Damning report says financial crisis ‘self-inflicted’

A damning report into Dundee University has said the financial collapse that led to a government bailout was caused by a “self-inflicted” failure of its oversight system.

The independent report said university bosses and its governing body failed multiple times to identify the worsening crisis and continued to overspend instead of responding.

It said the problems should have been clear to senior members of the university that its financial position “was worse than presented”.

Prof Iain Gillespie, who resigned as the university’s principal in December, was said to have had an “overbearing leadership style” and a dislike of potentially awkward confrontations or questioning.

The report said he frequently demonstrated hubris – or excessive pride – in his role, which it said can lead to a contempt towards people who offer criticism and obsession with personal image and status.

Prof Gillespie stood down weeks after he had told staff that job losses were “inevitable” in order to tackle a “significant deficit”.

He blamed “an extremely challenging period” for the UK higher education sector.

It later emerged that the university had a £35m blackhole in its funding and it had to be bailed out with £22m from the Scottish government.

The Scottish Funding Council then commissioned an investigation into why the university’s financial position deteriorated so suddenly.

The independent report, led by Prof Pamela Gillies, found the main causes included poor financial judgement from university bosses and weak governance from the university court, which is meant to hold senior management to account.

The report found that almost £40m of ringfenced money had been spent elsewhere and there had been “a lack of real action” to address an £8m “hole” due to a fall in international student recruitment.

It said those in charge of the university’s governance should have known well before November last year that there was a problem.

There were numerous points where “a reasonable person” could have reached a judgement that the university’s financial position was worse than presented, it said.

It then detailed the occasions when those overseeing the finances failed to challenge executives on the gap between rapidly falling income and continued high spending.

The report stated: “The failure of the university’s financial governance system was self-inflicted and experienced multiple times and at multiple levels.

“This led to a failure in identifying the worsening situation and not responding early enough.”

According to the report the university had a £33.7m increase in revenue in the year to July 2023, mainly driven by growth in international students and an increase in research income.

However, year-on-year recruitment of overseas postgraduate students then fell from 1,230 to 393.

The report said that the university needed to make £8m of savings in 2024 due to this fall in overseas recruitment, but that nothing had been done to address the “inevitable outcome”.

It said this “set the university up for failure” in the 2025 financial year.

The report added that this should have signalled “an immediate change” in the 2024 budgets and operations.

It added: “Despite this decline in student numbers and resultant impact on revenues, the university did not make significant cost reductions, notably around staff costs which account for about 60% of total costs.”

Instead, a message from Prof Gillespie was circulated to staff and students on 1 March 2024, which said that the university had improved its resilience, allowing it to “invest in our strength and continuing on a path of growth”.

The report noted: “This set the tone within the university for investment and growth at a time when savings should have been rapidly implemented.”

It added: “This was at a time when the Principal was aware that there was an £8m “hole” in the (2024 financial year) budget.

“There were no plans in place to deliver savings necessary to move into a surplus position.”

The report said that despite a fall in student numbers, there was an internal failure to control costs, stating: “There is little evidence that budgets were meaningfully updated to reflect changing circumstances.”

The report said that Prof Gillespie resisted “difficult conversations” and that “few dared to speak truth to power”, with women in particular finding it difficult to be heard.

It noted: “Female members of staff in particular, reported being spoken over, side-lined or discussed in public as being obstructive if they attempted to be heard.”

The report said that it was apparent there were “significant concerns” from staff in relation to income, expenditure and capital spending, but the true picture “was never put together in one place”.

The university’s current principal Shane O’Neill was previously deputy vice chancellor and is identified along with Prof Gillespie, the chief operating officer and the director of finance as one of the bosses who “did not cultivate a culture of openness and challenge at all levels”.

The report said greater scrutiny, challenge and curiosity should have been forthcoming and “would reasonably have exposed the worsening situation”.

It noted: “There was no unexpected event or culmination of unexpected events beyond those impacting the sector as a whole. The university was not ‘different’.”