The University of Sydney’s $1 billion surplus: Where did it go?

As staff go on strike on Friday, Honi decided to break down the University’s financial documents and counter University management’s spin. Our findings? The University is swimming in it.

Since mid-2022, the University of Sydney’s recording of a $1.04 billion surplus in 2021 has loomed over every attempt by staff or students to improve conditions at the institution. To counter this, University management has concocted a range of accounting tricks and press releases to downplay the extent of that surplus and their ability to spend that money. Honi analysed the University’s financial documents in a bid to dispel that spin.

What did the University actually make in 2021?

The oft-mentioned $1.04 billion figure represents the ‘parent operating result’ of the University in 2021. This is to say, the difference between its total income and its total expenses.

While the University is somewhat justified to claim that to only consider this result is misleading, the sheer size of this number is itself relevant. It paints a picture of a University who has enjoyed an influx of income at the same time it has cut its expenses. Those cuts have most perniciously affected staff at the University, with mass-layoffs in 2020 resulting in a $58.5 million decline in staff spending. USyd’s willingness to cut staff jobs the moment it heard doomsday predictions for the pandemic is one of the clearest manifestations of the increasingly corporate way in which the University is run. The University’s cynical and opportunistic sell-off of student housing in 2021 tells the same story. Staff and students can rightfully be angry at the University’s $1.04 billion surplus, given the choices the University made in pursuit of it.

The University has been at pains to say that much of this money cannot be spent and was a result of one-time gains during the pandemic. But even accepting this, the parent operating figure simply means the University has a lot of money lying around. The presence of ‘tied funds’ (money which the University can only spend on specific things, like a donation for a scholarship) necessarily means the freeing up of other funds which may have been used for that purpose. Similarly, one-off gains are still gains; they can be spent to improve staff and students’ lived reality in the same way they can be invested or held on to. Accordingly, the University’s claim much of its surplus came from one-off gains cloaks the decision it has in fact made not to improve staff and student conditions, but to hold onto it instead. 

The first figure the University uses in place of the one billion figure is $600.5 million. This represents the ‘parent underlying margin including non-recurring items’. That is to say, the tangible, free to use parts of the surplus. 

To get to this number, the University deducted almost $350 million of ‘philanthropic funds’ — which it claims are ‘restricted and unavailable for general use’ — and just over $100 million of investment funds. This seems to be fairly standard practice: philanthropic funds — and some investment funds — are indeed tied; just because the value of investments has gone up does not mean that those gains are available for the University’s use (yet). That said, the University is made wealthier by these gains. It could sell some investments and use that money to improve conditions for staff and students. The University not doing so is a  choice.

Crucially, even after making these arguably appropriate deductions from the $1.04 billion figure, the University is left with $600.5 million to spend. That is extraordinary. That is still more than the next-richest university in 2021, The University of Melbourne (this is even before UniMelb makes the same deductions as USyd made to get to this figure). $600.5 million is even more extraordinary considering the next richest university, The University of Adelaide, had a headline surplus of $332 million. University surpluses plummet in size from there.

This number is also significantly larger than any other reported surplus in The University of Sydney’s history. In 2020, the University had a parent underlying margin of $31 million. In 2019, it was $8.9 million, and in 2018 it was $27 million. These figures are dwarfed by the University’s most recent surplus. Even the parent operating surpluses (comparable to $1.04 billion in 2021) hover between $100 and $200 million in these years. Nothing else comes close to this.

But the University would claim at this stage that this extraordinary figure is still misleading, because it was gained through one-off endeavours, such as the sale of property in Badgerys Creek, Camperdown and Glebe, and contributions from the government. It says after these have been excluded, it had a ‘parent underlying margin excluding non-recurring items’ of $453 million.

In other words, even after deducting every form of revenue it could possibly justify, the University of Sydney still made over $400 million more than it spent in 2021.

The University has $400 million from 2021 to spend on whatever it wants. If it wanted to spend it, it has $150 million extra lying around from one-offs. If it really wanted to, it could spend even more than that: anywhere up to $400 million more.

The University came out of the pandemic with hundreds of millions of dollars. Staff came out of it without a job — or, if they managed to retain employment, they were handed denser workloads, longer hours and a significant pay cut.  

Financial Trickery

To even arrive at that reduced figure of $400 million, the University had to play accounting tricks that it hasn’t previously.

To understand these tricks, it is helpful to first look at the University’s 2020 annual report. That report provides insight into the ways in which the University approached its pandemic financial reporting. In the 2020 report, the University included ‘borrowing costs’ as a way of claiming it had a negative ‘parent underlying margin’ — that is, to say it was operating at a loss. This is something the University didn’t do in 2019, even though it would have yielded the same result: a deficit even larger than what was seen in 2020.

This is how the University went about justifying pandemic austerity. For management, it was absolutely necessary to justify the mass-layoffs it made in 2020, at the time justified on the financial threat posed by COVID-19. When economic armageddon didn’t arrive, the University then had to curate its financial reporting, introducing new terms and methods to save face and prove that the University was actually suffering.

This pattern was played out again in 2021, when the University introduced a new category — ‘parent underlying margin excluding non-recurring items’ — to downplay the extent of its pandemic profits, something it didn’t do in 2020. If it did, information revealed in its 2021 report shows the University would not have recorded a deficit in 2020.

The University invented a new category of surplus when it wanted to play poor in 2020. When it wanted to do the same in 2021, the University invented a new category to do so. The total lack of consistency, and the fact this inconsistency is what allowed the University to maintain its pandemic façade of poverty, is highly questionable.  

Where did the money go?

The best answer discernible from public documents is the differences between the University’s Balance Sheets on 31 December 2020 and 31 December 2021. This, as indicative of the University’s money on those specific days, does not tell the full story — but rather suggests what that story may be.

The biggest difference in those sheets is the $550 million increase to the University’s cash and cash equivalent assets. The vast majority of that increase is in the size of the University’s “future fund” (the money the University has invested) which increased from $28 million to over $450 million. This means a huge chunk of the University’s surplus went into its investments. Much of that money is still tied up in fossil fuels.

The University also added $500 million to its “other financial assets.”

In total, this meant the University had over a billion dollars more in assets in late 2021 than in 2020.

But at the same time, the University also reduced its “liabilities” ( money owed by the University to external stakeholders) by almost $300 million. It has done so by paying back that money in “borrowings.”

So far as the public can tell, the money went towards settling the University’s debts and lining a ballooning investment fund.

What does the future hold

The University’s financial information for 2022 is yet to be released. But it is unlikely to report such an extraordinary surplus as in 2021. With applications for international student visas recently reaching record levels and a new federal government at least superficially aware of the problems facing the University sector in charge, it seems unlikely the University will be facing financial hardship anytime soon.

As such, management should offer staff a real pay rise, end casualisation, and stop holding up enterprise bargaining. As staff go on strike on Friday, staff and students should remember: the University is swimming in it.