The Victorian Auditor General’s report has been tabled in state parliament Results of 2020 Audits: Universities. Each year, VAGO provide an audit opinion on the results of universities. The combined figures for the eight public universities (scroll down) are a combined snapshot of the Victorian public sector higher education system in financial terms.

The Auditor-General only reports net results (net profit in the business world); therefore, of the eight universities, five reported a net surplus in 2020. However, exploring the audit report further, it is  noted that;

* there were only approximately 12,000 fewer fee-paying students out of approximately 150,000

* second, there was a significant loss of staff (more on this in a future CMM piece)

* third, all universities had a cash surplus for 2020, meaning revenue was greater than expenditures

* fourth the total assets increased by $2 billion compared to the previous years

* fifth, the sector holds significant amounts of cash and financial investments.

The facts are the business model that the vice-chancellors so readily accepted relies upon on-shore fee-paying international students and the casualisation of employment on-campus for their teaching, research, and administration (see Carnegie .

I make several observations that indicate there was not a financial crisis in the sector in 2020 and that staff and students have significantly suffered from the various cost-cutting measures. Several financial accounting numbers are artificial constructions using business accounting rather than modified cash which should be used for public sector entities.

Also, the Victorian public sector universities prepare their annual financial statements according to accrual accounting. However, internally, they use a modified cash budget and internal expenditure controls. Accordingly, accrual accounting is not used to drive the day-to-day management of a university’s operations. Furthermore, governments fund public universities utilising cash, and students pay their higher education contribution (HECS) using cash.

Depreciation and amortisation for 2020 were nearly $.8 billion (below). The depreciation of buildings was a sizeable accrual cost for Victorian public universities. However, the budgets of faculties, schools or departments, and other organisational units do not include charges for depreciating expenses as they are not included in administrative units’ accounts of cash inflows and cash outflows, modified for accrual employee expenses.

Further, the government does not fund universities to meet the depreciation expenses of universities. Business accrual accounting and associated accounting standards dictate university building depreciation (see Guthrie, 1998).

In Andrew et al. (2020), I argue that economic “opportunity cost logic” has also been extended to treating land and buildings of Australian public universities. Let us explore the increase in total assets of S2 billion because of the fair value of property, plant and equipment. The use of fair value over property is questionable as until recently, most of these were gifted to the universities. Fair value should only be used if the property can be sold or a university is privatised by sale. Also, the fair market value has been applied to land and buildings, even in cases where these assets cannot be transferred, sold or used for any other purpose. Therefore,  the depreciation amounts determined as expenses to be charged against income seriously overstate the depreciation costs and therefore understate disclosed net profits.

In conclusion, the Victorian Auditor-General had a great opportunity in this report to highlight the financial risks associated with the high reliance on international onshore student fees. In the past, the Victorian Auditor-General has produced audit reports that explore the funding and state of the Victorian public sector universities. For instance, in the 2002 report, they observed:

“In response to decreasing levels of Commonwealth operational funding per domestic HECS student (in real terms) and to growing competition in the global higher education market, Victorian universities have become more commercially orientated in their operations. Monash University, RMIT University, and the University of Melbourne have all made effective use of international student programmes in order to offset reduced levels of government operational funding per student.’’

It is time for a public enquiry into the business model of Victorian public sector universities, which has relied upon fees from international onshore students and casualisation of staff to generate significant financial gains.

Importantly, universities in Australia remain public institutions, accountable to the public authorities and the electors who fund them. The public is entitled to know how far universities are financially secure  and are casualised, as an indicator of the quality of education for students as much as for academic employment rights. In this context, exposing contestations over numbers is  important.

Distinguished Professor James Guthrie AM, Macquarie U Business School

Victorian university funding sources 2020

Government student grants: $3 580.8m (up 2.8 per cent from 2019)

Government research, capital and other grants: $1 502.2m (up 4.4 per cent from 2019)

Student feeds and charges: $ 3 996.8m (down 5,6 per cent from 2019)

Contract research and consultancy fees: $464.1m (up 9.8 per cent from 2019

Investment income: $3322.9m (down 54.3 per cent from 2019)

Other revenue: $795.9m (down 16.4 per cent from 2019)

Victorian university spending : 2020

Employee benefits: $6 019.5m (up 6.5 per cent from 2019)

Depreciation and amortisation: $794.2m (up 4.8 per cent from 2019)

Repairs and maintenance : $199.8m (down 15.7 per cent from 2019)

Other expenditure: $3 341.9m (down 8.7 per cent from 2019)

source: VAGO universities report


Auditor-General Victoria, (1993), Report on International Student Programs in Universities.

.Free advice from the Victorian Auditor-General’s Office, Campus morning mail, 25 June 2021

Andrew J., Baker M., Guthrie J., Martin-Sardesai A. (2020), “Australia’s COVID-19 public budgeting response: the straitjacket of neoliberalism”, Journal of Public Budgeting, Accounting and Financial Management,  32  (5) , pp. 759-770.

Carnegie, G.D., Guthrie, J. and Martin-Sardesai, A. (2021), “Public universities and impacts of COVID-19 in Australia: risk disclosures and organisational change”, Accounting, Auditing & Accountability Journal, Vol. ahead-of-print No. ahead-of-print.

Guthrie, J. (1998), “Application of Accrual Accounting in the Australian Public Sector — Rhetoric Or Reality?”, Financial Accountability and Management, Vol. 14, No. 1, pp. 1-19.

VAGO audit reports tabled

Auditor General Victoria, (2002), International students in Victorian universities, No. 144 – Session 1999-2002, ISSN   1443 4911


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