The University of Otago remains in a ''solid financial position'' as it faces ''ongoing cost pressures'' due to flat student numbers and tight Government spending, financial services director Grant McKenzie says.
His comments were made in the 2012 financial review tabled at the university council meeting this week.
In the report, Mr McKenzie said the university was in a good financial position, despite declining student numbers, but once again warned it would be difficult to maintain good financial results in the current environment.
''Ongoing cost pressures and limited income growth, due to the Government's current fiscal position and flat student numbers, will make the achievement of acceptable financial outcomes a challenge for some time to come.
''It will be essential for the university to improve efficiency, manage costs and pursue other income streams,'' he said.
The report showed the university ended last year with an operating surplus of $14.61 million, which was $1.964 million lower than budgeted and $11.409 million less than 2011.
Income for the year stood at $596.873 million, $11.693 million higher than 2011, while expenditure was $582.263 million, $23.102 million higher than in 2011.
The result meant the university did not meet the Tertiary Education Commission's requirement for a 3% return on external revenue, but Mr McKenzie said at the meeting this was not a major concern for the commission.
Mr McKenzie noted in the report that the worse-than-expected result was in part due to falling student numbers, which caused tuition fees to be $2.928 million lower than budgeted.
Overall equivalent full time student numbers (Efts) stood at 18,951, 393 students (2%) fewer than in 2011, or 4.85% lower than when student numbers peaked at 19,918 in 2010.
The reasons for declining student numbers included more stringent academic standards, Government changes to student loans and allowances and less interest from United States students, the report said.
Mr McKenzie said the university finished the year in a ''solid financial position'', with record cash on hand of $73.745 million.
Much of the cash on hand was earmarked for ''two major capital projects'' - the ''renovation and major expansion of the dental school'' and the construction of a new building for the University of Otago Christchurch, as part of the Government's planned medical precinct.
Other items of note included in the financial review for the year included the amount the university had lent to Knox College for its earthquake strengthening and extension project. The figures showed the university lent the college $3.269 million more than it had budgeted on for the year, because of the need for the work.
The university had previously declined to give a figure for the loan.
