IT costs the University of Newcastle about $13 million each week to stay open, according to an email from the Vice-Chancellor to staff explaining its finances are more complex than its balance sheet may indicate.
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Professor Alex Zelinsky explained UON's reserves in detail on Wednesday, writing that although the audited financial statement for 2019 showed it had liquid cash and investment balances of around $525.8 million, "it is important to understand what makes up this figure".
He said of this sum, it had reserves for 18 weeks of average operating expenses, including salaries.
"There has been commentary in the media about our university's 'healthy financial reserves' and how they could be used to absorb our revenue declines without the need for other measures," he said.
"We need to view this approach with caution."
He said of the $525.8 million, it held $58.8 million in endowment and philanthropic funds; $66.3 million "already committed under research grants"; $20 million in capital funds "locked" to projects; and $149 million in employee entitlements earned but not yet paid.
He said the remaining $231.7 million "reflects cash balances maintained to fund our current operating expenditures".
"It costs us about $13 million per week to keep our university open," he said.
"This $231 million is therefore made up of 13 weeks of average operating expenses ($176 million) and $78.7 million in short term working capital [to pay bills].
"Together, this equates to 18 weeks of average operating expenses, including staff salaries."
However, the sum of $176 million plus $78.7 million is actually $254.7 million.
This includes a deficit of $23 million in "excess liquid assets".
Professor Zelinsky said normally "these balances are a solid buffer against short term, unexpected shocks", but UON expected to use part of this due to COVID-19.
He said borrowing money "is not an appropriate source of funds" for operating expenses and the balance sheet "is not and cannot be, as has been suggested, a 'rainy day fund'".
He said it was "for these reasons" UON had proposed measures to help it save $35 million.
It is negotiating with the National Tertiary Education Union and Community Public Sector Union over a proposed change to enterprise agreements to allow it to delay salary increases and increments.
Professor Zelinsky has said if there is no agreement by August 10, "jobs will have to go".
NTEU Newcastle branch president Dan Conway said he was awaiting a briefing on the figures.
The Herald understands the CPSU and UON have been unable reach a consensus.
A spokesperson for UON said it was a difficult time for everyone in the community, including university staff.
"The Vice Chancellor has maintained open dialogue with university staff about the financial challenges the university is facing throughout the COVID-19 pandemic response and his email today is part of that," the spokesperson said.
"All universities are experiencing financial challenges at the moment.
"We are a financially robust organisation."
The spokesperson said UON's cash holdings were considered adequate to meet operating requirements at current income and expenditure levels.
A decline in income will put pressure on the cash reserves, "which is why we need to review our spending and take responsible actions for immediate, medium and longer terms".
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