The Victorian Auditor General’s Office report (VAGO), Results of 2021 audits: Universities has just been released.[i] Each year the VAGO provides an audit opinion on the financial statements of public sector universities in Victoria. This report and the accompanying dashboard provide interesting reading as the Victorian public university system is under scrutiny regarding its financial sustainability. The VAGO) provides independent assurance on the accrual financial statements for all eight universities and 40 controlled entities. The combined figures in the  VAGO report appear for the operating activities only, not the consolidated ones, which would include the controlled entities.

In 2021, eight public universities in Victoria employed 36 319 full-time equivalents (FTE) positions and 36 817 FTE positions in 2020. There was a decrease of 498 FTE positions (compared to a 2020 decrease of 4 036 FTE). If headcounts rather than FTE had been used, we would see that many more people lost work over the past two years. The university paid termination payments of $0.256bn in 2020 and $0.165bn in 2021.

In 2021, total student enrolment numbers at the universities continued to decline slightly, recording a 1.5 per cent drop in equivalent full-time student load (EFTSL) for the year. Universities reported a total EFTSL of 298 949 in 2021 compared with 303 628 in 2020. Domestic student enrolments grew from 187 174 EFTSL in 2020 to 193 307 EFTSL in 2021. International student enrolments declined from 116 453 EFTSL in 2020 to 105 643 EFTSL in 2021. This decline in international students, mostly from China, is important as their fees make for a large cash surplus.

The VAGO highlighted the risks associated with international student fees in 2021. Hardly surprising, given that the overreliance on international students, especially students from China, has been debated and highlighted over the years.[ii]

All of the above numbers point to business as usual for our public universities, which have adopted a business model, one readily accepted by vice-chancellors, which relies on onshore fee-paying international students and casual employment on campus for research, teaching and administration.[iii]

The underlying raw data in the dashboard on the VAGO website[iv] represents the last five years. It highlights a deterioration in the only non-financial ratio in the VAGO report, which is Effective Full-Time Student Load (EFTSL) to Employee Full-Time Equivalent (FTE) (ratio). Again, this is not breaking news ‒ working conditions and students’ classroom experiences have worsened in recent years.[v]

The VAGO highlights the problems with the internal control associated with payroll in Victorian public universities. Uni Melbourne has provided nearly $70m for the underpayment of casual staff. Concerning this, the following statement appears to have been taken straight from the Melbourne University chief financial officer’s comments on the draft report.

“In late 2020 the university sector across Australia uncovered issues with wage underpayments, mainly in relation to casual academic and professional staff.

In 2021, most Victorian universities assessed whether underpayments had occurred and began making back payments to affected staff, in some cases dating back seven years.

This issue significantly affected the timing of the University of Melbourne’s financial report preparation and subsequent audit. During 2021, university management undertook an extensive exercise with the assistance of external specialists to assess the extent of the issue.

As a result of this exercise, the university became aware it had wage underpayments caused by a misinterpretation of conditions in their Enterprise Agreements. This meant casual academic and professional staff had been preparing and lodging timesheets for hours less than their minimum entitlement hours.”

The underpayment of casual wages has been a bonanza for expert advisors. Discussion about payments started in late 2018, although the situation was well known before that. Maybe the Victorian education ministers’ intervention instructing the vice-chancellors to sort out underpayments helped bring this issue to the surface?[vi]

The VAGO report shows the combined revenue of the sector was $11.5 bn, a 7 per cet increase over 2020. Breaking the revenue down, government student grants were $3.7 bn, student course fees were $3.6bn, government research capital and other grants $1.9bn, contract and other $1.3bn,  and investment income $1bn.

There was a $1.8bn growth in cash and financial investments. The University of Melbourne and Monash University accounted for 68 per cent of this. Interestingly, the total universities’ investment portfolios grew by 25.7 per cent ($1.4 B) and were $6.8bn by the end of the year. At the end of 2021, cash and financial investments were worth $9.2bn. Many of the public universities in Victoria are significant investment businesses.

With property plant and equipment of  $9.3bn, many of the Victorian public universities look like property development organisations, and the snapshot of their financial position included provisions of $2.5bn with a footnote about superannuation liabilities: “Note: *Provisions include the sector’s estimated deferred superannuation contributions of $1.15 bn ($1.25 bn 2020). An identical amount is included in receivables as the Australian and Victorian governments have agreed to meet this liability.”

There is no mention in VAGO’s report about depreciation and amortisation accounting expenses, so I have used 2020 data, which indicates a depreciation of  $730n for the eight universities. Remember, this is not a cash expense but an accrual that significantly decreases the disclosed operating results. The operating results for 2021 showed a marked improvement on 2020. These do not include the various public university-controlled entities such as accommodation, investment holdings, commercial property activities, off-campus training activities and other assorted hybrid structures that are not consolidated into these financial figures.

This report analysis highlights three specific issues not covered by the VAGO.

First, the VAGO relies on eleven financial and only one non-financial indicator to determine the universities’ financial sustainability risks. This is the ideal of the contemporary neoliberal university where performance management and university performance are mysteriously measured in accounting and financial terms only. Nevertheless, public universities are not-for-profit organisations and registered charities under federal law, with primary functions to educate citizens in a wide range of disciplines and professions and conduct research for the benefit of society. These legislated functions make clear that the proper functions of public universities are public value activities that serve the public interest. However, different discourses about costs and value are embedded in the neoliberal policies that currently inform VCs and senior managerial decision-making in Australia’s public universities. These discourses are underpinned by accounting methodologies better suited to commercial, for-profit corporations. A more spatially and ethically grounded accounting discourse of the costs and benefits to the community would more properly embed those functions as outlined in their individual acts.[vii]

At the state and territory level, governments should hold university councils accountable for a university’s legislated functions or objectives. That is, the governance of universities should ensure their function is aligned with their legislated objectives. As an example, the Monash University Act states, the objects of the university include—

(a) to provide and maintain a teaching and learning environment of excellent quality offering higher education at an international standard

(b) to provide vocational education and training, further education and other forms of education determined by the university to support and complement the provision of higher education by the university

(c) to undertake scholarship, pure and applied research, invention, innovation, education and consultancy of international standing and to apply those matters to the advancement of knowledge and to the benefit of the well- being of the Victorian, Australian and international communities

(d) to equip graduates of the university to excel in their chosen careers and to contribute to the life of the community

(e) to serve the Victorian, Australian and international communities and the public interest by— (i) enriching cultural and community life (ii) elevating public awareness of educational, scientific and artistic developments (iii) promoting critical and free enquiry, informed intellectual discourse and public debate within the university and in the wider society

(f) to use its expertise and resources to involve Aboriginal and Torres Strait Islander people of Australia in its teaching, learning, research and advancement of knowledge activities and thereby contribute to— (i) realising Aboriginal and Torres Strait Islander aspirations; and (ii) the safeguarding of the ancient and rich Aboriginal and Torres Strait Islander cultural heritage;

(g) to provide programs and services in a way that reflects principles of equity and social justice;

(h) to confer degrees and grant other awards;

(i) to utilise or exploit its expertise and resources, whether commercially or otherwise.

Second, rather than relying on historical accrual financial reporting, the Victorian government should direct public universities to frame their budgets around the objects or functions expressed in the various acts. These functions reflect long-term goals necessary for the well-being of the university community. New Federal Treasurer Jim Chalmers has confirmed that Australia will follow Aotearoa New Zealand’s example and put well-being at the centre of the national budget. These priorities are not meant to change significantly between years or even decades. The universities budget funds document should be made public at the beginning of the year and have appropriate output and outcome indicators to measure university  councils’ performance against university’s objectives. These disclosures would require independent assurance as to the quality and meaning of the information provided. This would bring about much-needed transparency and accountability regarding the internal workings of public universities.[viii]

Third, as I have argued in the past, a performance audit of the Victorian public university system is needed This would explore the various dimensions of the university and the challenges of relying solely on financial statements and financial performance indicators.[ix]

These three actions would be small but necessary steps toward changing the business model for universities and aligning their activities with the proper and legislative purpose of a university ‒ to teach and research for the benefit of all.

Emeritus Professor James Guthrie AM, Professor of Accounting, Macquarie Business School


[ii] Carnegie, G.D., Martin-Sardesai, A. and Guthrie, J. (2022), “Public universities and impacts of COVID-19 in Australia: Risk disclosures and organisational change”, Accounting, Auditing & Accountability, Vol. 35 No. 1, pp. 61-73.

[iii] Martin-Sardesai, A., Guthrie, J, and Parker, L. (2022 forthcoming), “Four decades of new public management and Australian universities: a revolution by stealth”, in Lapsley, I (Ed.) NPM: The Final Word,




[vii] Guthrie, J. and Martin-Sardesai, A. (2021), “Outcomes-based metrics and research measurement in the Australian higher education sector: A fast-changing landscape” for Hoque, Z. (eds) (2021), Outcomes-Based Approaches in Government Research. New York Routledge. DOI

[viii] Guthrie, J. (2022), Rhetoric and reality of public sector university finances: decisions made by a few elite people behind closed doors significantly impact staff and students, Campus Morning Mail, 28 April 2022. Available at:

[ix] To Victorian AG re performance audit of the Victorian public universities, James Guthrie (2021), What the Auditor General reveals about Vic uni finances, , Campus Morning Mail, 28 June



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