University bosses quit after damning report into financial collapse

The principal of Dundee University and two senior members of its governing body have quit after a damning report into the financial collapse that led to a £22m government bailout.

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 were "self-inflicted" and it should have been clear to senior members of the university that its financial position "was worse than presented".

The current principal Prof Shane O'Neill and two senior members of the university's governing bodies resigned as soon as the report was published.

Prof O'Neill took over as interim principal in December but he was previously deputy vice chancellor.

He was identified in the report along with former principal Prof Iain Gillespie, the chief operating officer and the director of finance as one of the university leaders who "did not cultivate a culture of openness and challenge at all levels".

Prof 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."

In the wake of the report's publication, Tricia Bey, acting chair of the university court, and Carla Rossini, convenor of the finance & policy committee, left the university with immediate effect.

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 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'."

In response to the report, Dr Ian Mair, deputy chair of the university court, said: "It is evident from the report that there have been clear failings in financial monitoring, management and governance.

"While there were significant external factors, which have affected the higher education sector across the UK to varying degrees, the university's response to these, and responsible management of our finances, has fallen well short of the standards that everyone should have expected."

Dr Mair added: "I understand that this has been an extremely stressful time for staff and students and I offer my sincere apologies for all of the anxiety and uncertainty this situation has caused.

"You have all deserved better, and we can only work to make that the case from here on."

He said the court hoped to make an interim appointment of a new principal to replace Prof O'Neill in the next few days.

Prof O'Neill said it was with a "very heavy heart" that he had decided to step aside.

He said: "I have done all I can to set the university on a path to recovery, engaging with internal and external stakeholders to find the best way forward.

"I had hoped that we would be further along that path by now, and it will now be for others to steer that course into the future.

"I am truly sorry for the impact this financial crisis has had on many people, particularly our staff and students."