Urgent action is needed to prevent the University and College Union (UCU) being plunged into debt, a letter from a UCU Trustee to all the National Executive Committee members reveals.
The letter, seen by FE Week, describes “a staggering loss to the union, something in the region of £3m – £4m” after the UCU Congress was “misled” into believing the sale of one of its buildings would raise enough to pay off debts.
However, the UCU insists it is “unwise” to gauge what the financial situation is with the union, until the sale, which is ongoing, has been completed.
Britannia House, in North London, was proposed for sale at an estimated price of £12 million after the merger of the National Association of Teachers in Further and Higher Education (NATFHE) and the Association of University Teachers (AUT) to form the UCU in June 2006.
However, in the letter, Fawzi Ibrahim, the former NATFHE national treasurer and now UCU Trustee, says: “I’m taking this unusual step of writing to you regarding an important aspect of the union’s finances.
“Congress 2011 was told that ‘the money received from the sale of Britannia Street property will be sufficient to pay off the existing debts. There will be some left over to add to the capital replenishment fund’.
“This is incorrect. Congress was misled.”
Mr Ibrahim says that following Congress, he wrote to the General Secretary, Sally Hunt, asking for clarification, leading to an exchange of ten emails.
In none, Mr Ibrahim’s letter added, did she approach the subject “let alone answer my questions” so he went to the union’s auditors.
The letter continues: “According to the auditors, at the time when the audit was carried out, the union owes a total of £12.45m in loans.
“The estimated cost of the sale of Britannia St. property (including agent’s commission, consultants and legal fees) is £2.03m.
“It follows that, if Britannia St. was sold at the agreed price of £12m, far from that being ‘sufficient money to pay off the existing debts’, there will be a huge shortfall.”
When approached, Mr Ibrahim refused to comment on the leak but he did say: “UCU’s finances are fundamentally sound.
“All we need is a long-term plan to pay back the existing debts over say the next ten or so years regardless of Britannia St.”
When pressed on the fact he had been openly critical of the union’s dealings in the past, he said: “It is no secret that I have, over the past few years, expressed my concern at the attitude towards the union’s finances which borders on complacency.”
One UCU source went further, saying the attitude had been that once the Britannia Street building is sold, “all our problems will be over”.
The result was a fragile financial situation, leaving the UCU at the mercy of the banks. His further concern was that any change in bank rates could see interest payments rocket and services would inevitably be affected.
These concerns are echoed in the rest of Mr Ibrahim’s letter, despite his assurances.
In November 2009, contracts were exchanged on the sale of the former NATFHE HQ in Britannia Street after the UCU bought a central London building in Carlow Street and a bridging loan to cover costs while the sale was completed.
The following year the UCU paid £145,862 in interest on the loan, which carried liabilities of £12.3 million.
The letter continues: “If you add the £2.27m advanced in cash when Carlow St. was purchased and a bridging loan was obtained, the outcome of the decision to buy Carlow Street, a decision that was taken in haste without a meeting of the Strategy and Finance Committee, is a staggering loss to the union, something in the region of £3m – £4m.
“Such an outcome was not hard to foresee at the time when property prices were beginning to decline. This is why, when it came to the Trustees, the decision to go ahead with the purchase was not unanimous.
“As a National Executive member you are charged with looking after the union finances and take decision on how the union’s money is spent.
“You cannot do that without the full knowledge of the true state of these finances. I hope this letter has helped to do that.”
A UCU spokesperson said: “The impact of recession on the property market is well-documented.
“It would be unwise to try to gauge what the financial situation with Britannia Street is until a sale has been completed.”