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“USP: the illusion of Government grants” (ed. in FT 24/10/2021)

31/10/2020

Would a consumer ever take a loaf of bread from a shop but inform the shop-keeper “I am not going to pay you for this loaf of bread until you fix your management up”?

That is exactly what the public sees happening at The University of the South Pacific, the premier regional university.

One of the customers the Fiji Government, who is also a minority shareholder in the shop, is telling the USP Council that it is not paying its bill to USP for teaching Fiji Government sponsored students at USP until its “conditions” are met.

You know exactly what an ordinary shopkeeper would tell that customer anywhere in the Pacific.

But while the media is reporting that the Fiji Government is threatening the withholding of its “grant”, the public should be clear that the funds being withheld are NOT “grants” but legally required payments for a service being rendered by USP.

USP Council would be perfectly entitled to sue the Fiji Government or inform the students to go elsewhere (after paying for what they have already received).

Fortunately, the other regional governments and donors to USP are all too aware of the importance of maintaining USP as the productive tertiary training institution it really is and its great use to the region (including Australia and NZ).

So how do you explain the mess at USP?

One key problem is that the membership of USP Council does NOT represent proportionately the true shareholders of USP and the Fiji Government has an unfair government representation, out of proportion to what its contribution amounts to in USP’s Budget.

While it appears that only a few representatives of the Fiji Government   are unhappy with the current USP management (some like Fay Yee are very quiet), the public needs to understand that the Fiji Government is NOT the majority contributor to USP’s budget, even if the largest proportion of USP’s students are from Fiji.

The Fiji public must also ask, why are some representatives of the Fiji Government interfering with the governance of USP, when there is a properly constituted USP Council responsible for its management.

This question is especially important given that the Prime Minister of Fiji (Bainimarama) is on record saying that he will not interfere with the running of boards of public enterprises like Fiji Airways or presumably USP.

This governance mess at USP requires the Fiji public to think seriously about the intellectual caliber of a few of the Fiji Government representatives on USP Council and indeed, their personal track records in national governance (which only the oldies will remember).

Who pays for USP?

Firstly, the public should be clear about who exactly pays (and how much) towards the running of USP, and whether these groups are proportionately represented and influential on USP Council.

The funding of USP, as of most universities globally, has always been a complex and changing affair involving a mix of taxpayer subsidies because tertiary education is usually considered a public good and private market demand.

USP’s funding formula is made more complex because instead of just one government, USP has had twelve regional governments, as well as a number of significant donors, including Australia, NZ, Japan, Canada, EU and others.

As my 1993 Consultancy Report for USP and IDP (Issues in the Financing of USP, 1993) pointed out, the formula for funds made available to USP often did not reflect the changing numbers of students, nor the vastly different costs of programs and levels. I note that the current formula does take into account the differential costs of programs but there are still fundamental faults.

In the early years of USP, the regional governments and donors paid for the bulk of the capital and recurrent costs while private student fees were but a small proportion of total revenues.

But not any more as with most universities the world over, USP’s funding has also gradually moved towards market principles, with the consumers bearing a heavier burden.

The graph shows the sources of USP’s  Total Revenue in 1919,  amounting to a total of $177 million (somewhat less than in previous years).

But while some representatives of one Government (Fiji) loom large in the media over the mess at USP, few members of the Fiji public understand that Total Government contributions from all the Member Governments have now declined to a mere 21% of total USP Revenue or $38 million altogether and the Fiji Government’s share is even less.

But private students’ fees contribute a massive $80 million or more than twice that of all the governments together.  They are effectively the largest shareholder in the corporate entity USP. But they have little say.

Sharing of government contributions

Governments’ total contribution, now only 21% of total revenue, is decided every three years by the University Grants Committee but each government’s share of this portion by the Member Governments, is through two complicated formula.

One half is via the Student Grant or General Grant which is divided up among governments in proportion to their students enrolled .

The second half is now called the Campus Grant which is divided up among governments in proportion to the amounts USP spends on salaries in the respective territories.  This second half is a crazy political “concoction” supposed to reflect the economic benefits each government receives by hosting USP facilities.  Fiji, Samoa, Vanuatu and Solomons usually pay a heavier proportion of this component because of the size of the facilities in their territories (there is another story to be told here).

USP Government Contributions 2019
 Govt. Contribution ($000)2019 Students (EFTS)2019 Unit Cost ($)
Cook Is182672736
Fiji3447199303471
Kiribati10055521819
Marshall Is304545584
Nauru131383446
Niue53316409
Samoa15044173608
Solomon Is336419431731
Tokelau55361528
Tonga13006711938
Tuvalu4992941696
Vanuatu25528952851
Total45420149003048

But what each government gets from USP is astonishing as the following Table shows.

Fiji does contribute the most, some $34 million in 2019. But Fiji also has some 9930 Equivalent Full Time Fijian students at USP, effectively and crudely, costing them an average of only $3471.  I suspect that this is way cheaper than what their students at FNU and Fiji University cost. ALL the member countries except for tiny Niue and Marshall Islands get an absolute bargain from USP.

If any regional member government were to send their students to an overseas university, you can guess yourself how much it would cost their taxpayers.

Of course, all these low average unit costs are subsidized by private students fees and donors contributions, as well as some independent incomes (consultancy fees, book centre, residential fees) earned by USP units and staff (some $30 million in 2019).

Then, what is often forgotten is that while donors to USP contribute almost as much ($30 million) to USP Revenues as Member Governments, in previous years they contributed even more, while financing the bulk of building construction at USP since its inception in 1968.

Of course the donors in Australia, NZ, Canada and US have had the great hidden benefit of obtaining tens of thousands of former USP graduates, at no cost to their own education budgets.

Unfortunately, while donors have a couple of representatives on USP Council, they probably decline to assert themselves because of political sensitivity to being “outsiders”. 

But I suggest that the unfortunate result is then a dereliction of duty to the Pacific peoples who deserve good governance at USP Council and the help of strong, neutral, objective and knowledgeable voices which donor representatives can be, as they are usually senior Australian and NZ academics.

Who manages USP?

USP is supposed to be managed by USP Council which has representatives of Member Governments (around 19), Students (2), Staff (2) Donors (2) and an assorted five who are labelled “Co-opted”.  Then there are the USP senior management who “attend” the meetings.

But if USP were a normal corporate entity, would the above representation of “Directors” to the governing board, represent the “shareholders”?  I suggest no.

The public should be asking: why is one Board Member of USP Council, a minority member at that, interfering with the internal management of USP, which is properly the domain of the USP Council?

It is quite clear that the Fiji Government reps are usually the most dominant in USP Council.  This dominance rose to unprecedented levels when the Bainimarama Government’s pressure on management for academic censorship of staff and students was capitulated to by the previous Vice Chancellor, who I personally know (I was a close friend then) felt beholden to them for his appointment.

In turn, the USP management, staff and student representatives to USP Council have usually been those sympathetic to the directions given by the previous Vice Chancellor, and USP Council has sadly not had the benefit of independent voices from within USP as used to be the case before the previous VC.

The public would have noted the completely opposite stance taken by the Prime Minister of Fiji who has declined to interfere with the Fiji Airways decisions on staff laid off allegedly because of COVID-19. 

So why does the Prime Minister of Fiji allow one of his ministers to interfere with the governance at USP while he himself says nothing.  Does the Prime Minister of Fiji have no concern that while he has often (correctly) condemned a previous government’s involvement in the NBF disaster, one of his own very prominent representatives at USP Council is the same one who not only presided over the NBF disaster but who at a public lecture at USP not too long ago pronounced that the NBF losses were exaggerated?

It is fortunate for USP that the smaller Government representatives are taking an independent approach to the governance of USP and not giving in to these few Fiji Government representatives.

But still, there is a mess that has been inherited by the current Vice Chancellor.

What is the USP mess?

For decades, USP quietly operated turning out qualified graduates and contributing to the wider intellectual life of the region with little public rancor.

Until academic censorship began under the previous vice chancellor, with staff (including myself) being pressured to leave because of concerns over Fiji Government funding.

It is a tragedy that there have been so many accusations and counter-accusations flying around in the media, and even more in the social media and blogs, without the public being informed accurately of what the problems are.

Under the governance of the previous vice chancellor, even this premier university has gone into secrecy mode deliberately denying the public access to USP policy documents (which USP management now calls “internal” as one just did recently to me in an email communication).

The current Vice Chancellor (Ahluwalia) made a formal complaint to USP Council with many serious allegations about appointments, promotions and emoluments, which has not been made “public” although the blogs have had a field day.

Those of us who know the inner workings of USP think that most of these allegations have substance.

But one Fiji Government representative who was the Chairman of the Audit and Risk Committee commissioned an outside supposedly independent investigation (by BDO Auckland) of the Ahluwalia allegations and produced a Report which has not been officially released to the public, although the social media have been circulating it.

Those of us who know the inner workings of USP over the recent years feel that the BDO Report fudged most of its conclusions on the Ahluwalia allegations, especially on alleged favoritism by the previous Vice Chancellor towards a few chosen staff, who would not be characterized as “outstanding” in any way whatsoever. The BDO Report did, however reluctantly, , admit to a few “substantiated” and “partially substantiated” allegations.

Perhaps USP Council might want to ask why this particular accounting and audit company was selected by the Chairman of the USP Audit and Risk Committee to conduct the investigation.

I won’t go into the details of the Ahluwalia allegations or the BDO Report findings, but suggest that any intelligent person who reads USP Financial Statements to USP Council ought to be asking how it is that under the previous VC, the administration became so totally top-heavy and emoluments escalated.

These Financial Statements (on the USP website) reveal that the number of senior management staff who received more than $300,000 went from 0 in 2008 (when the previous VC was appointed), to 5 in 2017 and then to 11 in 2018, just before the previous Vice Chancellor departed.

I won’t go into the several blatant cases of renewal of a few selected senior contracts at the end of the previous VC’s tenure when the agreement with the USP Chairman of Council (Thompson) was that the new VC would be consulted given that these senior staff would be part of his Senior Management Team (quite reasonable I would think).

I won’t even go into the shocking approval of multiple responsibility allowances to mediocre management and especially one individual who ensured that the photo of his boss appeared on as many pages of university publications as possible.

Or into the roles of that senior management whose exorbitant charges for consultancy services were shockingly approved out of donor funded projects that he had been given responsibility for.

I won’t even go into all the glossy public relations reports released by USP, including a whitewashed “history” of USP@50) which glosses over the many fundamental problems currently faced by USP such as: the mirage of healthily growing enrolments when a large part over the last five years has been due to the inclusion of a large Pacific TAFE technical training program, declining quality of students and staff, stagnant quality of research and public policy output, increasing legitimate competition from national universities in Fiji, Samoa and Solomon Islands and Fiji government censorship of academic staff and students.

There is also the frequent resurrection of the false bogey of “Fiji hogging all the benefits” of USP, recently even repeated by a senior Fiji academic who should know better given his eighties experience (another story sometime).

These are all questions (and more) which should be asked by USP Council and answers sought not from the USP management either, given that the current management might also have the same incentive to produce the self-promoting advertising dross that the previous Vice Chancellor had so usually delivered.

A better USP Council?

I would point out that there is an urgent need to ensure that USP Council better reflect the real shareholders or financiers of USP who deserve a quality vibrant university that serves the region independently and fearlessly, as it has been until the censorship years of the Bainimarama Government.

First, the majority of USP Council should comprise representatives who hold themselves accountable to the private students and parents of the region who contribute the most to USP’s revenues.

I would suggest to all political parties in the region that they announce policies to strengthen “people’s representatives” to USP Council whose primary brief must be to fight for the interests of parents and students who contribute more to USP than the governments do, even though all that the governments do is contribute taxpayers’ money.

Second, Government representatives should represent both Government and major Opposition parties and not just the ruling party which has an incentive to stifle independent thinking at the university.

Third, donor representatives must be specifically requested by USP Council to more assertive in the governance of USP, so that USP is better accountable for the use of donor money.

Fourth, USP Council has to explicitly espouse a culture of openness and accountability to the Pacific public, which it has sadly lost in recent years.

Fifth, USP Council needs to commission an independent USP@50 Review Team made up of knowledgeable former USP academics and international education experts to record where USP has come from and chart where it should be heading in the future, for the collective interests of the Pacific peoples.

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