation of the USS pension fund. For some reason that is put in the operating part of the accounts, unlike other non-cash items from revaluations (such as the loss on the £160m of borrowings). Adjusting for the extra-ordinary pensions item, we see an operating surplus of £25.425m (£42.934m deficit less the £68.359m pension adjustment). All of these numbers are on page 26.

The operating surplus in 2019 was almost double the previous year’s

In 2017/18, the surplus was £13.232m. To be consistent we should of course remove the movement in the valuation of the pension (which in 2017/18 saw an increase in value of the previous valuation), making a comparable operating surplus of £10.708m, must less than half of the £25.4m in 2018/19. All of these numbers are on page 26 of the 2018/19 accounts.

Next year operating surplus will be higher

Management is operating by squeezing staff. For them, it seems a university is buildings (or the rather more pretentious ‘estate’) first and people second. This is our guess. Would you bet against us?

£48.8 in operating cash generation

In many ways this is the most important number in any financial accounts. It tells you how ‘profitable’ is an organisation in cash terms. This is a better measure of the university’s financial performance because it is simple the difference between cash revenue and cash expenses and ignores all of the non-cash items.

The amount of surplus cash left after paying operational expenses is the money we have discretion over. We can choose to spend this as we wish. We could choose to spend it on more staff to lower workload and give students more staff time. We could use it to compensate staff for increases in the price of their pensions. We could spend it on buildings. We can use it to pay down debt. The question is the balance of those things.

The key figure is on p31 of the 2018/19 accounts, the line entitled “Net cash generated from operating activities”.

More than £240m of cash generated over the last decade

For this you need to sum the cash generated for each of the last 10 years, from each of the last ten financial statements. In each one, look for the line entitled “Net cash inflow from operating activities” or similar. For each of the last ten years it was: £8,243, £19.637m, £5.854m, £14.549m, £15.709m, £31.536m, £40.993, £25.716m, £18.087m, £12.724m, £48.818m. That sums to £241.866m.

Only £8m is needed to give staff a 3% pay rise

Total payroll costs, excluding compensation for loss of office, is £268.246m (£214.392m for salaries, £21.774m for social security, and £32.080m for pensions). All figures on p40 of the 2018/19 financial accounts. A 3% increase would be £8.05m, less than 1/6th of the operating surplus.

Much less is needed to secure those precarious contracts and redress pay inequality

It is hard to know exactly how much is needed to fix this. Management doesn’t think we have a problem, so then fixing it would be costless. The unions think we have a problem. Some of it is about cash, women for example being paid less than men in the same roles. Other parts of the issue are about access to job families. Fixing that is not expensive, it just takes management will to have blind application processes, training that allows everyone to reach their potential, and so on. All things worthy organisations should be doing.

Payroll as fallen almost 5% as a portion of income, squeezing staff numbers and pay £23.5m

In 2009, payroll was £159.729m (p19) and total income was £264.974 (p14), meaning payroll costs were 60.28% of total income.

In 2019, payroll was £268.165, not including costs for compensation for loss of office (p40) and total income was £483.857m (p26), meaning payroll costs were only 55.42% of income.

The difference between the two is almost 5% (4.86%, to be exact).

What does this mean in cash terms. If we spent the same portion of total income on payroll in 2019 as we did in 2009 (60.28%), that would mean spending £291.669m, £23.5m more than we did.

This is an important number. Staff costs as a share of income are 23.5m less in 2018/19 than they were in 2008/09. However you read this, this is staff being squeezed in financial and workload terms, and students being squeezed because less of their fee income goes to the labour that directly affects their education.

Of course, with cash generation of £48.8m, we have more than enough cash to revert to 2008/09 payroll rates.

‌In 20018/19 they lost £4.9m on investments, and £11.2m on unsecured notes.

2018/19 financial statements, p26.

Over 10 years they’ve spent £16m on compensating staff for “loss of office”

This is money management spends in redundency payments. Would you like to guess as a portion of income who gets the most generous payouts?

To get the total, you need to sum the cash generated for each of the last 10 years, from each of the last ten financial statements. In each one, look for the line entitled “Compensation for loss of office” or similar. For each of the last ten years it was: £162000, £712000, £2679000, £3087000, £3071000, £1381000, £961000, £603000, £1349000, £1000600, £1469000. That adds £16.4746m.

If management could work better with staff and provided them with training to develop into new roles, we wouldn’t need to waste this money, put colleagues through the misery of restructuring and redundancy (or give those that know too much dirt big sums to sign non-disclosure agreements).

The principal get as £25000 ‘market supplement’

This is just a way of making the total salary look more paletable (2018/19 financial accounts, page 41).

Principal’s accommodation is worth more than £60000 per year

Queen Mary owns a flat in Wapping and successive principals have been required to live their rent free. Judging by the estimated value of the rent, it must be a nice flat.

For this you have to go to the 2017/18 financial accounts (p41) because the number is not reported the same way in the most recent ones. The estimated value of the accommodation for the one month th pricipal was in the job was £5242. Over a year that is £62904. Taking the 2016/17 estimated rental value (£48750) and adjusting for London rent hikes, £60k looks about right. Do you earn £60k?

Almost £15m on agency staff

The same spreadsheet shows management spent £14.95m on temporary staff across five one-year contracts starting in 2016. Almost £15m in one year. How many extra full time staff could Queen Mary employ with that money? Probably around 250!

Senior management now costs more than £2m per year

Senior management payroll was £2.2m in 2018/19 (page 43). You will note that includes £88900 in severance costs, presumably for one or more of the four members of the team who ‘resigned’.

Words of warning

A couple of words of warning on management obsfucation of data and the use of benchmarking.

Management obfuscation

Management tries to hide the way they spend less and less of the university’s income on education and research. For example, look at this ‘helpful’ chart:

Note how that they have the headline income number in absolute terms “Total income grew by £21.9m to £483.8m” while the expenditure headline number is stated in relative terms (“Expenditure increased by 1.9% to £459.6m”).

Why do they this? It makes it impossible to compare without looking at the underlying data (which is not presented in the same place.

Remember, QMUCU members are having to analyse financial data in their private time. Management employs some of our colleagues to prepare and present this information. It must have been signed off at multiple levels before being published. This obsfucation is

Pernicious benchmarking

Management will use benchmarking to justify continued downward pressure on staff – meaning fewer staff, more precariously employed staff and more academic staff who do not get paid to do research and scholarship. Benchmarking is tactical and poisonous.

If Queen Mary truely is a different place, it should not be trying to ape a sector average, in sector lead by clone vice chancellors and principals. We are not King’s or Warwick, or UCL and we should not be copying their financial metrics. We should look at what we do together as an institution dedicated to the creation and diffusion of knowledge, and we should set our targets and ratios based on who we are and what we want to do.

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