Results of 2019 Audits: Universities

Tabled: 30 June 2020

1 Audit context

The Victorian public university sector comprises eight universities and their 48 controlled entities. Appendix B lists all entities. They principally provide higher education and conduct research. Figure 1A illustrates all main income sources, activities and key stakeholders for the sector.

Figure 1A
University sector 2019 income sources, activities and key stakeholders

University sector 2019 income sources, activities and key stakeholders

 Note: HECS = Higher Education Contribution Scheme.
Source: VAGO. 

Figure 1B provides a financial snapshot of the university sector for the year ended 31 December 2019. 

Figure 1B 
University sector financial snapshot for the year ended 31 December 2019


Note: *Provisions include the sector’s estimated deferred superannuation contributions of $1.2 billion ($1.2 billion in 2018). An identical amount is included in receivables as the Commonwealth and state governments have agreed to meet this liability.
Note: 2018 figures have been adjusted for the two universities with qualified audit opinions.
Source: VAGO. 

Most of the sector's income comes from student fees and Commonwealth Government student funding, both of which are driven by student numbers. Publicly and privately funded research is the sector's next largest revenue source. The majority of the sector's assets consist of the property, plant and equipment that it needs to deliver its services. The sector also holds a significant amount of cash and financial assets.

The sector's total liabilities increased significantly in 2019. This was because universities recognised $1.5 billion in contract liabilities under the new revenue standards that they would previously have recorded as revenue. However, this approach was not uniform across the sector and accounting for research grants remains a contentious and unresolved issue. The sector's total liabilities also increased because lease liabilities of $578 million were recognised as a result of accounting standard changes introduced by AASB 16 Leases.

Figure 1C shows each university's relative size, based on the number of equivalent full-time students enrolled, and the number of staff employed. The two largest universities, Monash University and The University of Melbourne, are also members of the Group of 8 (Go8), a company whose members comprise Australia's leading research-focused universities.

Figure 1C
Student and full-time equivalent staff numbers by university for the year ended 31 December 2019

Figure 1C Student and full-time equivalent staff numbers by university for the year ended 31 December 2019

Note: One equivalent full-time student load (EFTSL) represents the equivalent of a student who is studying on a full-time basis for a year. Overseas EFTSL includes both onshore and offshore student loads. Where relevant, EFTSL excludes vocational education (VE) student loads.
Source: VAGO. 

1.1 Legislative and reporting framework

The universities and their controlled entities are subject to a range of complex accountability and financial reporting frameworks, with many reporting requirements.

In Victoria, public universities are established by their own respective enabling legislations. As a result, they fall within the definition of a public body under the Financial Management Act 1994 (FMA) and must comply with its requirements for the preparation of financial reports. However, since the universities are not controlled by the State of Victoria, their financial results are not consolidated into the state's annual financial report. 

From the perspective of the Commonwealth, universities:

  • are registered with the Tertiary Education Quality and Standards Agency and are, therefore, subject to the regulation of the Tertiary Education Quality and Standards Agency Act 2011 (TEQSA Act)
  • receive most of their grant funding from the Commonwealth Government and fall within the scope of any legislation associated with this funding, including the Higher Education Support Act 2003 (HESA Act).

The TEQSA and HESA Acts, and many of the funding agreements that underpin the funding universities receive for research and other purposes, also impose other financial reporting requirements on the universities in addition to the requirements of the state-legislated FMA. The Commonwealth requires some of these reporting requirements to be included in universities' financial reports. As a result, universities' financial reports contain disclosures that are not usually found in general-purpose financial reports.

Many universities and their controlled entities are registered charities with the Australian Charities and Not-for-profits Commission. This means they have further reporting obligations under the Australian Charities and Not-for-profits Commission Act 2012.

Entities controlled by the universities do not automatically fall within the scope of the FMA, but may be required by the respective enabling legislation of their parent university to produce financial reports in a form approved by the Assistant Treasurer administering Part 7 of the FMA.

1.2 Report structure

In this report, we provide information on the outcomes of our financial audits of the eight Victorian universities and their 48 controlled entities for the year ended 31 December 2019. The financial results of controlled entities are consolidated into those of their respective parent entities. We restrict our comments on the controlled entities to the extent that they are relevant and significant to the consolidated results of their respective groups.

We also report on the key matters arising from our audits and analyse the information included in the universities' financial reports. Figure 1D outlines the structure of this report.

Figure 1D
Report structure



2 Results of audits

Evaluates the audit opinion results from our financial audits of universities, and the timeliness, accuracy and quality of their reporting.

Assesses the strength of the internal controls designed, implemented and maintained by the universities.

3 Significant audit issues

Discusses the sector's implementation of the new revenue standards.

Discusses the impact of COVID-19 on the 2019 financial report and comments on the future financial reporting considerations for the sector.

4 Financial performance and sustainability

Reports on the sector's financial outcomes and comments on the sustainability of the sector in the context of information obtained and observed during our audits.

Source: VAGO.

Appendix B provides a list of all 56 entities included in this report and details the financial audit opinions issued for the year ended 31 December 2019.

We carried out the financial audits of these entities under section 10 of the Audit Act 1994 and Australian Auditing Standards. Each entity pays the cost of its audit.

The cost of preparing this report was $135 000, which is funded by Parliament. 

1.3 Submissions and comments

We have consulted with the Department of Education and Training (DET) and the eight public universities in Victoria, and we considered their views when reaching our conclusions. As required by the Audit Act 1994, we gave a draft copy of this report to those agencies and asked for their submissions or comments. We also provided a copy of the report to the Department of Treasury and Finance.

The following is a summary of those responses. The full responses are included in Appendix A.

We received one submission from the sector and a response from DET.

DET notes our conclusion that the financial reports of the universities and their controlled entities are reliable. DET also acknowledges the audit issues we raised and will work with the universities to action the areas for improvement.

The University of Melbourne has provided details on the timeliness of its financial reporting. The university has also commented on the accounting for research grants matter, which is discussed in Part 3

Back to Top