by GARRY CARNEGIE and JAMES GUTHRIE
Pre COVID-19 public universities in NSW and Victoria relied on international students studying on-shore for up to 45 per cent of total income for continuing operations (our CMM story, August 13).
Now many are adopting austerity measures, which may hurt students, academic and professional staff, and the institutions themselves at least in the short to medium term.
* laying off research students/tutors and unknown numbers of other casual staff
* loss of special study programs, and related leave, and research funding, for at least 2021
* voluntary and compulsory redundancies
* curriculum and teaching-mode changes that may reduce offerings to students and lead to much reduced on-campus delivery and associated usage of public facilities.
These and other measures, ostensibly in response to what is described as the “COVID-19 effect”, are linked explicitly to the downturn in income derived from pay-paying onshore overseas students.
However, an array of stakeholders who are interested in the future of public universities do not have access to up-to-date information on universities financial circumstances and student/staff numbers, which they need to make informed judgments on the state of play, including for personal decision-making purposes.
Instead of up to date information managements provide stakeholders with generalisations.
In our August 13 report, we called for half-yearly financial reporting by public universities “to provide a fuller understanding of their financial predicament from 1 January 2020 and what their prospects and potential may hold.”
We proposed interim reporting begin for the six-months ending 30 June 2020.
This would provide a fuller understanding of public universities financial management circumstances and render vastly better public accountability to stakeholders. This is entirely feasible as universities have the required accounting systems to deliver such reports at not considerable expense.
Late last week, the University of Tasmania issued its 2019 Annual Report, almost nine months after the year-end date of 31 December 2019. * The entry regarding COVID-19 in the notes to, and forming part of, the financial statements, is typical of most disclosures we have examined in our investigations.
Despite this annual report being released towards the end of August 2020, a university media release on June 3 disclosed, “the university is facing a $30-34 million shortfall this year, with up to $120 million in revenue to be lost each year for the next three years.”
Such media reports, however, are not subject to independent audit and have less credibility than when such critical financial information is published in annual reports or in interim reports as we propose in this commentary.
U TAS joins other slow-reporting Australian public universities, notably in NSW and Victoria, where the 18 universities in both states did not make their 2019 annual reports available until mid-May to early June 2020.
As the COVID-19 crisis hit Australia in January, the pandemic, along with its estimated financial impacts, were regarded as a “non-adjusting event” for financial reporting purposes for the year ending 31 December 2019. Therefore, no “accounting” or risk disclosures combined with related estimated financial effects were made of any consequence.
Our research shows that four Australian public universities did not even mention the COVID-19 crisis anywhere in their 2019 annual reports.
Given these circumstances, we need interim financial reporting from Australian public universities.
Interim financial reports are issued when a shorter reporting period than annually is desirable. Like now in the public university sector.
Interim financial reports will inform stakeholders of public universities, including the Australian public and current and future students and staff, of the ramifications of unheralded and sweeping financial management reforms, otherwise known as “cost-cutting” or “austerity” measures, including employee redundancy programs.
Presently, stakeholders are interested in whether public universities are cutting capability, capacity and programs either too much or too soon.
There may also be a concern as to whether university executives and governing bodies are acting without adequate public awareness or understanding of the downturn in their financial results. Such decisions are effectively sweeping thousands of staff, including unreported numbers of casuals, to the unemployment ranks or earlier than planned retirement.
If there is no public release of financial information for the six-months period ending 30 June 2020, then there will be “no accounting” and a lack of informative and adequate risk disclosures. The estimated financial effects to stakeholders of the impacts of COVID-19 will not be known until sometime around April-June 2021 or even later.
In our view, that is too long a period to wait for timely publicly available financial accounting reports and appropriate public accountability to all stakeholders from 1 January 2020.
Emeritus Professor Garry Carnegie, FCPA, RMIT University and Distinguished Professor James Guthrie AM, FCPA, Macquarie University.
* Uni Tasmania’s treatment of COVID-19 in its newly released 2019 annual report reads:
“Note 24. Events occurring after the end of the reporting period
On 30 January 2020, the World Health Organisation declared the COVID-19 outbreak a public health emergency of international concern and on 11 March 2020 announced the virus was a global pandemic. On 1 February 2020 the Australian Government introduced a travel ban for anyone other than citizens, permanent residents and their immediate family members travelling from China. On 20 March 2020, this ban was extended to travel from the rest of the World. The impact of COVID-19 and the associated public health measures are being managed and modelled by the University. Several scenarios are being considered over the immediate, medium- and longer-term horizons, to inform strategic planning and to assess and manage the severity of the impacts (financial and non-financial).
Some critical areas of anticipated financial impact include:
– course fees and charges, due to travel restrictions and teaching activity moving to a virtual model;
– an expected change in investment balances, due to a decline in equity markets;
– potential impact on research outcomes and funding, due to disruption in research activity; and
– potential implications in industry and philanthropic partnerships.
However, due to the significant level of uncertainty including Government policy setting, the full economic impact for 2020 is uncertain. …”,