The University of Otago is anticipating a "satisfactory" operating surplus next year, even though it is in the midst of what it describes as challenging financial times.
The 2011 budget, being presented to the university council today for discussion and adoption, forecasts an operating surplus of almost $19 million, about the same level as has been achieved in recent years.
Tertiary institutions have felt the squeeze over the past three years as the Government moves to cap the billions it put into general tertiary funding and student loans and allowances.
Government policy influenced more than 67% of the university's income and available funding continued to be constrained, financial services director Grant McKenzie said in the budget report.
"Under the circumstances, the budgeted surplus is satisfactory and meets all of the Tertiary Education Commission (TEC) minimum requirements."
The TEC requires universities to reach specific targets in areas such as return on assets, income to equity ratios and cashflows.
To try to save money, Otago has been examining costs throughout the university since last year.
This has resulted in several high-profile departmental reviews and the loss of almost 40 full-time positions to date.
The budget forecasts spending on academic and general salaries and staff-related costs will increase next year, while spending on consumables and general expenses is forecast to drop by $2.48 million, or 2.4%, on this year.
Operating surpluses are used to fund capital expenditure including new buildings, renovations, property purchases, vehicles, software, library books, art works and equipment.
The total capital expenditure budget for 2011 is forecast to be $87.53 million, $7.5 million less than this year.
Of that, $47.72 million is earmarked for buildings and almost $15 million for equipment.
Capital expenditure could be higher than budgeted next year and could require the university to borrow, Mr McKenzie said.
"If, as expected, the capital development committee and university council see benefit in approving more projects than allowed for in the budget, then this will require funding to be provided from working capital or from borrowing.
The university has a loan facility of $50 million in place for this purpose."
The report did not indicate what additional projects might be approved.
It was "reassuring" the university's financial position was expected to remain strong next year, as that would provide financial flexibility to carry out essential capital projects.
Budget highlights
2011 forecast 2010 revised budget
Total income $586.1 million $578.7 million
Vote education funding $207.95 million $202.28 million
Income domestic tuition fees $95.23 million $90.33 million
Income domestic
tuition fees $40.92 million $38 million
Total expenditure $567.4 million $556.8 million
Academic salaries $188.67 million $183.93 million
General salaries $134.90 million $130.06 million
Consumables &
gen expenditure $100.71 million $103.19 million
Scholarships $27.02 million $26.2 million
Operating surplus $18.98 million $21.95 million
Total capital expenditure $87.53 million $95.13 million
New buildings, renovations/
property purchases $57.61 million $61.34 million
