CHL Financial Models – Presented by Paul D’Arcy, Mark Donohue, Assa Doron, Peter Hendriks, Harriette Wilson
On April 7 Chris Grange, Executive Director (Administration & Planning), presented data to CHL staff from ANU’s Financial System on the CHL’s financial results from 2011 and projections until 2021. While many academics felt the details were long overdue, an analysis of Grange’s figures suggests that the CHL may be financially sustainable with minimal changes to staffing.
There were also issues in the CAP levy on the CHL, as well as in discontinuing support for less-commonly taught language subsidies.
Staff were told the CHL was presently running at a $1.5 million deficit and required significant cuts to place CHL in a financially viable position.
Grange presented a financial model for the CHL until 2021 that assumed no increases in income, steady student enrolments, and no cuts to staffing. Under this model, the CHL was projected to be operating at a $6.4 million deficit by 2021 assuming an average 2% increase in wage costs each year.
CHL was also forecast to experience a plunge in income between 2018 and 2019 due to a possible, but unconfirmed, discontinuation of a previously granted subsidy (Language Strategic Allocation) for less-commonly taught languages, amounting to around $2.4 million.
There was also an unexplained increase in expenditure between 2016 and 2017, from $13.2 million to $16.9 million, according to Grange’s data. Financial officers from the school who examined these figures also found no explanation for the sudden increase.
Nevertheless, Grange’s model demonstrates that since 2011, CHL income has been consistently higher than its expenses – what causes the deficit is transfer outflows to CAP in the form of a levy, hovering between $2.2 million in 2011 and $2.8 million this year.
CAP administration also decided that debt accrued from previous years would be written-off in the interest of focusing on establishing the School’s financial sustainability into the future. Therefore, the only factor pushing CHL into deficit would be the CAP levy.
The Staff Model
Later that day CHL academics and National Tertiary Education Union (NTEU) Delegates Paul D’Arcy, Mark Donohue, Assa Doron, Peter Hendriks, and Harriette Wilson prepared an alternate financial model based on Grange’s data. It indicates the CHL is without deficit, with its income and expenditure pointing to a financially sustainable future without staff cuts.
Like Grange’s model, it makes certain assumptions as foundation. It assumes that there will be no staff cuts, and that there will be modest increases in enrolment in the future. It also disregards the $3.7 million jump in expenditure that Grange forecasted between 2016 and 2017.
It assumes that the Language Strategic Allocation will continue after 2018. Donohue and numerous staff members, as well as the student group Hands Off Asia-Pacific Studies, have argued that in order for CHL to maintain its excellence the continuation of central support for less-commonly taught languages is critical.
Furthermore, Grange predicted another financial crisis for CHL in 2019 if this support was dropped. While easing ANU’s expenditure, cutting this support would be disastrous for ANU’s excellence in Asia-Pacific studies and ultimately unrealistic.
Furthermore, the staff model assumes a positive position for the CHL at present, following Grange’s data that indicates the School’s income remains higher than its internal expenditure, and that debt carried-forward will be written off by CAP. The large CAP levy, which Grange admitted did not provide good value back to the CHL, was not included given that it may be renegotiated.
To compensate for these assumptions, the modellers added a 5% increase in expenditure per year (higher than Grange’s estimates of between 1% and 3%).
Ultimately, the staff members’ modification to Grange’s model sees the CHL projected to remain in a financially viable position without significant growth, but free of deficit. This is without School restructuring and large cuts in ongoing staff positions, as proposed by CAP’s draft Change Management Proposal (CMP).
The Levy Problem
Each year the Colleges at ANU levy their respective schools to maintain central operations, and are in turn levied by ANU’s central administration. Each College conducts their levies (which are effectively taxes) differently. Currently, CAP is one of the colleges with the lowest tax rates on campus.
Yet, the proportion of wages spent on administration in CAP is among the highest rates on campus, according to Grange, with 25% of all salary expenditures going to administrative, rather than academic wages.
To support this, the CHL will be taxed $2.4 million in 2016. This was referenced by Mark Donohue in an interview with Language Diversity on April 8.
The University Executive does not determine how Colleges determine the levy, and Grange stated that the amount of administration supported by these levies in CAP does not give good value for money.
Academics also expressed doubt that their taxation by CAP yielded adequate value back to the CHL. Much of these taxes go towards overhead costs – administrative salaries – which were labelled by Grange as “too high” across the University, and he stated that CAP was “one of the most expensive [colleges in ANU] in terms of administration overheads.”
Grange emphasised that completely removing the tax was not the solution; rather, the salaries of high-ranking administration at college, school, and central levels should be lowered to make the levies more cost-efficient.
Similarly, CHL staff have long suggested that bloated mid-level management costs, where neither teaching, research, nor strategic directions are conducted, has hampered effective growth in the university.
Hands Off Asia Pacific Studies told Woroni that these high overheads were “not sustainable” for the CHL, particularly when “no genuine discussion of addressing” this issue was made during the presentation and that at present, professional CHL staff are still overworked and few in number, as previously reported by Woroni.
Donohue also expressed similar frustrations to Woroni with the disproportionately high administrative costs on multiple occasions.
Transparency Still Absent
Underlying the recent presentation of executive-level financial data is the continuing lack of transparency, particularly from CAP administration. The CHL figures provided by Grange were general – the only level of detail easily available to the University executive. CAP administration controls CHL financing more directly and has detailed information that may itemise the umbrella income and expenditure numbers.
However, CAP has not yet made this data known, much to the ire of CHL staff and concerned students.
In the original CMP, the CAP Dean did not include any financial information. After being requested to do so by students at a recent forum, the only figures provided were in un-detailed graphs.
CHL staff are due for a meeting with Vice-Chancellor Brian Schmidt on April 12 as part of the change process. It remains to be seen whether the Vice-Chancellor will address the discrepancies in forecasting between CAP Dean Veronica Taylor and Executive Director Chris Grange.