01/04/2009 - 22:00

UWA sharpens its pencil to ride out crisis

01/04/2009 - 22:00

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A REVIEW of capital works, an efficiency dividend and a growing reliance on Commonwealth funding; it might sound like the state government but it's actually Western Australia's oldest tertiary educational institution.

UWA sharpens its pencil to ride out crisis

A REVIEW of capital works, an efficiency dividend and a growing reliance on Commonwealth funding; it might sound like the state government but it's actually Western Australia's oldest tertiary educational institution.

University of Western Australia vice-chancellor Alan Robson said he had been forced to take serious action after being hit by a significant drop-off in unrestricted investment income, which sliced almost $12 million off his revenue stream last calendar year.

UWA has assets of around $1.5 billion, a figure that has remained remarkably steady. But its $320 million financial assets portfolio, like the rest of the investment world, has taken a thumping from the global financial crisis, fuelling an investment loss of $100 million.

While that loss is largely on paper, the collapse of equity markets and general investment malaise has resulted in a reduction of forecast revenue for the university of about 5 per cent.

Professor Robson said this was particularly difficult to deal with because, unlike much of the federal funding and even private donations, investment income was unrestricted and could be applied freely by the university management.

The result will be a temporary halt to a number of proposed capital works as well as other expenditure reduction programs.

He said the university remained committed to a $50 million new medical research institute but would shelve plans for new engineering and science buildings, new child care facilities, an expansion of the Curry Hall student accommodation and an arts precinct until market-related income improved.

"We have been running a very substantial building program," Professor Robson told WA Business News.

"We have spent $240 million over the past eight years, so we are not in a position to continue at that rate."

He said other initiatives included a 2.5 per cent across-the-board budget cut akin to the state government's efficiency dividend, tighter controls on hiring and more focus on strategic procurement such as more one-off agreements with suppliers.

Aside from its recent building program - which includes the new business school facility due to be officially opened next month - UWA has been expanding its enrolments at breakneck pace.

This year, the university has 21,000 students, 2,000 more than 2008 and 50 per cent more than 1999, when the total enrolment was 14,382.

Professor Robson said enrolments had benefitted from the world's financial ills, including a 10 per cent increase in the international student intake.

However, rising fee income would not make up for the drop in investment returns.

"If you lose 5 per cent, universities don't have big profit margins," he said. "We have a remarkable capacity to spend what we have, if we get more money we try to improve quality.

"And when you have the money you have enormous pressure on you to spend it.

"Most years we have a margin of $30 million on $600 million, which is our annual income."

In the year ending December 31 2006, UWA made a $36.5 million surplus when investment income was $59.7 million. In 2007, it made a profit of $944,000 when investment income slipped to $45.3 million and $13.4 million was recorded as an investment loss.

Last calendar year UWA recorded a $63.9 million loss. Investment income was $33.8 million and the investment loss was $100.4 million.

In other numbers, total revenue was up 10 per cent to $672.3 million.

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