Is the Australian National University a profitable investment and commercial property organisation?

The ANU’s current business model appears to be disastrous.  The university relies heavily on fees from international students, but Covid 19 has cost the ANU this significant income source. In response, it has cut staff employees to underpin its financial sustainability. However, this risks the quality of teaching for students – one of the university’s core purposes. Instead, it should look at its investments and property developments, a significant part of which is heavy investment in accommodation for a substantial student housing portfolio.

On April 23 2021, Vice-Chancellor Brian Schmidt told staff and students that ANU “recorded a $162.4m operating deficit in 2020.”  ANU released its key financial results for 2020 ahead of the formal tabling of its annual report in parliament later in the year as part of its commitment to full transparency about its financial position (now available).

The $162.4 million operating deficit is a better return than the $219 million forecast in the university’s recovery plan. This is mostly due to better-than-expected tuition income from student retention ($22.7m) and income from research grants ($27m). The reported accounting loss in 2020 was $17.7m, which includes insurance proceeds of $91m for 2018 flood and 2020 hail damage that can only be spent on related repairs; investment returns of $61m, which can only be used for superannuation and endowments; accounting adjustments of $3.8m and deferred superannuation expense of $11.5m. The university does not anticipate any more job losses than the 467 modelled in its Recovery Plan”.

However, the published 2020 Annual Report highlights the operating result of $17.7m and the so-called underlying operating deficit of about $80m.

It gets interesting here as a drop-in investment funds income of approximately $165m is revealed. The university’s consolidated net assets stand at $2.7bn, and it has financial assets, mainly shares and other financial instruments, totalling about $1.7bn. Only a tiny proportion of this would be gifted assets expenditure for a specific purpose, but these expenses would be recorded in the operating expenses that make up the operating results.

Now some accounting 101. To first provide some context, ANU receives money from the Australian Government in the form of financial assistance grants, domestic student fees paid by income-contingent loans, research and consulting income from government and industry, fees paid by international students, research commercialisation, and a range of commercially oriented business ventures. First-year accounting students understand that the money flowing from the government and students is funded under cash accounting, and this is what we should focus our attention on –  not the accruals that come about because of the application of business accounting to the public sector universities. The accrual numbers show the ANU’s operating revenue of $1 330bn and operating expenses of $1 347bn, therefore the loss of about $17 million. However, in these accrual numbers are items such as depreciation, impaired assets, and service concessions (public-private partnerships for student accommodation). However, net cash provided by operating activities showed a surplus of about $137m.

Focusing on these financial assets, the ANU states it has investments of about $382m in restricted assets. Understanding this number is challenging as I doubt the ANU has received all this money as gifts (2020 total Donations and Bequests = $15 million). Maybe the CFO imposed a general restriction rule on these funds. The money for many of these financial assets would have come from governments and students paying cash for quality education.

Also, the ANU holds nearly $600m in funds to meet the cost of the Commonwealth Superannuation Scheme (CSS), which was a defined benefit. The  CSS closed to new members from 1 July 1990. Therefore, employees eligible for this scheme will have been working for more than three decades at the ANU. It is unclear how many current or past employees fall into this category.

These numbers provide an image of a corporation managing financial assets of about $1.7bn outsourced to investment bankers rather than an educational institution. However, I assume it all complies with the university’s accounting rules, council’s policies, and government regulations.

We now turn to the decline in international student numbers. Carnegie et al. (2021) highlight that the ANU had the third-highest international to local student ratio of all public sector universities in Australia before the pandemic. This business model is inherently high-risk, given that there could be a downturn in student numbers for any number of reasons. This is exactly what the ANU is now experiencing.

In 2020 the ANU disclosed land and buildings and infrastructure of $2.5bn and adjusted the 2019 figures from $1.8bn in the 2019 annual report to $2.3bn in the 2020 report. That is an increase of $0.5bn without any explanation, other than a footnote about a service concession arrangement. These are arrangements whereby a government or other public sector body contracts with a private operator to develop (or upgrade) land or buildings.

Explicitly focusing on commercial student accommodation, it appears that the ANU had problems in terms of the construction and operation of the accommodation. Some of this would be due to the downturn in international student numbers. Clark (2021) highlighted these issues, pointing to student accommodation 8 (SA 8 project) and lost bed capacity valued at $146m, revenue reduction, and significant budget overruns.

As a Commonwealth corporate entity, the ANU must prepare an annual report under subdivision B, sections 17BA to 17BF of the Public Governance, Performance and Accountability Rule 2014 (PGPA Rule) and report employee statistical data, as follows:

“(ka) Statistics on the number of employees of the entity (including by reference to ongoing and non-ongoing employees), at the end of the report period, in relation to each of the following: * full-time employees * part-time employees * gender * location.”

Note that the requirement appears not to include headcount during the period for casuals. Therefore, many casuals are not included. However, the disclosures show an increase in ongoing employment in 2020 (pp. 86‒88) from 2019 ongoing 3225 to 2020 ongoing 3407. However, the ANU Charities Commission report disclosures for 2020 have different numbers: full-time employees, 4014; part-time employees, 827; casual employees, 4342; full-time equivalent staff (FTE), 4,467. How can this be?

While the ANU disclosures may vary from public report to report, the numbers ultimately point to one overarching issue. The university has shifted its focus from its core teaching and research activities instead of positioning itself as a fund and property operations. In doing so, it seems the university’s Council has lost its way in its understanding of risk and urgently needs to review its core operating model.

In conclusion, ANU is not alone being a property developer. As highlighted in previous CMM pieces on Deakin U , Uni Tasmania, UTS etc.) and in recent articles by Kelly and Ross, Australian public sector universities are selling off non-core real estate and ratcheting up the earning potential of their campuses by property development. Suburban-based institutions such as Western Sydney, Uni Tasmania, Edith Cowan U and Griffith U embraced property investment in the years before Covid-19, putting campuses on the market to finance the purchase or redevelopment of others. Central city universities are following suit – particularly in Sydney, where property values are soaring despite significant university job losses. Australian universities have increasingly ventured into commercial property development in the past ten years, using debt rather than government grants to fund these projects. As this authors said in the Australian Financial Review, “we’re not talking millions, we are talking a billion-dollar industry or even more at the moment.” ( Guthrie, AFR quote)

James Guthrie, distinguished professor of accounting at Macquarie Business School,


Carnegie, G.D., Martin-Sardesai, A., Marini, L. and Guthrie AM, J. (2021), “Taming the black elephant”: assessing and managing the impacts of COVID-19 on public universities in Australia”, Meditari Accountancy Research, Vol. ahead-of-print No. ahead-of-print.

Kai Clark, 2021, ANU covers up 146 million construction fiasco,

Martin Kelly, AFR, 10 October 2021,

John Ross, More Australian universities turn to property speculation: With land prices and Covid costs both ballooning, universities are selling up and retreating on to campus, Times Higher Education September 7, 2021


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