by JAMES GUTHRIE

The NSW Auditor-General (A-G) released her ‘Annual work program 2021–24’ on August 5, providing an overview of planned audits for the year ahead and foreshadowing likely performance audit topics for the following three years.

To our disappointment, there is no planned performance audit of the ten public universities in the state.

NSW legislation requires the A-G to conduct performance audits of NSW statutory bodies. This includes audits of the financial statements of the ten public universities in NSW and their controlled entities. These audits are prepared according to the Public Finance and Audit Act 1983. Universities’ annual reports are also provided to the NSW Treasurer and the responsible minister, as required by the Annual Reports (Statutory Bodies) Act 1984. Certain non-financial information is also required to be disclosed according to NSW legislation and regulations. This includes staffing numbers. An examination of the 2020 annual reports indicates non-compliance with these requirements. (CMM June 20 2021)

COVID-19 has had a significant impact on Australian universities, not least those in NSW. The universities have implemented severe austerity measures due to COVID-19, arguing that their future revenues will be seriously impacted. These measures include wide-scale job losses, the closing of courses and subjects and a widespread switch to remote learning, in some cases when face-to-face learning is possible.

In her University 2020 report, the A-G noted that six universities recorded negative net operating results in 2020 (two in 2019). Remember, these are accrual numbers impacted by specific accounting calculations such as depreciation. However, the decline in 2020 is not entirely as bad as presented. The combined revenues of the ten NSW public universities from fees and charges decreasing by only $361m (5.8 per cent) on total combined revenue $10.9bn. A snapshot of revenue for operations for the year ended 31 December 2020 shows the combined NSW public universities have investment income of $1.1bn, government grants of $3.7bn, fees and charges earning $5.8bn and other revenue of $.3 billion. See the table reproduced from the A-G’s University 2020 report for more information.

Note that non-financial data, such as the number of employees and breakdown of students, are not audited. Nevertheless, this information is vital to understanding the current situation of the NSW public universities, which have been silent on the actual numbers of people who have lost employment since the beginning of 2020. They also provide no breakdown of domestic and international students’ student numbers nor disclose their fee-paying status. Finally, there is no discussion of how job losses and restrictions on face-to-face learning affect the student experience.

Last year’s NSW Legislative Council inquiry, Future Development of the NSW Tertiary Education Sector portrayed the NSW public university system as a public good, job creator, driver of innovation and research, and supporter of the industry and local communities. There is no doubt that the sector is critical to the economic and social development of the state, and its success contributes to the prosperity of communities and the creation of livelihoods.

Whilst the Commonwealth is the primary funder of universities in NSW, the state government has a crucial role to play in the development of the sector. Specifically, it has legislative and regulatory oversight of the sector, especially public accountability and transparency of operations.

Some of the Legislative Council inquiry’s recommendations, which the state government has recently indicated it supports in-principle, follow. They mainly focus on adequate disclosure of financial and staffing matters and the quality of student life and experiences:

(1) That the NSW Government improve university transparency and enhance annual reporting. This should include data on reliance on international student income, overseas student numbers in each course, staffing, job security and the staffing balance between teaching and research only.

(3) That the NSW Government expand the responsibilities of the NSW A-G to grant the NSW A-G a broader brief and stronger investigative capacity to ensure university financial and staffing management is transparent, effective and acting in the public interest, especially regarding reliance on international student income and the salaries paid to vice-chancellors and senior university administrators.

(7) That the NSW Government require universities to report on the quality of student life and experience, particularly in vertical campuses.

(22) That the NSW Government extend the powers of the NSW A-G to audit the state’s international education sector and make recommendations to universities as part of their annual audit of university finances, especially concerning risk management, income diversification, economic resilience and reliance on international student income.

(23) That the NSW Government require NSW universities to publish comprehensive international student data by course, country and study program through the NSW A-G audits and annual reporting to the responsible NSW Minister.

(39)  That the NSW Government ensure that all recommendations of the NSW A-G’s 2019 financial audit of universities are implemented immediately.

The Legislative Council Inquiry, state government and other stakeholders point to pressing issues requiring urgent investigation including, disclosure of staffing numbers, student experience, high debts, the nature of investment portfolios and the impact of COVID-19 on public universities’ current business model. Despite this, the A-G has not included a performance audit of the public universities in her work programme.

The A-G has a responsibility to conduct these audits to fulfil legislative requirements and public interest. Given that tens of thousands of university employees have lost their work, and now the remaining workforce is losing significant conditions, as well as the erosion of the student experience, with consequences for a generation in education, we strongly urge the NSW A-G to undertake a performance audit of the public sector university system now.

Distinguished Professor James Guthrie AM, Macquarie U Business School