Enterprise Bargaining

Dear colleagues

I understand that the NTEU at JCU has issued a Factsheet regarding the financial situation of the University, which among other things states that in 2012 our operating result was in excess of $20 million. However, the trouble is that such bald figures have to be looked at in context.

The real or underlying operating result for last year was actually $8.186 million after taking into account such monies as yet to be used grant funds, capital grants and Smart State income. All of these are tied and can only be used by the University for the specific purpose for which they were provided.

You can find the details in the 2012 Annual Report at Pages 63 and 64.

We prepare the annual financial statements on an accrual basis and comply with the Australian Accounting Standards.

When these Standards are applied to not-for-profit entities (such as the University), it can lead to operating results being reported which are over-inflated and do not reflect the underlying result from operations.

As I said earlier this is because income received specifically for capital and other grants is included in the income statement without the associated expenditure.

Below is a table that shows the situation over the past seven years.

It is my intention over coming days to provide further information about the financial state of the University and the background to the headline figures quoted by the NTEU.

I was also disappointed to note that the local NTEU does not appear to be supportive of its national body in their acknowledgement that the recent cuts to committed Government funding will have a severe impact on universities.

Tricia Brand

Executive Director

Finance & Resource Planning

Year

Net Operating Result (as reported in the annual financial statements)

Less: Unspent committed grant funds

(Note A)

Less: Capital grant income less expenses

(Note B)

Less: Smart State income less expenses

(Note C)

Adjusted Operating Result

Surplus/(Deficit)

Comparison of underlying operating result to Total revenue and income from continuing operations *

$’000

$’000

$’000

$’000

$’000

%

2006

19,850

-

10,572

-

9,278

3.8%

2007

51,603

-

44,821

-

6,782

2.4%

2008

50,343

-

49,584

-

759

0.2%

2009

19,994

-

17,985

5,564

(3,555)

(1.2%)

2010

18,442

-

19,345

2,634

(3,537)

(1.1%)

2011

42,520

2,420

31,638

5,127

3,335

0.9%

2012

20,950

(1,895)

8,867

5,792

8,186

2.0%

*An adjusted operating result of around 5% is a good target to achieve a sustainable operation

    Note A – Unspent committed research grant funds

    The nature of grant funding is such that income is recognised as revenue when received while the expenditure may not be incurred in the same reporting period. The expenditure may be incurred over a number of reporting periods depending on the terms of the funding agreements. The result is that unspent research grant funding will either be required to be spent in future years or may need to be returned to funding agencies if unspent in accordance with the conditions of the funding agreement.

    Note B – Capital grant income less expenses

    Capital grant income is required to be recorded as revenue when received in the statement of comprehensive income whilst capital assets are recorded in the statement of financial position. Therefore to avoid any incorrect matching of income and expenditure, the income and expenses (excluding capitalised expenditure) associated with capital grant projects undertaken are excluded.

    Note C – Smart State income less expenses

    Accounting standards require that Smart State borrowings (i.e. interest free, 30 year term, 10 year repayment moratorium and debt forgiveness on one-third of the loan balance) be reported at their net present value which results in unrealized interest and income. The unrealized income needs to be excluded from the operating result figure to avoid misleading comparatives.

    Tricia Brand | Executive Director
    Division of Finance and Resource Planning