University surplus over budget

The University of Otago has recorded a much healthier operating surplus than it expected for 2008, but staff have warned the picture may not be as rosy this year.

The university ended 2008 with a surplus of $24.6 million - $9.2 million or almost 60% higher than budgeted, financial services director Grant McKenzie said at a university council meeting last week.

Total income was $517.7 million, $33.5 million higher than budgeted.

Research income was up $14.1 million on budget, government education funding was up $6.4 million, interest and investment income was up $5.8 million, and sundry income was up $4 million, due to more conferences being held at university venues and the sale of the Bio Investigation group based at the university's Wellington campus.

In addition, there was a $4.1 million under-spend in internally-funded research activities, and savings of $2.2 million from delays in filling some academic staff vacancies.

However, Mr McKenzie said total expenditure of $493 million was $24.3 million higher than budgeted.

Academic salaries were $4.3 million over budget, general salaries were $4.6 million over, staff-related costs were $7.9 million over, and spending on consumables and general expenditure was $30.1 million over budget.

The steadily declining number of international students also had an impact, with international tuition fees falling below budget by $2.4 million.

The five-year moving average surplus was $20.5 million, which Mr McKenzie said represented a 2.3% return on net assets.

It was was the first time the university's's moving average surplus had exceeded the 2% target.

Just over $53 million was spent on new buildings and property upgrades last year, $4.1 million less than was budgeted.

The under-spend was caused by "continued delays in a number of projects", with the progress or completion of those projects being carried over into this year.

The university has planned for an operating surplus of $24.6 million this year.

Mr McKenzie said while the financial result for the first two months of this year was close to budget, it was already becoming evident the impact of falling interest rates and the declining New Zealand dollar would put pressure on the surplus.

Investment income for January and February was $660,000 - $173,000 or 20% less than budgeted.

Over the whole year, the university had budgeted to achieve a 7.5% return but the weighted average for January and February was 5.6%, he said.

"This is likely to drop further in the coming months as the official cash rate continues to be reduced [and] is likely to reduce the . . . surplus by more than $3 million."