by JAMES GUTHRIE
I am preparing a submission for Tasmania’s Legislative Council inquiry into the Provisions of the University of Tasmania Act 1992.
The University of Tasmania’s 2021 annual report is required by its act to be available six months after the end of its financial year, which runs January to December, so it is expected to be tabled in state parliament in the next sitting, which is in August.
The university did submit, at the last possible moment, a Charities Commission Annual Information Statement 2021 and annual financial statements as of December 31 2021. Interestingly, the PDF was dated early February, and the independent auditors signed off on their report on February 16 2022.
The University of Tasmania 2021 statement to the Charities Commission described its charitable activities and outcomes as follows: “During the year, the university’s activities consisted of Learning and teaching, research, knowledge transfer and research training, community engagement, and activities incidental to undertaking the above-mentioned educational activities.”
I will analyse the various available public documents for the 2021 year, focusing on human resources, income, and expenses from continuing operations. I will drill down on several items that raise concerns, including depreciation, executive salaries, investments and buildings.
First, concerning Human resources in 2021, the numbers provided include both headcounts and full-time equivalent (FTE) (Full-time employees: 2,062, Part-time employees: 841, Casual employees: 3,120 =6,023 by headcount and FTE: 2,894). In 2019 total headcount was 7,608, with a casualisation rate of 63.2 per cent casuals. In 2020, the headcount was down to 6,480, and 58.79 per cent were casuals, as the charities commission report reported. Therefore, in the two years since 2019, about 1,600 or more people lost employment at the University of Tasmania. As at many other Australian universities, casuals were underpaid over some time, and as of 31 December 2021, the university also recognised an $11M provision concerning the potential historical underpayment of staff.
Second, concerning income and expenses from operations for the calendar year 2021.
| Income and Expenses |
| Comprehensive Income Statement summary |
| Gross income |
| Donations and bequests: $5,366,000.00 |
| Revenue from providing goods or services: $139,734,000.00 |
| Revenue from government including grants: $560,778,000.00 |
| Revenue from investments: $113,566,000.00 |
| All other revenue: $22,675,000.00 |
| Other income (for example, gains): $13,762,000.00 |
| Total revenue: $842,119,000.00 |
| Total gross income: $855,881,000.00 |
| Expenses |
| Employee expenses: $$421,119,000.00 |
| Interest expenses: $11,151,000.00 |
| Grants and donations made for use in Australia: $0.00 |
| Grants and donations made for use outside Australia: $$0.00 |
| All other expenses: $253,609,000.00 |
| Total expenses: $685,879,000.00 |
| Net income |
| Other comprehensive income: $140,000.00 |
| Net surplus/(deficit): $170,002,000.00 |
| Total comprehensive income: $170,142,000.00 |
As we can see, in 2021, the University of Tasmania’s net surplus was $170m. When looking at the 14-year database, which includes total revenue and expenses from continuing operations, the numbers changed significantly over time for the following items: investment income, fees, depreciation expenses and other expenses ($254M), which include a significant increase in advertising marketing and promotional expenses. Therefore, these items are the ones analysed.
Third, as seen above, the investment revenue was $113m in 2021. The asset value of these investments was $400m, recognised at fair value. A significant investment portfolio was managed internally by an investment manager. Although most funds are invested in listed equities or listed equity investments, these funds are also invested in various investment categories. This money would include a small number of donations and bequests; the rest would be surplus student fees and government funds for specific purposes such as teaching and capital. Under a funds system of accounting, these funds would not be allowed to be invested in shares, etc.
Fourth, the University of Tasmania is undertaking significant property development. It established an off-balance sheet subsidiary UTAS Properties Pty Ltd, on 10 October 2019, to sell the current campus and build a new campus in the Hobart CBD and Launceston.[i] As no annual report is available, we do not know what the costs and benefits of this subsidiary will be. In addition to revenue and income derived from education and research activities, the consolidated entity also derives revenue and income from other fees from services that are ancillary to education and research, such as accommodation and amenities provided to students. The University of Tasmania has entered into public-private partnerships in student accommodation, where the private sector funds, builds and operates the accommodation, which explains long-term liabilities of about $250m.
In 2017, the university executed a market transaction in respect of Purpose-Built Student Accommodation (PBSA) assets, whereby it granted a 30-year licence to receive net rentals from these assets in exchange for payment of an upfront amount. The licensee is responsible for maintaining the asset condition to a pre-set regime, and the university retains the operations of the premises. After the arrangement, the asset will revert to the university’s control at a pre-agreed condition, when the university will assume asset risk and rental revenue.
In 2019, the university entered into a joint arrangement with third parties to construct new Purpose-Built Student Accommodation (PBSA) at 40‒44 Melville Street, Hobart. The contract was settled on February 2 2021, resulting in an increase in service concession assets and the recognition of a corresponding grant of right to operate liability. It would be interesting to know the financial risk and guarantees concerning student occupancies associated with this venture, especially as in 2019, the university had 36,484 students enrolled, and 6,644 (18.2 per cent) were international students. The COVID health crisis makes it difficult to determine the drop-off in international and mainland students that would need accommodation.
Fifth, turning to executive salaries, Vice-Chancellor Rufus Black was appointed in March 2018, and his reported salary in 2021 was just under $1m. He joins the millionaire’s salary club like many other VCs in Australia. The Tasmanian premier is paid $300,000 a year, and last year the university’s senior executive team included six members who received more than the premier. Executive officers are defined as the vice-chancellor and University executive team members responsible for the university’s strategy.
Sixth, on the role and powers of the council, while university councils should be at the heart of strategy and the driver of quality teaching and research, the corporatisation of public sector universities in Australia has seen the executive gain dominant power. The University of Tasmania Act 1992, section 9 sets out the roles and responsibilities of the council.
Public Universities Australia (PUA) has issued a Declaration of the principles, practices, and protocols that should guide Australian public universities’ governance, funding regimes and praxis. The Declaration urges Australian public universities’ governance, like that of their OECD counterparts, to be collegial, transparent and accountable. Furthermore, PUA has summarised these principles in a series of actionable points, which have also been translated into a hypothetical “model act” to re-establish Australian public universities as statutory bodies owned by and acting for ‘the public’. We argue that the University of Tasmania’s governance should be consistent with these principles, practices and protocols.
Seventh, we need an entirely different discourse for universities in Australia, one that is not based on financial accrual costs in the context of orthodox accounting arising from the neoliberal corporatisation of Australian public universities over the last four decades. Andrew and Cahill’s (2017)[ii] research highlights that alternative discourses must be developed to understand the public value of universities. The functions, as outlined in the University of Tasmania Act 1992,[iii] make clear that the university’s proper functions are to be publicly accountable for the public value activities of the university in the interests of the people of Tasmania.
Emeritus Professor James Guthrie AM, Professor of Accounting, Macquarie Business School
At least the first step in acting in the public interest is to make the university’s annual report for 2021 much earlier than August.
[i] https://www.hobartcity.com.au/Projects/Sandy-Bay-UTAS-redevelopment-submission
https://www.hobartcity.com.au/Projects/City-shaping-projects/University-of-Tasmania-relationship
[ii] Andrew, J. and Cahill, D. (2017), “Rationalising and resisting neoliberalism: The uneven geography of costs”, Critical Perspectives on Accounting, Vol. 45, pp. 12-28 https://doi.org/10.1016/j.cpa.2016.09.0011
[iii] The University of Tasmania Act 1992, Version current from 1 January 2013 to date (accessed 22 July 2021 at 13:57), are the stated functions of the University.