Many Australian public sector universities would have us believe they have suffered a significant financial impact because of COVID-19. Nevertheless, how do universities earn their income and what is their exposure to debt? An analysis of recent disclosures by the ten NSW public universities sheds some light on this question.

Over the past decade, the ten public universities in NSW, as a system, have moved into significant debt (Liabilities) while also acquiring significant cash and financial instruments investments (Assets). Overall, the debt-to-equity ratio for all ten universities is 14.8 per cent, but it varies widely from the lowest, UTS at 22.3 per cent, Macquarie at 33.4 per cent,  and Wollongong 77.6 per cent (the highest).

In her University 2020 report, the NSW Auditor-General (A-G) disclosed combined revenue from operations for NSW public universities in 2020. That disclosure revealed investment income of $1.1 bn, or about 10 per cent of revenue with students’ fees of $4.8 bn, government grants including research $3.7 bn and other revenue of $0.3 bn.

Of the ten NSW universities, Macquarie University had the highest percentage of investment income from total revenue, at 21 per cent, and the highest percentage of the debt. The  NSW public universities in 2020 had short term borrowings of $311 million and long-term borrowings of $3.6bn for a  total of $3.7bn (Liability).

NSW public universities have seen significant growth in financial assets since the global financial crisis, which saw derivatives failures from the Lehman Brothers collapse impact many public universities.  From about  2013, several prominent universities started to invest in financial assets from the surplus funds generated by student fees and borrowings.

Looking at the latest available data, in 2019 NSW public universities had a total of $5.09 bn in assets (Asset), consisting of other current financial assets and non-current financial assets (cash or cash equivalents). The following table combines both university’s other current financial assets and non-current financial assets. The figures have been rounded.






Charles Sturt University Macquarie University  Uni of Newcastle Southern Cross University  Uni of New England  Uni of New South Wales  Uni of Sydney UTS Western Sydney U Uni Wollongong
$381m $393m $545m $56m $99m $766m $1.7bn $77m $352m $476m


The NSW A-G has drawn attention to the materiality of these financial amounts on the universities’ balance sheets in various 2020 audit reports. For instance, the following statement relating to Key Audit Matters in the Uni Sydney 2020 annual reports:

“Key audit matters are those matters that, in my professional judgement, were of most significance in my audit of the financial statements for the year ended 31 December 2020. These matters were addressed in the context of my audit of the financial statements as a whole, and in forming my opinion thereon, I do not provide a separate opinion on these matters.

At 31 December 2020, the university held investments of $1.8 billion measured at fair value. The university’s investments are managed by external fund managers and a contracted services organisation.

I considered this to be a key audit matter because: of the significance of the balance to the university’s financial position

* the university holds a portfolio of assets classified as ‘level 3’ according to the fair value hierarchy under Australian Accounting Standards (i.e. where significant unobservable inputs a used in the valuation). The University’s Level 3 assets of $62 million include unlisted unit trusts and unlisted equities. Assessing the fair value of these assets requires judgment as the valuation inputs are not based on observable market transactions or other readily available market data

* of the degree of judgement and estimation uncertainty associated with the valuation.”

Similarly, for UNSW, the A-G’s Key Audit Matters statement says: “At December 31 2020, the university held investments of $654 million measured at fair value. The university’s investments are managed by external fund managers and a contracted services organisation.”

Most NSW public universities reported investment income losses for 2020, including fair market value applied on  December 31 2020. The following table highlights the changes in short-term and long-term borrowing for the universities from 2019 to 2020.

ST Borrowing LT Borrowing
2020 2019 Change on 2019 Change on 2019 (%) 2020 2019 Change on 2019 Change on 2019 (%)
Charles Sturt 4,324 54,716 -50,392 -92.1% 23,847 54,716 -30,869 -56.4%
Macquarie 12,950 264,321 -251,371 -95.1% 729,817 495,708 234,109 47.2%
Newcastle 2,380 2,442 -62 -2.5% 1,321 8,963 -7,642 -85.3%
New England 1,189 868 321 37.0% 44,560 3,856 40,704 1055.6%
Southern Cross 2,261 2,440 -179 -7.3% 42,437 42,169 268 0.6%
Sydney 216,961 13,351 203,610 1525.1% 477,689 699,409 -221,720 -31.7%
UNSW 6,428 5,292 1,136 21.5% 415,355 377,462 37,893 10.0%
UTS 53,857 14,912 38,945 261.2% 396,728 398,244 -1,516 -0.4%
Western Sydney 7,672 49,792 -42,120 -84.6% 636,315 393,983 242,332 61.5%
Wollongong 7,558 7,397 161 2.2% 610,207 272,812 337,395 123.7%
317,600 3,378,276

The accusation of  exaggerating excessive losses due to the financial impact of COVID-19 has already been levelled at Australian universities, with “fair value” investment evaluations and accrual accounting conventions dwarfing losses from international students’ tuition fees. For the 36 Australian institutions that have published their 2020 financial accounts, all but one had achieved surpluses on cash transactions, an increase averaging around 3.5 per cent.

The analysis above highlights that many public sector universities are using debt to increase funds, and these funds have been used for non-productive infrastructure developments and to invest in shares, bonds and other financial instruments. These investments provide an income stream to help with operations expenditures, as in the case of Macquarie University.

How does this strategy support universities’ core mission? While staff lose their jobs and students face constant erosion of their education experience, universities engage in risky investments that, the not very distant past tells us, may see a massive market downturn in which shares tumble and interest rates for borrowing rise.

Distinguished Professor James Guthrie AM, Macquarie U Business School


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