Federal government reports and state audits generally advise universities are in good financial shape. Helen Irvine and Christine Ryan (QUT) took an in-depth look

They report their analysis of financial data from all 39 public universities for 2009-2015 in journal Accounting, Auditing and Accountability, looking at five performance measures.

revenue health: They found the bottom ten universities are more dependent on government funding than the top ten, which have more diversified income streams. Viewing revenue concentration as “an indicator of financial vulnerability,” they conclude, “despite increases in total revenue, any cutbacks in government funding, given the limited revenue diversity across the sector, could render some universities financially vulnerable.”

expense health: While public documents put average surpluses at 6.1 per cent over 2009-15, they conclude the net operating result across the sector was 8.8 per cent. However five universities were in deficit by 2015.

The top ten institutions share of sector net operating result rose from 46.4 per cent in 2009 to 51.5 per cent in 2015. The bottom ten’s share of total sector result dropped from 8.1 per cent in 2009 to 4 per cent in 2015.

debt health: Overall, “the sector is financially healthy in terms of debt, and there is latent capacity for most universities to increase their levels of debt to service their needs and remain viable, and even, in some cases, resilient.” The share of interest-bearing debt is bigger among the middle 19 universities than the top and bottom ten.

liquidity health: Current ratios declined over time but are sustainable. The top institutions have lower ratios than those at the other end, perhaps demonstrating the first group’s more sophisticated cash management Crucially, reserves increased.

 financial sustainability: The expenses to revenue gap among the top and bottom ten universities widened over the study period.

In 2015 one of the top ten and six of the bottom had a return on assets below 2015 inflation (1.5 per cent). “This indicates financial vulnerability, and the importance of leaner, more efficient operations regarding new building acquisition and the use or disposal of existing buildings, particularly vital in a digital age.” Irvine and Ryan warn

Overall:

* “the university sector is viable in terms of revenue but will become vulnerable if attempts to diversify revenue are not successful. So far successful diversifying is “fledgling at best”

* the top ten is more likely to be sustainable and resilient “in the face of government funding uncertainty.” In the study period the bottom ten was “showing distinct signs of financial vulnerability”

* advocates of the current, or increased levels of public funding current need to consider university efficiency, allocation of resources, cross-subsidisation of courses and between teaching-research. They also need to consider marketing expenditure, employee benefits and general efficiencies

* advocates for less public funding should be aware this could threaten the viability of some universities and “seriously affect the sector’s capacity to offer equity of opportunity to all.”

 

Sadly, they do not name institutions.