Mazars review of Dundalk IT raises major concerns

A projected deficit at Dundalk Institute of Technology (DkIT), potentially rising to €5.5 million by the 2023/2024 academic year; the impact of declining student numbers not being fully realised by the Institute; and the VP Finance position being vacant “for a significant amount of time”, were among concerns listed in a review compiled by professional services firm, Mazars, for consideration by the Higher Education Authority (HEA) in August 2022.

In a review of financial projections and preparation of a sustainability plan for DkIT, carried out by Mazars for the HEA and seen by the Dundalk Democrat, Mazars said in its report that “we believe that DkIT should have identified the scale of the challenge at an earlier stage”, and that “the Senior Leadership Team and Governing Body should have responded promptly to declines in student numbers, as well as rising pay costs.”

A spokesperson for DkIT has told the Democrat that it “welcomed the organisational evaluation conducted by the professional services firm Mazars which was facilitated by the HEA last year”, that it has “fully embraced the findings of the Mazars report” and that the “developed and comprehensive Sustainability Plan that has been approved by Governing Body and presented to the HEA is both realistic and achievable”.

DkIT said that “this external bird’s eye view of the organisation assessed the Institutes future projects and sustainability and concluded with outlining 29 necessary actions for future proofing DkIT.”

The spokesperson added that “both the Mazars report and the subsequent Sustainability Plan was circulated by the Institute to all stakeholders, including all staff last year.

“This plan is part of an evolving journey and there has been and will be regular consideration and consultation with staff and stakeholders on the implementation of the actions and sub-actions identified and the progress being made.”

The HEA appointed Mazars in April 2022 to conduct the review, after DkIT reported a a draft deficit of €1m for 2020/21 and projected a deficit of €2.6m for 2021/22 to the HEA, a deficit which was likely to increase further over the next two years with initial draft projections at the time, showing a deficit of €3.4m for 2022/23 and €5.5m for 2023/2024.

According to the review, the HEA met with the Institute and requested further information, including actions required to improve the Institutes financial position and ensure financial sustainability. Updated financial projections provided to the HEA in March 2022 showed lower deficits, but still at a concerning level for DkIT.

DkIT says that “some of the detail of the report stated a projected deficit of €5.5 million for 2023/2024, the variances from projections are inherent to the financial forecasting process, however the Institute is committed to returning to a breakeven position.”

Mazars' review said that the “lack of early identification of and response to financial challenges of the Institute may have been as a result of the VP for Finance, Resources and Diversity position being vacant for several years, some members of the Senior Leadership Team (SLT) not attending SLT meetings for a significant period, as part of a specific action undertaken, and interpersonal challenges within the leadership structure.”

It is understood that the HEA had considerable engagement with the Institute over the last number of years in relation to their concerns about this vacancy, the subsequent job description and length of time it took to fill “this critical role within the Institute”.

The report says that the position was filled in May 2021. Commenting on the role, DkIT said that it “filled the role of VP of Finance, Resources and Diversity over 20 months ago.

“Prior to this position being filled DkIT had a strong, experienced Finance Team who, in the absence of a VP, ensured projections were completed based on the best available information at the time. The Institute have a well-balanced Executive Board with a wide range of skills and this Board are fully engaged in ensuring the Institute returns to a balanced budget situation.”

Mazars says that on the basis of the financial projections and further engagement with the Institution and the Department of Further and Higher Education, Research, Innovation and Science (DFHERIS), the HEA appointed the firm to undertake the review.

In its review, Mazars said that it noted the “strategic importance of DkIT attaining TU (Technological University) status, but that the Institute is likely to experience difficulties in finding an alignment partner given consolidation in the sector and the current financial difficulties experienced by the Institute.”

Mazars said that “the indicators in respect of the financial challenges on the horizon for DkIT should have been visible in prior years. DkIT had experienced a period of decline in respect of full-time student numbers, while in parallel increasing its staff count and associated costs.”

It added that “had the seriousness of the financial challenges ahead been identified at an earlier stage, and earlier action taken by the Institute, we believe that the scale of the challenges DkIT now face, could have been less severe.”

Mazars also noted in its review that it had identified “a number of interpersonal and governance related challenges experienced by DkIT”, which in its view, “may have at least partially contributed to a lack of early identification and action in respect of the financial challenges now known to DkIT”.

It further added “we also understand that some members of the SLT had not attended SLT meetings for a significant period, as part of a specific action undertaken.

“In addition, we have noted some frustrations on the part of GB [Governing Body] and FAR members, in relation to the provision of information around student numbers, budgeted figures and future projections, during Q4 2021.”

The Dundalk Democrat reported in October 2022 that DkIT saw a fall of over 500 full-time undergraduate students from counties in the Republic of Ireland, enrolled at the third level institute since the 2016/2017 academic year.

The number fell from 3,654 in 2016/2017, to 3,485 in 2017/2018, to 3,421 in 2018/2019 and down to 3,253 in 2019/2020. The number rose in 2020/2021 to 3,317 but fell again in 2021/2022 to 3,139.

At the time, a spokesperson for DkIT said when asked if there was a fear that the fall in numbers would have an impact on government funding that: “DkIT’s predominate funding stream for both undergraduate and postgraduate EU students is that of the Recurrent Grant Funding Model. This model is based on student headcount, weighted for the discipline of study, amongst other factors.

“Student numbers are under continuous review and the Institute is happy to announce a 17% increase in Round 1 offers for 2022/23 compared to that for 2021/22. Both Non-EU and non-Irish student recruitment has rebounded well post Covid-19 with increases in registrations across a variety of courses.”

Looking at a 6% decline in overall full-time student numbers between 2018/19 and 2020/21, Mazars said that key factors that contributed to the decline included: a significant decline in student numbers in the School of Business and Humanities, a decline in the School of Informatics and Creative Arts; a decline in first preference CAO acceptances overall in the context of an increased market share in both level 7 and level 8 first preferences; and that “DkIT is not part of a TU process and this may have impacted recruitment”.

DkIT said last in week in relation to the decline in student numbers: “Student numbers are continuously under review in the Institute. Due to the Covid-19 Pandemic it has been an extremely difficult and testing three years with all third level education sector experiencing challenges and DkIT has not being immune to this.

“However, the Institute was happy to report a return to positive intake numbers for 22/23. DkIT has been and will continue to be at the forefront of delivering excellence in higher education to meet the academic, economic, social, and cultural needs of our region.”

With regards TU status, Mazars said that “progression to TU status has been a highly contested matter within DkIT over recent years. “The Institute’s desire to be within a TU was not always clear. We understand that DkIT has now made a strategic decision to pursue TU status and we note from discussions with leadership that DkIT is on target to achieve TU metrics within the short term.”

It added however that “it appears to be accepted by the majority in DkIT that lack of TU status impacts the Institute’s ability to attract and retain students and staff, as well as the Institute’s ability to access funding in line with its competitors. Currently, DkIT and IADT are the only remaining Institutes of Technology.”

Looking at the impact that the Institutes finances may have on its capital projects, Mazars noted that planned capital projects include the North/South project, as well as refurbishment of the Carrolls building and the Dconnect project. It commented that “these projects are primarily externally funded but overruns on construction costs may have to be borne by the Institute.

“We note that, due to rising construction costs, it is unlikely that parts of the full North/South project and Dconnect project will continue in the short term, but the Institute should be in a position to complete the additional refurbishments required as part of the PJ Carrolls project to create capacity for apprenticeship blocks.”

In concluding its review, Mazars noted DkIT’s sustainability actions in May to July 2022 “designed to assist in reducing the projected deficits in coming years, and ultimately return the Institute to a sustainable level”, and proposed a number of “sustainability actions” that it believes are needed to to return the Institute to a sustainable position.

Included in the proposed actions was a recommendation that “a HEA nominated independent facilitator should be appointed to lead the implementation of a sustainability plan, to monitor the progress in respect of individual actions, and to provide regular updates to the Governing Body, Finance, Audit and Risk Committee, President and Senior Leadership Team, as well as coordinating reports to the HEA”.

Commenting on the actions proposed in the report, DkIT said that it “fully embraced the findings of the Mazars report as a lot of the suggested actions specified in this review had already been identified internally and in progress. The developed and comprehensive Sustainability Plan that has been approved by Governing Body and presented to the HEA is both realistic and achievable.”