by GARRY CARNEGIE and JAMES GUTHRIE
Public universities in Western Australia were among the first in the country to publish their 2019 annual reports having all been tabled in the WA Parliament by 19 March 2020 and, as a result, provide certain disclosures on the COVID-19 scenario in which they are placed.
The possible severe impacts of COVID-19 and related financial risks on Western Australian public universities, particularly on their future financial performance, financial position and cash flows were not addressed in their 2019 annual reports. In the meantime, many major Australian universities are announcing financial “black-holes”, with more alarming vice chancellor’s disclosures to contemplate.
All four public universities – Curtin, Edith Cowan, Murdoch, and University of Western Australia (UWA) – have a December 31 2019 year ending, with the latest annual reports being tabled in the Legislative Assembly within three months.
The earliest cases of COVID-19 emerged in China – a significant source country of international students enrolled at Australian universities – which advised the WHO on 31 December 2019 of several cases of unusual pneumonia in Wuhan. While the effects of COVID-19 and related mitigation actions did not become apparent in Australia until early 2020, the universities are to disclose information in their financial statements on “events occurring after reporting date/period” that is material.
These disclosures were made in “notes” to the financial statements, which typically stated: “subsequent to the reporting period, the impact of the COVID-19 virus and the related extended travel ban on future student income remains to be quantified. There is no material impact from the event on the 2019 financial position of the Group” (UWA). Curtin and Murdoch made very similar disclosures.
However, Edith Cowan, in referring to the local COVID-19 developments in 2020, produced details on certain mitigation activities undertaken relating to measures “to mitigate the late arrival of those commencing and continuing students including online orientation and flexible study plans”. Edith Cowan also indicated that it “does not expect that there will be a material impact to revenue” from students delayed in arriving to study.
The statements by chancellors and vice chancellors, however, provided more diversity to disclosures. The Curtin Vice-Chancellor’s Report stated: “the new decade will not be without its challenges for the higher education sector, as the emergence of the novel coronavirus (COVID-19) at the start of 2020 has already shown us. However, Curtin’s organisational strength and resilience and its forward-looking nature will continue to stand it in very good stead”. The Chancellor’s Forward, however, did not contain any specific statement on COVID-19 and related financial risks, commenting instead that revenue growth from international student enrolments was stalling across the sector in the state.
Neither the chancellors and vice-chancellors at Edith Cown and Murdoch commented in their reports on the COVID-19 predicaments and the inherent financial risks to their institutions. Instead, both vice-chancellors made brief statements on the growth of international students during 2019. The Edith Cowan Vice-Chancellor’s Summary advised, “2019 saw the largest ever commencing cohort of onshore international students, as well as increasing enrolments in our offshore programs”. The Murdoch Vice-Chancellor’s Report stated the university “focused on sustainable growth in international student numbers, with 11.4% growth in 2019”.
In short, there was more emphasis on growth in fee paying international student growth rather than the emerging concerning news for international student enrolments due to the likely impacts of COVID-19.
At UWA, however, the Chancellor’s Introduction, provided a comment on COVID-19 stating the university: “sought to address and mitigate the impact of the Novel coronavirus (2019-nCoV) in the latter part of 2019 … [and] worked with the Federal Government and relevant agencies to understand this dynamic and complex issue … minimise disruption in the delivery of courses particularly to overseas students …”.
While the UWA Vice-Chancellor’s Overview did not specifically comment on COVID-19 and the related financial risks, UWA commented on COVID-19 within “Financial Highlights” (Future financial performance) stating “… its impact on the global economy and associated restrictions on international travels will have a significant impact on the university’s sustainable operations in 2020. The impacts of COVID-19 has (sic) caused global disruption with international enrolments at universities compromised, along with shocks to returns on investment portfolios and impacts on supply chains to operate core activities. The university is working actively to mitigate these risks”.
UWA also indicated, within “Significant issues and Trends”, that future load expectations of international students “will be conducted in the light of any ongoing Covid-19 effects”.
COVID-19 impacts around the globe now constitute a serious threat to the financial sustainability of Australian universities.
Emeritus Professor Garry Carnegie, RMIT University and Distinguished Professor James Guthrie, Macquarie University