Uni consultants make $17m killing

MANAGEMENT consultants big winners in university annual results as sector pays big firms to restructure.

Ormond College Main Building, University of Melbourne

MANAGEMENT consultants were the big winners last year, taking home $17 million in fees, as universities struggled to absorb federal funding cuts and cope with changing markets.

The annual reports of Vic­toria’s universities, tabled in state parliament this week, show that the University of Melbourne paid $6.5m to Booz & Co to advise it on business practices and process improvements.

The contract with Booz & Co was almost equal to Melbourne’s underlying “core” surplus of $7.2m after stripping out discretionary investment income, endowments and infrastructure grants, but it was an improvement on 2012’s deficit of $5.8m.

Melbourne wasn’t alone in paying a premium for advice. PricewaterhouseCoopers picked up $1.95m advising La Trobe on its restructure, which has resulted in 350 people facing the loss the of jobs. PwC received $4.4m in contracts from Victorian universities, securing contracts with RMIT ($964,600), Deakin ($601,900) and Monash ($878,500).

Nous Group secured $2.9m, largely due to a $2.1m deal with Monash, supplemented by $607,000 from Victoria Univers­ity and $217,000 from Deakin.

KPMG earned $1.6m courtesy of Monash ($905,000) and RMIT ($711,000), while sector specialist PhillipsKPA received $1.4m from Victoria University. Swinburne was the only university to not detail any contracts with individual consultants.

LH Martin Institute director Leo Goedegebuure said the amount of money being spent was no surprise and in line with international trends. He said it was always a “trade off” between what universities should do in-house and what advice they need to buy-in.

He said universities faced complex challenges in adapting to increased competition, rising student numbers and technology developments that often demanded outside expertise.

“It is an easy thing to critique, but if they didn’t need them, these firms wouldn’t exist,” Professor Goedegebuure said. “It becomes an issue if universities are paying consultants simply because they don’t want to make a decision themselves, but I don’t think that is the case. There are a lot of these serious restructures going on.”

Most Victorian universities posted solid surpluses buoyed by increased international student revenue, but Victoria University and Federation University continued to suffer weaker under­lying results as they battled fierce competition for domestic students and state funding cuts to TAFE. Victoria University had been expecting to make an underlying loss this year, but scraped through with a surplus of $1.4m, down from $9m last year. Federation University, in its last year as University of Ballarat, suffered a steep decline in its underlying surplus to $4.2m from $19.6m.

International student revenue across the eight universities rose 4.4 per cent to $1.5 billion, but the increases were uneven. Melbourne University benefited the most from the upturn, with international fee revenue up 12 per cent to $374m, while RMIT and Victoria University recorded increases of 7 per cent and 6 per cent respectively.

On the downside, Swinburne suffered a 12 per cent fall to $80m, which the university said was a result of it having lifted English-language proficiency requirements. “While this has had an impact on enrolments, we see it as a temporary correction,” a spokesman said.

International fee revenue at Deakin fell almost 3 per cent to $133m.

Spending on marketing and advertising rose almost 5 per cent to $78m, led by RMIT ($17m), Monash ($16m) and Melbourne ($13m). Deakin was the fourth-biggest spender at $9.6m. Deakin, Victoria University and La Trobe trimmed their advertising budgets, while University of Ballarat quadrupled its spending to $4.8m as it promoted its name change to Federation University.

In the Victoria University annual report, vice-chancellor Peter Dawkins warned that the university needed to brace for further cost cuts. It posted an operating surplus of $5.9m, turning around a loss of $6.7m, but the result was inflated by one-off capital grants.

Ballarat was hit by a 14 per cent fall in revenue and a 7 per cent rise in costs, partly due to its takeover of Monash’s Gippsland campus. Vice-chancellor David Battersby said the result was “acceptable” and in line with a minimum target of a 2-3 per cent margin on revenue. He said undergraduate enrolments at the Gippsland campus were on track to meet or exceed a target of 5 per cent annual growth.

Melbourne’s operating surplus amounted to $117.8m, up from $104.6m. Monash reported an increase in operating surplus from $100.7m to $105.7m, for a “core” underlying result of $29.1m, up from $22.4m. RMIT reported a rise in operating surplus to $67.4m from $49.4m, while Deakin suffered a decline from $108.9m to $78.2m. Deakin’s underlying result fell from $61.1m to $50.4m.

La Trobe beat budget projections to post a rise in operating surplus to $45.3m from $34.7m on the back of greater than expected cost cutting. But with the university still at loggerheads with the National Tertiary Education Union over pay increases and job losses, it said more cuts were still needed.

“Our forward budget projections are impacted by a combination of slower than expected growth in revenue, anticipated reductions in government support, funding and indexation and rapidly rising costs,” a spokesman said.

Swinburne increased its operating surplus to $50m from $20m, for an underlying result of $32m.