6.
MURDOCH UNIVERSITY
RESOURCES COMMITTEE
Minutes of meeting held on Tuesday, 14th May 2002 at 8.00am
Present: Mr R Pett (Chair)
Professor M Nairn (Vice Chancellor)
Ms P Allen
Mr R Lester
Professor J McComb
Ms A Ryans-Taylor
Apologies: Emeritus Professor G Bolton
Professor M Richmond
In Attendance: Mrs G McMath – Acting Pro Vice Chancellor (Resources Management) and Chief Financial Officer
Professor J Gawthorne
Mr J Pike (Secretary)
Mr A Bain (for Items 4 and 9)
Mr P Crook (for Item 8)
1. Conflicts of Interest
No conflicts of interest were declared.
2. Minutes
The minutes of the meeting held on 26 March 2001were confirmed.
3. University Budget 2002
At its last meeting, Senate considered the 2002 University Budget which was projected to produce a $839,000 deficit, comprising a $2.572 million deficit on University Operations which was offset by income from Commercial Operations of $1.733 million. Senate requested that the Budget be revised in a way that was achievable but not in deficit and not dependent on funds from commercial operations.
The Office of Financial Services had held discussions with all academic and administrative divisions and had identified an increase in revenue (primarily additional research and consultancy income) and some expenditure had been transferred to capital, reducing the effect on the Profit and Loss statement but increasing depreciation costs over their lifetime. This review achieved a reduction of the deficit in University operations to $640,000, giving a combined surplus of $1.093 million for the total University budget.
The recommendation that Senate approve the revised Budget for 2002 was withdrawn on the grounds that University Operations Budget was still in deficit. Further review of the Budget would be undertaken to bring it into balance, such that it was not dependent on support from commercial activities. This would require a percentage reduction in compressible costs. Depreciation was fixed and research costs were largely fixed because grant expenditure was directed, thus any additional cuts would necessitate fiscal readjustments to core activities in Division and Service/Administration Budgets. The reduction required was relatively small, amounting to approximately 0.5% saving over the year or 1% for the balance of this year.
In discussion, the following specific issues were raised:
· The Kemp funds related to industrial relations reform within the sector. The University’s submission had been prepared with assistance from AHEIA and it was considered highly probable that this would be successful.
· Depreciation was up as a result of the revaluation of property and buildings but the effect of this was nominal because the depreciation rate was low (2%).
· A new policy has been implemented under which proprietary software purchases would be capitalised in line with hardware purchases. While this defers the cost for 2002, depreciation is increased over the next five years.
· International fee income was reasonably close to projections because the Director of Policy and Planning had been conservative in setting targets.
Senate has previously resolved that the University was not to use commercial income for operational expenses. The purpose was to build an endowment fund, the interest on which would provide a discretionary income stream or where Senate could make conscious decisions on expenditure. The PVC(RM) would bring a recommendation to Resources Committee in the future. It was noted that only book profits were being made at this stage, until loans were paid and the endowment was in place. For example, St Ives was expected to break even in March 2004. It was recommended that a statement be made to staff to clarify the nature and extent of the “profit” on Commercial Operations and when it was expected to generate discretionary funds from the Endowment Fund.
The Senior Executive were actively seeking to increase discretionary income. There were about ten areas under consideration but most had roughly 10-year targets. International fee paying activities were being reviewed and this was the area most likely to show short-term financial gains.
Divisions would be requested to prepare three-year forward projections to demonstrate that they were structurally sound in the medium term and could manage within expected financial constraints.
The Senior Executive would review potential income and expenditure further and re-present a balanced Operational Budget to Resources Committee on 25th June 2002.
4. Reimbursement of Senators
The Vice Chancellor recommended that a system be put in place to reimburse reasonable costs incurred by Senators in attending meetings of Senate and its Committees and Working Parties.
A member suggested that the Senate should show leadership in times of financial restraint and that this measure, which was a trivial cost, should be deferred to a future year. In response it was noted that some senators, such as student or alumni representatives, might not have significant funds and needed assistance. This was a clear issue of equity. Further, Senators were not paid directors fees and it was considered inappropriate to require them to be out of pocket to attend meetings.
It was agreed that the preamble to the recommendation be amended to indicate the specific costs which would be reimbursed. The Vice Chancellor reported that these costs would be paid from existing budgets.
Resolved RC/10/2002:
… To recommend to Senate that the Policy on Reimbursement of Senators be approved, as attached.
5. Financial Reports
5.1 Financial Management Reports
The Financial Management Reports for the quarter ending 31 March 2002 were noted. These were now available on a monthly basis and could cascade down to school/office level. They were tied to the Budget and therefore some figures looked skewed because of the timing of actual income and payments against budgeted projections.
Revenue and expenses were tracking well but Commercial Operations were slightly down, as a result of St Ives lower than projected performance.
In response to a members query, the PVC(RM) indicated that the University and Commercial Operations were provided as a single report to ensure a transparent snapshot of the University’s financial position that made clear the University did not have available surplus funds. It was acknowledged that the report might send a message that University could only support its internal operations by using commercial income. As indicated above, a statement clarifying that funds were not yet available from Commercial Operations for discretionary expenditure would be provided to staff.
The interest on Commercial debt was included as an expense on the Commercial Profit and Loss statement. Repayment of the loans appeared under the Commercial cash flow.
Monthly reports were provided to allow the executive to manage effectively. Reports would be provided to the Committee for review.
5.2 Operating Budget Variance Report
The consolidated Murdoch and Rockingham Operating Budget Variance Report of Income and Expenditure for the period January to March 2002 was noted. In broad terms, we were 25% through the year and across the University about 25% of projected expenditure had been made.
5.3 The University Company Pty Ltd
The audited financial statements for the year ended 31 December 2001 and the statement of financial position, financial performance and project notes for the quarter ended 31 March 2002 for The University Company Pty Ltd were noted.
The Senate Working Party on University Companies and Consultancies was looking at the need for and structure of University companies.
Where revenue was a Grant, expenditure was defined against that grant (that is expenditure was matched to revenue). If the Grant was expended over two years, then the Profit and Loss statement showed a profit in the first year and a loss in second. Full accrual accounting would see the second year’s expenditure offset against the income in the first year. The PVC(RM) reported that the University sector had not fully implemented accrual accounting and these reports were in line with accepted practice.
Resolved RC/11/2002:
… To recommend to Senate that the attached Audited Statements for The University Company Pty Ltd for the year ended 31 December 2001 be approved.
5.4 Murdoch Retirement Services Ltd
The audited financial statements for the Murdoch Retirement Services Ltd for the year ended 31 December 2001 were noted and approved.
The statement of financial position, financial performance and project notes for the quarter ended 31 March 2002 for Murdoch Retirement Services Ltd were noted.
Resolved RC/12/2002:
… To recommend to Senate that the attached Audited Statements for Murdoch Retirement Services Ltd for the year ended 31 December 2001 be approved.
5.5 Murdoch University Veterinary Trust
The audited financial statements and management letter of the Murdoch University Veterinary Trust for the year ended 31 December 2000 were noted.
Noting that the audit was for 2000, it was acknowledged that the University had not been significantly involved in managing the Trust. The Trust had now been brought in to the University Budget and 2002 would be a catch up year.
Resolved RC/13/2002:
… To recommend to Senate that the attached Audited Statements for Murdoch University Veterinary Trust for the year ended 31 December 2000 be approved.
5.6 Guild of Students Financial Report
The Murdoch Student Guild income and expenditure statement for the period January to March 2002 was noted.
Concern was expressed that the Guild’s commercial properties, Walters Coffee Shop and the Tavern, were running at a loss. The Guild President reported that Walters was closed over the break with resultant cost savings and redeployment in the main office of three staff. However, salary expenses were still booked against Walters and it was expected to catch up over the next few months.
A budget template was being prepared and was currently under discussion by the Secretariat. It was noted that the Guild faced financial problems near the end of the year and this underscored the importance of VSU repeal.
6. Payments above $100,000
The Committee noted that the Vice-Chancellor and Acting Vice Chancellor had approved placement of the following orders and payments above $100,000:
· BGC Construction – St Ives Murdoch progress claim $288,602
· BGC Construction – St Ives Murdoch progress claim $390,826
· WATC Loan Repayment – Quarter ended April 2002 $107,257
· CSIRO Minerals – Parker Centre progress payment $262,625
· Curtin University – Parker Centre progress payment $136,216
· CSIRO Minerals – Food Science and Biotech progress payment $147,367
· CSIRO Minerals – Parker Centre progress payment $275,000
· Software Spectrum - Caudit Agreement annual payment $102,894
Resolved RC/14/2002:
To approve the above payments.
7. Commercial Land Development Project Overview
The PVC(RM) introduced Peter Crook, Director of Commercial Development, who had recently joined the University and who brought a wealth of experience and expertise covering all aspects of real estate. His most recent position was with Landcorp as Business Manager - Industrial. He also had a broad experience in legislative matters relating to property development.
The strategic objective of the University was to build a financial reserve from commercial land development of $8 million by 2006, growing to $20 million by 2010. The Guiding Principles ensured no sale of land, preservation of income for the Endowment Fund, shared risk & shared return, preservation of the Vet Farm and environmental sustainability.
Mr Crook reviewed the current projects:
· St Ives Retirement Village
While currently slightly behind projected sales, this project was expected to generate a cash surplus by 2003 from unit sales. Revenue would continue thereafter from hostel bonds and for termination and deferred residency fees.
· Murdoch College
There had been substantial increases on initial performance projections. While the built capacity of the College was about 900 students, its practical capacity was around 750 students. The University was discussing with College management how the increase was to be accommodated. It might be possible to leverage off the existing buildings to build additional space.
The increase in projected income resulted from higher than projected fees for both local and international students and a more favourable local student mix, providing more recurrent government funding. It was important to monitor the College closely at this stage to see if projected income was delivered, then we could consider further investment.
Our partner had divested its student accommodation and then informed the University. This would have a significant effect on recruitment of foreign students. In the short-term, this has been overcome by an increase in home stay arrangements.
The flow on of students to Murdoch, another aim of this initiative, was 13 international and 9 local students. This was over half of the international students who had continued to University and had not planned to go interstate. With respect to locals, a reasonable proportion had come to Murdoch but the academic strength of the College meant a number went to high entry score courses at UWA (medicine, dentistry, combined courses).
· Forrestdale
The University needed to monitor this development closely to determine whether to sell en globo or proceed as developer, once rezoning occurred. This would take approximately two years, at which time the University would need to determine whether it then developed the estate or sold the land in its en globo form with the value added component of the rezoning to urban.
· Masterplan
The University had been advised that the Masterplan required approval under the Metropolitan Region Scheme (MRS) and Local Scheme amendments. It was also noted that some Masterplan changes might require changes to the Act. The University currently had a live project with a blue chip partner (4,000m² of space) with research and development links. It was proposed to ask the Minister for special approval of this project prior to commencement of the full MRS process.
The MRS process required public forum review and the Commercial Developments Office would actively manage the process. This process would necessitate changes to Masterplan. It was acknowledged that Murdoch was being treated differently to the other Universities only in as much as that it had started from a different position.
In consideration of the projected revenues, a member requested that “Triple Bottom Line” approach be prepared to gauge the full impact of the Masterplan implementation. It was noted that other mechanisms to generate discretionary income were also in place or under consideration. A business plan for all accumulated assets was needed to show how they would be managed. The PVC(RM) would bring a paper forward on management of the Endowment Fund, including detail such as possible structures (Trust or other structures) and level of independence.
8. Project Status Reports
Status reports for the following projects were noted:
· Equine Scintigraphy and Isolation Unit· Murdoch College
· St Ives Murdoch Retirement Estate / · Forrestdale Land Subdivisions
· Ground Lease Somerville Baptist College
Resources Committee Minutes – 14 May 2002