Cambridge University is almost £10 million in the red, millions more than it predicted. Control over its finances is still in disarray two years after the bungled implementation of a new financial system.

Cambridge has an operating deficit of £9.8 million as expenditure continues to outstrip income, according to its 2001 annual report, due to be published this week, several months late.

The gap is several million pounds higher than predicted in June 2000, when the university said it would have a £2.3 million deficit this year, rising to some £15 million by 2004.

Treasurer Joanna Womack said it was too early to say what action would be needed. There was uncertainty over funding for the research assessment exercise and the results of the comprehensive spending review, she said.

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Ms Womack said that the university governing council would "be reviewing the whole business of the university but they'd prefer to look for increased income rather than make anything that would be regarded as a cut.

"As we become more successful commercialising knowledge and more entrepreneurial, that is one of the ways in which the university can help to fund absolutely basic research. Provided universities remember their basic mission - teaching and research - they quite properly seek to maximise their income from other sources."

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For the financial year to July 2001, the university increased its income by 6.6 per cent to £396.5 million. It received £1 million from the ÌÇÐÄVlog Funding Council and Teacher Training Agency, £48.78 million from endowments, £49.3 million from the research councils and £77.1 million, almost a fifth of its total income, from research grants and contracts. The rest came largely from tuition fees.

But expenditure rocketed by almost 13 per cent to £406.3 million. Ms Womack said this was largely a result of increased staff costs - which, at £205.3 million, amounted to more than half of total expenditure. Promotions to the recently created post of senior lecturer, as well as an increase in the number of research staff added to costs.

There were increased overheads for charity-based research and increased premises costs as a result of a building programme, she said.

The university confirmed that Capsa, its £10 million accounting system, was still not functioning properly. Despite "steady improvements", "the system overall is still not performing as expected and required", the annual report says.

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