Mr Chaudhry - Address at the USP Regional Finance Ministers Meeting
Jun 26, 2008, 10:09
HON MAHENDRA P. CHAUDHRY
THE MINISTER OF FINANCE, NATIONAL PLANNING, SUGAR INDUSTRY AND PUBLIC UTILITIES
ADDRESS AT THE USP REGIONAL FINANCE MINISTERS MEETING THURSDAY 26th JUNE 2008
Honourable Ministers;
The newly appointed Vice Chancellor of the University of the South Pacific, Acting Vice Chancellor; Vice Chairman of USP Council, Chairman of the USP Finance and Investments Committee, Members of the University Grants Committee;
Ladies and Gentlemen.
Good morning, Ni sa Bula, Namaste! And a very warm welcome to you all on behalf of the Government and people of the Fiji Islands. I hope you have an enjoyable stay while in Fiji.
Colleagues, we meet today as the University of the South Pacific marks its 40th milestone: it is this year celebrating its 40th Anniversary with the theme, “Our Future, Your Future: Celebrating 40 years of quality and excellence in education at USP”.
Let us all commend USP for the excellent service it has rendered the region over these 40 years. We have seen it grow from humble beginnings in 1968 to an institution of recognized excellence in the field of tertiary education. In the 40 years of its existence, USP has spawned academics and professionals notable not only in the region but also internationally, and who have made their mark in their different walks of life.
The University has met the educational aspirations and provided opportunities for thousands of our students who would otherwise have probably missed out on the benefits of tertiary education.
But 40 years on, it is time for our regional university to do some serious stocktaking and take heed of where it is headed and how. How can it become more responsive to our changing regional needs? How do we as stakeholders ensure better value for our money? As island nations with serious budgetary constraints, how do we continue to meet USP’s expanding financial needs? How cognizant is the university administration of the need for good governance and accountability?
These are some basic questions we need to tackle as we set new platforms for the next 40 years.
As such, our meeting today as Finance Ministers from the region is crucial to USP’s continued financial stability and its general future direction and well being.
I note that the USP Council which met in May this year, considered an audit report on Academic Quality for the University. This is a positive development, aimed at improving the quality of education the University offers, moreso, when concerns are being expressed in some circles about its academic standards. I look forward, therefore, to a progressive implementation of this report.
As Finance Ministers of USP member countries we are responsible for the finances of the University. We last met in 2003. As Chair of the forum, Fiji takes some responsibility for the delay in convening this meeting. At the same time, I must concede, it is quite a challenge to gather Finance Ministers together from all regional countries, due to their heavy work commitments.
Our specific task today is to consider the Report of the University Grants Committee on funding for the 2007-2009 triennium, based on the USP’s Triennial Submission - even though we are now half way through the triennium. Of course, member governments have this triennium made their contributions based on the current funding model which, I believe, has not been formally approved by this Forum.
Our meeting today must, therefore, consider and give a general direction on a financing platform for the University in the medium term.
In this respect, we note and acknowledge efforts and measures taken by the USP Council to address issues pertaining to the USP Budget.
We are all encouraged by reports from our government delegations that attended the USP Council meeting held in Tonga last month, that the Council has already initiated measures to improve USP finances. However, we also know from reports that have come to our notice that there was much wrong with the manner in which the University’s finances were managed in the recent past.
A briefing paper submitted to me highlighted certain key issues concerning the provision of tertiary education at USP. The paper recommended the need for urgent reforms and alluded to wastage and mismanagement of both financial and physical resources at USP.
While I do not wish to be negative, USP has shown increasing signs and symptoms of bad governance - more particularly, a bloated salary and wage bill and administrative overheads that have skyrocketed.
It is obvious that USP has been living beyond its means. And that Government contributions and revenue targets are driven by pre-set expenditure targets of the University, rather than the other way round.
Honorable Ministers, I am sure this is not the practice in your own countries. Why then should we condone such practice where our University is concerned? There will be more on this in a presentation later which will focus on USP’s finances.
Let me simply say at this stage that such practices must change as we plan for the next 40 years. USP must learn to work within a practical budgetary framework. Let us not hesitate to inject greater transparency and accountability into the administration and financing arrangements of our regional institutions.
I am sure there is room for exercising greater economy in the running of USP. This must be fully explored, and measures implemented to eradicate wastage and extravagance.
I am told that much of the financial problems faced by USP today stem from decisions made by the previous Vice Chancellor, even though in doing so, the VC acted within his delegated powers.
I am aware that the USP Council has since acted swiftly to put corrective measures in place, to prevent such occurrences in the future. At its meeting in May 2007, the Council moved to withdraw the Vice Chancellor’s delegated powers on senior management salaries and terms and conditions of service.
Then at its meeting in Nuku’alofa Tonga last month the Council resolved “that the base salary in all renewals of current contracts for senior management staff be at the 2004 remuneration levels plus any general increase approved by Council, plus additional remuneration for any additional responsibility falling within the position due to the restructure, and reflect any other decisions made by the Council since.”
As a result, all new contracts for senior management staff will be based on the 2004 remuneration levels and all benefits outside the Council policy will be removed at the time of contract renewal or limited or full contract extension.
We would have, however, preferred better vigilance from USP’s oversight bodies from the beginning. Preventative measures are always better than trying to take remedial action afterwards.
I am informed that salaries and benefits of USP’s academic as well as senior administrative staff are currently quite high and out of line with comparable positions in other institutions. These employment benefits need to be reviewed to bring them in line with local conditions.
As part of the review process the Senior Management Remuneration Working Group (SMRWG) comprising the Pro-Chancellor, chair of Finance Committee and chair of Audit Committee, has already compiled data on existing salaries and terms of conditions of service as agreed between the former Vice Chancellor and Senior Management staff.
This Group will now make recommendations for a revised salary scale for senior management to be considered by the USP Council when it meets in October.
The USP Council has also approved the appointment of a consultant to study salary levels at comparative universities and to report to Council as soon as possible.
Another area of concern to us as Finance Ministers is the recent write-offs of losses sustained by USP’s commercial ventures.
USP has written off in excess of F$3m. This is totally unacceptable. I have sought an explanation for these losses, and you will be appraised of this in one of the presentations later in the meeting.
Today’s presentation will also include an audio-visual on Member Governments’ contributions to USP. We need to review the existing funding formula and redefine the role of USP.
For one, the USP Funding formula for Member Governments is not linked solely to the number of students sent by their countries but rather to the total expenditure of USP.
The governments of United Kingdom, Australia and New Zealand are already part of the USP Council and contribute to financing of USP’s activities. Perhaps they should now be invited to be included in the calculation of government grants given their long association with the USP.
To this end, the USP Council has resolved that the Task Force on Governance arrange for an independent examination of the current formula for setting country financial contributions.
It is to recommend an appropriate and transparent formula to be considered by the Council at its October meeting. The Fiji Government in its efforts to assist in implementing the Council’s decision will be tabling a Terms of Reference on this review for consideration and approval by this forum before it is forwarded to the Task Force on Governance.
Honourable Ministers, I am informed that of the 458 courses offered by USP, 33 per cent are considered undersubscribed. The Finance and Investments Committee will calculate and present to the October Council meeting the unit cost of each programme showing trends over the past five years.
I believe USP can, without increasing tuition fees and student accommodation charges, identify cost cutting measures to offset the reduction in its expenditure that I will shortly propose for the Honourable Ministers consideration.
I must make it quite clear that in view of the economic and financial challenges currently facing regional governments, USP member countries will not be able to support any increases to their present rate of contribution.
Honourable colleagues, from what I have just said the message for us should be quite clear! USP must immediately embark on a programme of austerity – it must reduce costs over the next three years. It can start by first of all cutting back on wastage and mismanagement!
This triennium, 2007-2009, USP will cost us a massive $53m annually – quite a substantial sum for small island nations with highly restrictive budgets.
As custodians of public funds, we have to justify our respective annual contributions to USP. This is no easy task given the increasingly competing demands on public finances that we all face.
As a broad financing direction, it would be appropriate, prudent and fruitful if this meeting were to reach a consensus that USP must embark immediately on a program of austerity in the management of its finances. A 15 percent downward adjustment in its expenditure over the next 3 years can be a target that is not impossible to achieve.
Hon Ministers, you may be aware that our contributions for 2007 were based on 2006 levels plus 6%. In 2008 USP billed us at 2007 levels plus 6%. USP is expecting to implement another 6% increase in 2009.
USP implemented these increases on the basis of the recommendation of the UGC. However, UGC recommendations should not be implemented until endorsed by the Ministers of Finance. Unfortunately, USP jumped the gun, and we are now expected to pay the price. All our countries paid the 6% increase in 2007. Whilst some have accepted and paid the 6% increase for 2008, Fiji has not done so on the principle that no increase can be applied until Ministers of Finance have approved it.
Today, we not only need to decide on how to treat the 6% increases in 2007 and 2008, but also the level of funding to be provided to USP in 2009.
I am told that work on USP’s 2009 budget is well advanced, and a clear indication by us today will enable the process to be completed in time for the October Council meeting.
It would thus be splendid if we could ensure a smooth, fruitful meeting today, ending with consensus on the need for USP to embark immediately on a cost cutting exercise to contain its ballooning expenditure.
Nevertheless, we must play our part and not make unreasonable demands in terms of courses we want it to deliver. For its part, USP must continue to demonstrate at all times a clear commitment to the principles of good governance, astute and prudent management of its finances and strive to improve academic standards.
Honourable Ministers, in our deliberations today, I invite you to give serious consideration to the following:
∑ USP’s Budget to be revenue- driven rather than, as has been traditional, expenditure-driven;
∑ review the UGC Report and rationalize grants to affordable levels;
∑ enhance coordination, interaction and linkage with our Ministers of Education;
∑ create better linkage between the USP Budgetary cycle and Member Governments’ Budgetary Cycles;
∑ prescribe a cap on student numbers for full-time, part-time and distant learners. This cap must be carefully worked out to ensure acceptance by member governments. The aim here is to achieve positive financial results and to contribute to the effective and economical management of USP resources;
∑ review all proposed capital expenditure programmes for the next five years to reassess their necessity. In view of the cost containment measures being undertaken, to ensure that no contracts, or MOUs for capital projects are signed until the required finances have been identified and confirmed;
∑ revise remuneration packages of all senior and middle management employees (academic, administration and technical staff) to align salaries and other employment benefits with comparable local institutions, including statutory authorities; and
∑ effect appropriate expenditure re-adjustments for the next three years, commensurate with the financial decision taken by this Forum today.
Honourable Ministers, I have outlined these specifics, fully cognisant of the role of this forum and its distinction from the governance of the university. Even then, I believe our views do have a significant bearing on the decisions and activities of the Council and the university.
We have an onerous task ahead of us and I have all the confidence that we will be able to respond in like spirit to the report and advice the University Grants Committee has placed before us.
Ladies an gentlemen, I hope I have been helpful in setting the scene and benchmarks to assist in our deliberations today. I look forward to your cooperation and good judgement in helping us reach sound and judicious decisions for the operations of the university, at least for the medium term.
I thank you for your kind attention.
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