Painting Over the Cracks
The fall of the Edinburgh College of Art — an investigation for The Journal.
Senior staff at the Edinburgh College of Art received large increases in pay and pensions even as the troubled art school’s finances deteriorated to near-bankruptcy, an investigation by The Journal has found.
Financial records show that by the end of the 2008/09 financial year ECA was left with only £16,000 cash in hand, next to debt liabilities totalling nearly £3 million.
The college is now set to merge with the University of Edinburgh in August, after a damning inquiry by the Scottish Government reported that financial mismanagement had left ECA close to collapse. Education minister Michael Russell told The Journal that “the financial situation at the College should not have been allowed to develop and it points towards very significant weaknesses in ECA’s internal controls and governance structures at crucial stages in recent years.
“The scale of the financial difficulties at the College are such that even with an equivalent injection of funds to those being provided for the merger it would not be able to continue to operate to its current level and range of provision.
“I very much regret that these matters have overshadowed, and had a bearing on my decision.”
Beleaguered principal Professor Ian Howard has now announced his intention to retire a day before the merger takes effect, citing a desire to see a new principal “take the college forward into a bright future.”
Despite significant financial turmoil at ECA, senior-level pay continued to increase even as the art school’s finances were failing. Prof Howard’s salary grew from £94,559 in 2005 to over £125,374 in 2009 — an average yearly increase of 5.8 per cent at a time when the college’s overall income was increasing at just 3 per cent, and its debt at twice that rate. His employer’s pension contribution, meanwhile, increased by 48 per cent over five years, rising from £11,820 to £17,511.
A spokeswoman defended Prof Howard’s pay deal, telling The Journal: “The Principal’s salary is determined by the college’s Remuneration Committee on an agreed set of criteria covering both financial and non-financial factors, and reflects salaries in the sector.”
The official also noted that Prof Howard does not receive ancillary benefits, such as subsidised accommodation or a company car.
However, information obtained by The Journal shows that over a three-year period between 2007 and 2009, Prof Howard made extensive use of an ECA expense account, charging over £17,000 to his college credit card. The documents seen by The Journal did not detail the nature of specific charges, but show that the largest single transaction totalled £2,556.25 in February 2008. The college refused to clarify the nature of this expense.
Challenged on these expenditures, ECA’s spokeswoman said: “We continuously review in detail the expenses of senior staff and we are satisfied as to the validity and necessity of these expenses.
“In light of [Prof Howard’s] role as an ambassador for the College, the level of expenditure is considered reasonable.”
At the same time, there have been reports of cuts to estates services at the college’s Lauriston Place campus, with students becoming increasingly frustrated by declining standards of campus cleanliness and limited out-of-hours access to buildings, including studio space.
In an emailed response to the complaints, sent to students by union president Francesca Miller in mid-February, students were informed that the college had decided to recruit eight students to work as part-time cleaners on a temporary basis. She went on to say that “the students will be paid by the college to clean studios and corridors, working part-time two to three days a week for the next three weeks.”
Speaking to The Journal, Ms Miller defended the use of students as cleaners as a stop-gap measure, saying that the union “would rather students were employed over contract cleaners as we see a constant stream of students looking for jobs.”
It is understood that since November the college has sought to reduce its staffing budget by £1 million, and that University of Edinburgh cleaning staff are now being used at ECA’s campus. However, Ms Miller confirmed that “we are currently of the understanding that the college has not yet reached the £1 million target, and so more cuts are to come.”
She went on to condemn ECA management for their handling of the cuts, saying that she was “unsure as to why the management did not foresee problems” with the staff cuts, and that the union “would encourage the college management to consider the impact of all upcoming decisions regarding staff cuts with greater attention to detail.”
The college’s accounts show a worrying pattern of financial decline over a five year period, with the most pronounced deterioration taking place since 2007. An analysis of ECA’s balance sheets from 2004/05 to 2008/09 (the most recent available filing) shows that, on average, annual expenditure was increasing at twice the rate of income. By the end of the 2009 financial year, staff costs had increased to 72 per cent of annual income.
ECA would not disclose exact salary information for senior officials other than Prof Howard, but annual reports show that the number of employees being paid over £70,000 a year — the highest salary band — rose from just one in 2006 to four in 2009.
The institution is shown to have experienced a major cash flow crisis, evidenced by a disastrous reduction in its liquidity. In 2005, ECA held cash reserves of £804,000, but over five years that figure dwindled to just £16,000; an average decrease of 54 per cent a year.
ECA officials described the reduction as “a reflection of capital expenditure incurred during an extended period of estates rationalisation.”
The college’s debt, meanwhile, has spiralled out of control. The art school’s end-of-year reports show that in mid-2005 they were already facing debts of £1.5 million. By the end of the 2008/09 financial year, this liability had increased to £2.7 million. In that year alone, its debt rose by some £700,000.
These figures refer only to debt falling due in the coming financial year — the college’s longer term debt by the middle of 2009 stood at just over £13 million. This is largely connected to the controversial purchase in 2006 of the Evolution House building on West Port, in Edinburgh’s Grassmarket area.
ECA secured an £11.5 million loan from Lloyds bank to partially fund the acquisition, and borrowed a further £1.5 million from the college’s Endowment Fund. But a report in the Sunday Herald last October revealed that, despite college administrators pouring £21 million into the purchase and refurbishment of the building, it was recently valued at just half that sum.
The merger deal, which is currently awaiting final approval from the Scottish Parliament, includes a £14 million cash infusion from the Scottish Funding Council. It is predicted that much of this sum will be spent relieving ECA’s debt burden.
Details about the precise mechanics of the merger are still scarce, but government figures have expressed a desire to see the art school’s collegial identity preserved. Mr Russell said that he had “made clear that I regard the University’s expressed commitment to preserve the identity of the College and its ethos and studio-based culture as binding.”
