Results of 2024 Audits: TAFEs and Universities

About this report

This report presents the results of our financial and related audits of TAFEs and universities, and their controlled entities. It also shares our independent insights on the sectors' financial outcomes, highlights common issues in internal control and financial reporting, and offers recommendations for improvement.

Outcomes of our financial audits

We issued clear audit opinions for all TAFE and university financial reports and TAFE performance statements, giving Parliament and the community confidence in the reliability of these reports. Both sectors produced good-quality reports and met legislated reporting timelines.

TAFE sector financial analysis

The TAFE sector reported a net surplus in 2024, largely due to one-off capital grants. Eight TAFEs reported a net surplus, but without these grants, only 5 TAFEs would have done so.

TAFEs delivered more training in 2024, which increased training revenue. They also grew own source revenue, an important contributor to financial sustainability. The ability to generate this revenue varies across TAFEs depending on their location and community service needs. 

TAFEs focused on managing costs in 2024, but inflationary pressure continued, alongside growth in employee costs despite maintaining staffing levels. 

We found no signs that TAFEs were unable to meet their short-term financial obligations in 2024. Yet, we observed emerging financial pressures, including budget forecasts showing that 5 TAFEs may face low or negative cash positions by 2026. 

Accurate and timely budgeting is important to help TAFEs with these challenges. However, TAFEs still need to strengthen their budget process and approach. We encourage TAFEs to continue to work with the Department of Jobs, Skills, Industry and Regions on these matters.

Victorian public university sector financial analysis

The university sector delivered improved financial results in 2024, supported by strong investment returns and increased teaching revenue. Even without the investment returns, most universities improved their financial results, though some still reported losses.

Higher teaching revenue was driven by an increase in domestic students after variable growth in recent years. Universities also kept their cost increases under control, allowing revenue to grow at a rate faster than expenses.

While most universities ended 2024 with strong balance sheets, they need to stay focused on planning for potential government policy changes to remain financially resilient. For example, changes in enrolment settings or funding arrangements could affect future financial outcomes. Most universities still rely heavily on revenue from domestic or international full-fee-paying students, which makes them sensitive to shifts in these areas.

Internal control issues

TAFEs and universities maintained adequate controls to produce reliable financial reports and performance statements. However, both sectors need to strengthen information technology (IT) controls, especially TAFEs, as they explore opportunities to move to shared or common IT systems.

While there were mixed results for new issues, both sectors reduced the number of long outstanding prior year issues.

Reporting requirements

The Financial Management Act 1994 requires both TAFEs and Victorian public universities to prepare a financial report.

The Act requires them to give us their draft financial reports within 8 weeks after the end of the year.

Along with their financial reports, TAFEs must also report against 4 mandatory key performance indicators (KPIs) in a performance statement. The descriptions of the 4 KPIs and the formulas used to calculate them are provided in Appendix E.

Within the performance statements, TAFEs must include their target for each KPI, report actual results for the current and prior years and provide commentary on significant variances between the target and actual results.

The Minister for Skills and TAFE, through the Department of Jobs, Skills, Industry and Regions' (DJSIR) Office of TAFE Coordination and Delivery (OTCD), releases a statement of priorities each year that aligns with these KPIs. Both the minister and each TAFE sign this statement.

The current year's version of the statement of priorities is called the TAFE Network Statement of Priorities for 2024.

Our audits of TAFEs and universities

The Audit Act 1994 gives us the authority and responsibility to audit the financial reports of TAFEs and universities in Victoria. We must form an opinion on these financial reports and provide an auditor's report that includes our audit opinion to the entity.

We also form an audit opinion and provide an audit report on each TAFE's performance statement.

TAFEs in Victoria

Victoria’s TAFE sector is made up of 12 TAFEs and the 8 entities they control. TAFEs that control other entities must prepare a consolidated financial report. In these circumstances, we audit both the consolidated financial report of each TAFE (which will include the financial results of entities they control) and separately the standalone financial report of each controlled entity.

TAFEs run vocational education and training (VET) courses to give students practical skills for a variety of careers. They also provide pathways to university courses. 

Private sector VET

In Victoria, private registered training organisations also run VET courses. 

We have not included them in this report because the Education and Training Reform Act 2006 (which governs the Victorian TAFE sector) and the Audit Act 1994 do not require us to audit them. These entities have financial reporting and audit requirements under other legislation, such as the Corporations Act 2001 or the Australian Charities and Not-for-profits Commission Act 2012.

TAFEs' comprehensive operating statements

A TAFE's comprehensive operating statement mostly consists of its training revenue, funding from Australian and Victorian governments and employee benefit expenses.

TAFEs also earn revenue from sources, such as sales of goods, receiving donations and selling assets. They spend money on materials and services, which cover most non-employee–related costs of delivering courses. TAFE expenditure also includes depreciation and amortisation of their fixed and intangible assets.

TAFEs' balance sheets

A TAFE's balance sheet is mostly made up of the property, plant and equipment it owns.

TAFEs also hold cash to fund their operations. Their main liabilities include money owed to employees and fee payments received before delivering training.

Figure 1 shows the total value of the sector's key revenue and expense streams and its assets and liabilities for 2024.

Public universities in Victoria

Victoria’s public university sector is made up of 8 universities and the 55 entities they control. These entities deliver higher education and undertake research at a range of campuses across the state. In this report, we use the financial, staff, and student figures for universities' consolidated results.

Victoria’s 2 largest universities – Monash University and the University of Melbourne – are members of the Group of Eight (Go8), which is an association of Australia's most research-intensive universities.

Universities and controlled entities we do not audit

This report excludes any controlled entities of the universities that are based outside Australia. We do not audit overseas incorporated entities because they follow the financial reporting and audit requirements of the country where they were set up. We do, however, gain an understanding of the nature of the balances and transactions of these controlled entities and, where material, seek evidence to support them, as they form part of the universities’ consolidated financial reports.

This report also excludes private universities (such as Australian Catholic University) and universities controlled by the Australian Government or other states. These entities report under separate legislation, such as financial reporting laws in other states.

Other university-related legislation

In Victoria, each public university is set up under its own legislation. The State of Victoria does not control these universities. As a result, the Annual Financial Report of the State of Victoria does not include universities' financial results.

The Australian Government sets financial reporting requirements for all universities Australia-wide, including the Victorian public universities. As such, several financial reporting requirements of the Victorian Government (such as many of the financial reporting directions) explicitly do not apply to universities to avoid conflicts between state and federal requirements.

The Financial Management Act 1994 does not cover universities' Australian-controlled entities. However, each university's own legislation requires these entities to prepare financial reports and give us a draft within 3 months of their balance date for auditing.

Universities' comprehensive income statements

A public university's comprehensive income statement mostly consists of its teaching revenue, investment income and its employee benefit expenses.

Universities also earn revenue from research they undertake and spend money on their students and staff. Their expenses also include depreciation and amortisation of their fixed and intangible assets.

Universities' balance sheets

Most of a university's balance sheet consists of its property, plant and equipment. In particular, the value of the land and buildings it owns.

A university's balance sheet also includes its cash and investments. 

Borrowed money and lease liabilities make up most of the sector's liabilities, along with revenue universities have received but not earned.

Figure 2 shows the total value of the sector's key revenue and expense streams and its assets and liabilities for 2024.

Audit opinions issued

We issued clear audit opinions on the 12 TAFEs' financial reports and performance statements and the 8 controlled entities' financial reports for the 2024 reporting period. This means Parliament and the community can confidently use these reports.

Figure 3: Clear audit opinions issued for the TAFE sector in 2024

Source: VAGO.

Timeliness

In 2024, all TAFEs submitted their draft financial reports to us within the 8-week statutory deadline. Meeting this deadline helps TAFEs comply with the law, facilitates a timely audit process and maintains financial transparency and accountability.

Errors

Financial reports provide critical information for decision-making. Correcting errors ensures that decisions are made based on reliable information. 

During an audit we sometimes find an item that an entity has not prepared in line with relevant reporting requirements, known as an error. The nature, number and size of errors in financial reports provided for audit shows the quality and effectiveness of the systems and processes used to compile them.

We classify these errors as either material or immaterial errors. We assess errors individually and in total with other errors found during the audit.

No material errors identified

Like last year, we found no material financial errors or classification and disclosure differences in TAFEs' financial reports. Similarly, we did not find any material errors in TAFEs' performance statements, which indicates that the reports are of good quality.

First-time application of simplified financial reporting

Australian Accounting Standards allow for tiers of financial reporting: 

• Tier 1, which requires all disclosures in the Australian Accounting Standards 
• Tier 2, which allows for simplified disclosures.

In June 2024, the Minister for Finance approved a new reporting direction called FRD 101 Application of Tiers of Australian Accounting Standards (FRD 101). Under FRD 101, entities that are not classified as a 'significant entity' shall prepare Tier 2 financial reports. 

This requirement will apply to TAFEs for the first time in the 2025 reporting year. Since TAFEs are unlikely to meet the definition of a 'significant entity' in 2025, they will likely report under the Tier 2 framework.

Tier 2 financial reports contain fewer note disclosures, making financial reports easier to prepare and understand. While reducing disclosures can help streamline reporting, certain disclosures required under the Tier 1 framework may still offer valuable insights that enhance a user’s understanding of a TAFE’s financial outcomes. Where specific Tier 1 disclosures provide meaningful context, TAFEs are encouraged to retain them to support transparency and informative financial reporting.

To prepare for the transition to Tier 2 reporting, TAFEs have formed a working group to review the model Tier 2 financial report issued by the Department of Treasury and Finance (DTF).

In December 2024, we released Tech alert: Significant accounting developments, which outlines key considerations for entities transitioning to Tier 2 reporting. As part of this transition, we recommend that TAFEs implement the actions and guidance outlined in the tech alert. 

Amendments to fair value measurement

In December 2022, the Australian Accounting Standards Board (AASB) added authoritative implementation guidance to AASB 13 Fair Value Measurement. It did this to address the challenges that not-for-profit public sector entities face in applying the standard's fair value measurement requirements.

The changes to the application guidance took effect for the first time in 2024. To address the practical challenges entities face when applying the amendments, particularly those not in their full revaluation year, DTF approved a revised FRD 103 Non-financial physical assets (FRD 103). This revision allows entities to adopt the AASB 13 amendments in a phased approach, as briefly described below.

TAFEs last completed a comprehensive valuation in 2022, with the next scheduled valuation in 2027. While the revised FRD 103 provides relief to TAFEs that are not in their revaluation year, we encourage TAFEs to review our Tech alert: Significant accounting developments (issued in December 2024) and implement the recommended steps in the tech alert to prepare for these changes early. These steps include:

• engaging with valuers in planning for the changes
• reviewing past valuation reports and assessing the impact of the amended implementation guidance 
• identifying key judgements to determine if revisions are required
• revisiting past position papers and updating any in preparation for these changes
• assessing if any changes in valuation policy or procedures are required because of the amendments.

The sector's net result

In 2024, the sector reported a net surplus of $12.0 million, a decrease of $59.7 million from the $71.7 million surplus reported in 2023. The decline was driven by a reduction in capital grants from the Victorian Government, which fell to $65.0 million in 2024 compared to $107 million in 2023.

Capital grants are 'one-off' and not available for TAFEs' day-to-day operations. Without these capital grants, the net result of the sector would have been a $53.1 million deficit. This is a consistent trend for the last 5 years as Figure 5 shows.

Figure 5: TAFEs' net result and net result excluding capital grants from 2020 to 2024 ($ million)

Source: VAGO.

Capital grants fluctuate significantly by TAFE and year

TAFEs are not set up to make large surpluses or fund capital costs completely on their own. As part of the general government sector (GGS), they receive capital funding from the Victorian Government to support the renewal, replacement and construction of new assets.

Each year, the capital grants that TAFEs receive change based on the sector’s capital project needs. Recently funded significant projects include:

• Bendigo Kangan Institute’s $60 million Health and Community Centre of Excellence in Broadmeadows 
• Chisholm Institute’s $67.6 million stage 2 of the Frankston Redevelopment Project 
• Melbourne Polytechnic’s $40 million Collingwood campus modernisation.

Over the last 5 years, the portion of income from capital grants varied widely among TAFEs. One TAFE earned only 1.2 per cent of its income from these grants between 2020 and 2024, while another earned 15 per cent of its income for the same period. The total value of capital grants over the last 5 years ranged from a minimum of $55.2 million in 2020 to $107 million in 2023.

Net results of TAFEs

When comparing TAFEs or analysing their performance over time, capital grants are often excluded (as shown in Figure 6) to standardise the results and provide a clearer picture of underlying financial performance.

Ongoing operational costs associated with these assets, such as maintenance and depreciation, are not excluded from our analysis. This is because TAFEs do not normally receive additional funding to cover these ongoing costs: they are expected to be met through TAFEs own operational revenue and income sources.

Overall, for 2024, 8 TAFEs reported a net surplus. However, only 5 would have achieved this outcome without capital grant income. Only 6 TAFEs would have achieved this in 2023 as well, as Figure 6 shows.

This has occurred consistently over recent years. In the last 5 years, 9 of the 12 TAFEs reported a net surplus for 3 or more years. However, without capital grants, only one TAFE would have achieved this result.

The profitability of a TAFE indicates its ability to generate revenue and manage expenses to achieve a net surplus. While TAFEs are not expected to make large surpluses, generating a small surplus is important to ensure they have sufficient funds for future operations. Ideally, these surpluses can be reinvested to maintain and improve the quality of education and services offered by the TAFEs. If the underlying net deficit trend continues for these TAFEs, without effective management of expenditure or own-source revenue growth, their long-term financial sustainability may be at risk.

To remain financially sustainable, a TAFE must be able to meet current and future expenditure requirements from revenue earned, absorb foreseeable changes and materialising risks and manage the impact from these factors to changing revenue and expenditure requirements.

Revenue increased overall due to more training

In 2024, the sector reported total revenue of $1.61 billion, compared with $1.52 billion in 2023. This increase was because of increases in training revenue.

The sector trained more students in 2024, increasing from 210,399 in 2023 to 214,590. They also received more per student. Combined, this was the reason training revenue increased.

For government-funded training, along with an approximate increase in the number of enrolled students of 7 per cent, TAFEs received more per hour of training delivered because of additional funding provided through some Victorian Government programs.

TAFE sector is showing improvement in own-source revenue

In 2024, training revenue made up more than 72 per cent of sector's total revenue and income before capital grants, increasing from 66 per cent in 2023 and almost back to its 2020 peak of 74 per cent.

TAFEs must report on a KPI called 'training revenue diversity', which shows how much of their training revenue comes from different sources. A 2024 priority in the TAFE Network Statement of Priorities for 2024 was to ensure that third-party revenue and commercial activity are strategic and support essential TAFE delivery. This type of own-source revenue mainly comes from a TAFE's fee for service revenue. It is an important contributor to financial sustainability, as it demonstrates the TAFE’s ability to independently generate income.

Fee for service revenue has experienced a gradual increase over the last 3 years. This growth reflects the sector's continued efforts to diversify revenue and rely less on grant funding. TAFEs are doing this by securing and maintaining agreements with private and government bodies to deliver training. This includes training employees or delivering services, such as training programs in prisons.

In 2024, TAFEs received $63.8 million less in operating grants than they did in 2023. As shown in Figure 7, operating grants made up 23 per cent of total revenue and income (excluding capital grants) for 2024, down from 29 per cent in 2023. However, this is only a small difference to 22 per cent in 2020, suggesting that the sector is now returning to its pre-COVID-19 funding levels. The increase in grant funding during COVID-19 was expected.

It will take further time and effort for TAFEs to source further fee for service contracts.

Figure 7: Composition of revenue sources (excluding capital grants) for the TAFE sector from 2020 to 2024

Source: VAGO.

Own-source revenue growth may be challenging for some TAFEs

As shown in Figure 8, the training revenue each TAFE received from government funding or fee for service revenue varied substantially. 

Wodonga Institute of TAFE earned 79 per cent of all its revenue from fee for service revenue, while South West Institute of TAFE earned just 8 per cent from this source.

The location and course offerings of each TAFE can either help or hinder its ability to earn fee for service revenue. For example, Wodonga Institute of TAFE benefits from its proximity to the Australian Defence Force's Army Logistic Training Centre within the Albury Wodonga Military Area, which has led to it securing an agreement for approximately $300 million in fee for service revenue over 5 years. In contrast, TAFEs in Gippsland (TAFE Gippsland), Geelong (Gordon Institute of TAFE) and Barwon (South West Institute of TAFE) operate in regions that are transitioning to new skills and businesses. The fewer large, established organisations in these areas may limit these TAFEs' ability to earn more fee for service revenue.

Employee expenses continue to grow with training revenue

To deliver increased training and therefore earn more training revenue, we would expect to see an increase in the costs TAFEs incur to deliver courses. In particular, employee costs. This is due to the TAFE needing more staff to train more students.

Since 2020, total training revenue has risen 27 per cent from $881 million to $1.12 billion in 2024. Employee expenses have also mostly followed this trend, rising 24 per cent from $808 million in 2020 to $1.00 billion in 2024, as shown in Figure 9.

Figure 9: TAFE sector's total training revenue and total employee expenses from 2020 to 2024 ($ million)

Source: VAGO.

Employee costs have continued to be TAFEs' largest expense, accounting for over 60 per cent of all expenses, which is shown in Figure 10. TAFEs must proactively manage these costs and ensure the efficient use of employee resources to maintain financial sustainability.

Figure 10: Composition of TAFEs' expenses by type from 2020 to 2024

Note: Percentages may not total 100 due to rounding.

Source: VAGO.

Employee expenses rising faster than staff numbers

While total employee expense has increased in line with training revenue earned across the sector, the number of staff that TAFEs employ has not increased in line with this trend. As shown in Figure 11, the number of employees since 2020 has remained mostly stable at around 8,000 full time-equivalent (FTE) staff. The 2024 total FTE of 8,149 is just a 4.2 per cent increase in FTE staff numbers since 2020.

Figure 11: Total FTE staff in the TAFE sector from 2020 to 2024

Source: VAGO.

Over the last 5 years, the modest increase in staff numbers reflects targeted cost-saving strategies implemented by TAFEs, including workforce reductions and organisational restructuring. 

While employee numbers have remained relatively stable in recent years, rising staff costs continue to present a financial challenge. TAFEs must balance the need to maintain sufficient staffing levels to meet growing service demands with managing annual wage increases of approximately 4 per cent, driven by enterprise bargaining agreements and staff progression. 

TAFEs reduced costs in other areas

TAFEs' operational expenses grew in 2024, which is expected due to higher training activity. However, there was a notable decrease in spending on marketing and promotional costs by $2.57 million. Spending on repairs and maintenance also slowed, dropping by $528 thousand, despite a 29 per cent growth in the sector's property, plant and equipment over the last 5 years.

These shifts may reflect a strategic decision to defer certain expenses, potentially to ease short term pressures. In the context of a competitive VET market and growing asset bases, these decisions may lead to future financial challenges. For example:

• reducing spending on promotional activities may lead to lower engagement with potential students, impacting revenue and income growth
• deferring repairs and maintenance, as seen in Figure 12, may lead to asset deterioration, shorter useful lives and higher future replacement costs.

Figure 12: TAFE sector's repairs and maintenance expenses and total property, plant and equipment balance from 2020 to 2024 ($ million)

Note: 2022 was TAFEs' last revaluation year, with a significant increase in value recorded in that year.

Source: VAGO.

Capital grant income may not be enough to fund capital works at all TAFEs

As mentioned, TAFEs receive capital funding from the Victorian Government to help renew, replace or construct assets. While there is some connection between capital replacement and the amount of capital grants a TAFE receives, this is not always the case.

The capital replacement ratio is a way to assess whether a TAFE's spending on renewing its assets is sufficient. It is a longer-term measure that assesses spending on assets compared to depreciation. A result higher than one shows that capital renewal spending is greater than depreciation rates. A low capital replacement ratio might indicate that a TAFE is not investing enough in its facilities or equipment, possibly due to limited funding or deferred capital works. 

It is worth noting this indicator does not consider TAFEs' planned capital expenditure.

While the sector overall has achieved a capital replacement ratio greater than one over the last 5 years, this has varied significantly between TAFEs, as shown in Figure 13.

Sunraysia Institute of TAFE and Wodonga Institute of TAFE both had a capital replacement ratio greater than one for the period, despite receiving less than 2 per cent of the sector's total capital grant funding during this period. Conversely, Holmesglen Institute earned 3.8 per cent of the sector's capital grant funding but had a capital replacement ratio of only 0.73.

Figure 13: Proportion of the sector's total capital funding each TAFE received for 2020 to 2024 and its average capital replacement ratio for the same period

Note: Percentages may not total 100 due to rounding.

Source: VAGO.

The gap between the capital replacement ratio and amount of capital funding highlights some possible trends:

• TAFEs with a ratio above one but a smaller share of capital grants are using their own funds to renew assets.
• TAFEs with a ratio below one may be deferring asset renewal as part of broader efforts to manage cost pressures, consistent with lower spending on repairs and maintenance.

Overall, the sector earned a total of $405 million in capital grant income over the last 5 years but spent $719 million in cash on non-financial asset additions over the same period.

TAFEs are economically dependent on the state for funding

We found no signs that TAFEs were unable to meet their short-term financial obligations in 2024, yet we observed emerging financial pressures for some TAFEs.

As part of our financial audits, we assess whether management has appropriately applied the going concern assumption. This assumption means the entity expects to meet its financial obligations and continue operating for at least 12 months from the date of the audit report. If we identify a significant risk to this assumption that is not properly disclosed in the financial report, we may modify our audit opinion to highlight a material uncertainty.

TAFEs operate within the State of Victoria’s GGS, which functions as a single legal entity. The government centrally controls and funds TAFEs, so their continued operation depends more on policy decisions and the availability of government support if financial issues arise, rather than on the financial performance of individual TAFEs. As a result, GGS entities typically face lower going concern risks than private sector organisations, unless there is clear evidence to the contrary from a policy or funding perspective.

In 2024, we did not modify any audit reports to highlight material uncertainty related to going concern. All TAFEs provided sufficient evidence to support their ability to operate for at least 12 months from the audit report date.

However, our audit procedures, including reviews of budgets, cash flow forecasts and performance against financial and non-financial KPIs, revealed the following:

• 5 TAFEs ended 2024 with lower liquidity ratios than in 2023, indicating reduced financial resources.
• One TAFE, Melbourne Polytechnic, reported a liquidity ratio below one, meaning its current liabilities exceeded its current assets. However, it was enacting planned asset sales to access future financial resources.
• Budget projections beyond 2025 show that 5 TAFEs may experience low or negative cash positions by the end of 2026.

These observations indicate emerging financial pressures ahead for several TAFEs, which will need to be actively managed to maintain financial sustainability.

KPIs have been set around the sector's financial sustainability

The TAFE Network Statement of Priorities for 2024 includes an overall priority on TAFE financial sustainability. This priority includes targets specifically for:

• viable service delivery
• TAFE network-wide shared services
• standardised approaches to financial reporting
• balanced budgets
• operating within established risk parameters.

Many of these targets are stated to be achieved in collaboration with OTCD.

The KPIs that TAFEs report on annually are associated with these financial sustainability priority targets. TAFEs set the targets for these KPIs in line with their budgets and with input from OTCD.

For 2024, the 4 mandatory KPIs were:

• training revenue diversity
• employment costs as a proportion of training revenue
• training revenue per teaching FTE
• operating margin percentage.

These KPIs are a key way that TAFEs are publicly accountable for their performance against these priority areas. They all show the sustainability of a TAFE's operations, either through efficiency or diversity.

TAFEs' budgeting processes for KPIs are still lacking

In our Results of 2023 Audits: Technical and Further Education Institutes report we highlighted that we observed persistent and significant variances between budgeted and actual results for many KPIs. Given that KPIs are a key mechanism for TAFE accountability, improving budgeting accuracy presents a valuable opportunity for the sector.

Accurate budgeting supports better government funding decisions and enables TAFEs to plan more effectively for future changes in their finances, operations and service delivery. This would ultimately help to manage ongoing financial sustainability.

As Figure 14 shows, while there was a slight improvement in accuracy for 2024, there was still almost a quarter (23 per cent) of KPIs that varied from target by more than 10 per cent.

Figure 14: Variance between TAFEs' target and actual for KPIs from 2022 to 2024

Note: Percentages may not total 100 due to rounding.

Source: VAGO.

We previously recommended that TAFEs focus on analysing the causes of significant variances between budgeted and actual revenue and expenses, which form the basis of the target KPIs. We observed a trend that TAFEs tended to under-budget revenue and over-budget expenses. 

For the large (greater than 10 per cent) variances for 2024, all but one were a result of under budgeting revenue or over-budgeting expenses. While some of these variances are due to uncertainty over enterprise bargaining outcomes, this shows that the trend has not improved since 2023. TAFEs should continue to work on this recommendation.

Update on timely budget recommendation from our 2023 report

In our Results of 2023 Audits: Technical and Further Education Institutes report we also included a recommendation that, as TAFEs continue to work with DJSIR to achieve balanced budgets into the future, they begin their budgeting process earlier to ensure budgets are in place before the year they are to apply.

In 2024, all TAFEs submitted their board-endorsed draft budgets for 2025 to DJSIR within the timeframes they agreed with the department. However, the budgets needed significant revisions because of key factors that changed after they were initially submitted. TAFEs then resubmitted and DJSIR approved the budgets with these revisions in January 2025, missing the end-of-2024 deadline.

While TAFEs were unable to finalise their 2025 budgets before the end of 2024, we acknowledge the progress they made in improving the budgeting process. In particular, submitting board approved draft budgets by the end of October. We encourage TAFEs and DJSIR to continue this process, with the aim of having 2026 budgets finalised by the end of 2025.

Audit opinions issued

We have issued clear audit opinions on the 8 universities' financial reports and 23 of their 44 Australian controlled entities' financial reports for 2024. This means Parliament and the community can confidently use these reports.

Figure 15: Clear audit opinions issued and outstanding audits for the Victorian public university sector in 2024

Source: VAGO.

Audits still in progress

As at 15 May 2025, audits of 21 controlled entities' financial reports are still in progress for 2024. This did not affect our ability to issue audit opinions on the universities' consolidated financial reports because the operations of these controlled entities are not significant, either individually or collectively, to each university's operations.

See Appendix C for more information about these audits.

Timeliness

In 2024, all universities submitted their draft financial reports to us within the 8-week statutory deadline. Meeting this deadline helps universities comply with the law, facilitates a timely audit process and maintains financial transparency and accountability. 

Controlled entities' timeliness

Of the 44 Australian controlled entities we audit, 26 submitted their draft financial reports to us within the 3-month deadline. This was a decrease from 2023, when 36 met the deadline.

Some controlled entities missed the deadline because universities prioritised preparing their own financial reports and those of significant controlled entities on time, over the smaller controlled entities. While it is important to prioritise universities and their significant controlled entities, it is also important to meet the legislated timelines for all controlled entities to ensure validity for users.

Of 21 controlled entity audits still in progress:

• 6 controlled entities have yet to prepare their draft financial reports
• we are still auditing the financial reports of 15 others.

No material errors identified

As noted in Section 2, the nature, number and size of errors in financial reports provided for audit shows the quality and effectiveness of the systems and processes used to compile them.

Like last year, we found no material financial errors or classification and disclosure differences in the universities' financial reports, indicating that the reports are of good quality.

Amendments to fair value measurement

As also noted in Section 2, the AASB issued authoritative implementation guidance to AASB 13 Fair Value Measurement, which applied for the first time in 2024. But unlike the TAFE sector, universities did not receive any relief to defer application. This is because FRD 103 exempts the Victorian public universities from following it and therefore the relief contained within it, which allowed for a phased approach.

Universities applied the amended implementation guidance for the first time in 2024. We observed no material changes to the valuation outcomes of non-current physical assets, nor any significant changes to financial report disclosures because of the new guidance. We also did not identify any control or financial reporting issues associated with its implementation. This outcome aligns with the expectations disclosed by all universities in 2023, where they expected the impact of the amended guidance to not be material. 

The sector's net result

For 2024, the sector's net result improved. The sector recorded a net profit of $597 million, compared to $41.9 million for 2023.

This result was because revenue from teaching both domestic and international students increased more than expenses on staff and operations. Investment performance was also strong in 2024.

Investment returns support net result

Universities have large investment portfolios. They record the amounts they earn on these investments in their comprehensive income statement each year. These earnings include both amounts they receive from the investments (such as interest and dividends) and movements in the value of the investment itself, known as fair value gains or losses on investments.

Market conditions heavily influence investment returns and changes in investment fair values. These fluctuations can significantly impact the reported net results each year, either positively or negatively, depending on market performance.

As Figure 17 shows, investment gains contributed significantly to the sector's net result in 2024. Excluding these gains, the sector would have recorded a net result of $129 million, which is $468 million lower than the $597 million reported.

Figure 17: The Victorian public university sector's net result before and after fair value gains or losses on investments from 2020 to 2024 ($ million)

Source: VAGO.

Overall, investment returns and fair value gains or losses have played a critical role in shaping universities' net results in recent years. Over the last 5 years, changes in fair value have made up almost a third (32 per cent) of the sector's investment income. The impact to the sector's net result has been significant, as seen below.

The start to 2025 has been marked by heightened market uncertainty, with most global markets falling since the end of 2024.

While universities may be able to manage their revenue and expenses, whether they ultimately record a net profit or loss may depend on how these market conditions evolve.

Net result by universities before fair value gains or losses

For 2024, 3 of the 8 universities reported a net loss. Without fair value gains or losses, one further university would have also reported a loss.

Figure 18 presents the net result margin by university before accounting for fair value gains or losses, providing a clearer view of the underlying financial performance across the sector.

For 2024:

• 4 universities recorded a net profit and therefore a positive net result margin
• 2 universities reported a loss. However, both improved their net result margins compared to 2023
• 2 universities reported a loss and recorded a worse margin than in 2023.

Figure 18: Universities' net result margins before fair value gains or losses on investments for 2023 and 2024

Source: VAGO.

While universities operate as not-for-profit entities, generating modest profits is important to ensure they have sufficient funds to reinvest in their service delivery and remain financially sustainable. This includes investing in things such as paying for additional academic staff or making investments into new buildings and equipment.

Some universities experienced deteriorating results

As shown in Figure 18, Deakin University, Federation University Australia, La Trobe University and the University of Melbourne all recorded a net loss before fair value gains or losses in 2024.

Deakin University and Federation University Australia improved their results compared to 2023. Both universities increased revenue at a faster rate than expenses in 2024. Additionally, Federation University Australia recognised a one-off impairment loss in 2023 that did not occur in 2024. But even excluding this amount, it would have reported an improved net result margin before fair value gains or losses on investments, from −18 per cent in 2023 to −6.4 per cent in 2024. 

In contrast, the University of Melbourne reported a larger net loss in 2024 and La Trobe University moved from breaking even in 2023 to recording a loss in 2024.

The University of Melbourne's lower result reflects the spend on research activities in 2024 that were funded in prior years.

La Trobe University's decreased net result was driven by several factors:

• It stopped receiving capital grants for various large-scale projects.
• It incurred restructuring costs, including employee termination payments, to reduce expenses in future years.
• It completed several other capital projects that begun incurring depreciation expenses in 2024.

Revenue grew on domestic and international student numbers

Most revenue universities earn is teaching revenue, which made up over 67 per cent of the sector's total revenue in 2024. Growth in this revenue source is therefore what drives increases in revenue.

All universities reported a second consecutive year of teaching revenue growth in 2024. And as Figure 19 shows, all universities increased the number of students they teach, measured by equivalent full-time student load (EFTSL).

This increase was mostly consistent across the sector for both domestic and international places, and for both the Go8 universities and the non-Go8 universities. The sector’s total EFTSL increased from 322,988 in 2023 to 351,559 in 2024.

Positive signs in return to growth in domestic teaching revenue

Teaching revenue and EFTSL from domestic students increased in 2024 compared to recent years. This had been variable since COVID-19 in 2020, with increases and decreases being mostly equal over the period 2020 to 2024. But all 8 universities increased the amount of domestic student EFTSL in 2024, compared to only 4 in 2023. This increase in domestic EFTSL resulted in higher revenue.

Figure 20: Percentage change in domestic teaching revenue and domestic student EFTSL for the Victorian public university sector compared to preceding year for 2020 to 2024

 Source: VAGO.

This increase in domestic students can be attributed to:

• an increase in year 12 students in Victoria in 2023 – 1,827 (3.0 per cent) more students than in 2022
• increased demand for subjects such as teaching and nursing, often seen as 'safe' courses during times of economic uncertainty
• the government often subsidising in-demand courses at a higher rate than other courses, making these cheaper for the student.

This increase in enrolments for teaching and nursing is consistent with earlier times of economic uncertainty (such as the 2008 Global Financial Crisis and COVID-19), where demand for courses that are highly likely to lead to paid employment are seen as safe options.  

Expenses still increased but at a slower rate

Universities' expenses grew in 2024, but the growth rate slowed. Total expenses excluding fair value losses increased by 7.7 per cent in 2024 compared to 10.4 per cent in 2023. 

This was mostly because of increases in cost pressures. The Producer Price Index for higher education measures changes in the price of goods and services the higher education industry uses. It increased by 6.9 per cent in 2024 compared to 2.9 per cent in 2023, according to the Australian Bureau of Statistics.

The rest of the increase is linked to universities doing more teaching and other activities overall. For example, costs such as student related expenses increased by 38 per cent in 2024.

While growth in 2023 was mostly due to increases in how much teaching universities were undertaking, growth in 2024 was mostly due to cost increases.

Figure 21: Percentage increases in Victorian public universities' primary expense sources excluding fair value losses for 2022 to 2024

Source: VAGO.

Growth in number of staff slowed, but cost per staff continues to increase

As teaching organisations, universities spend most of their money on their staff.

Universities had been increasing staff numbers in 2022 and 2023 as international students returned to universities. But they slowed this growth in 2024.

Despite an increase in EFTSL of 8.8 per cent in 2024, the FTE growth throughout the sector has varied, as shown in Figure 22. As at 31 December 2024, the sector employed a total of 41,538 FTE staff, compared to 40,784 in 2023.

Figure 22: Universities' staff numbers by FTE for 2023 and 2024

Note: Number of employees includes full-time, part-time and casual academic and non-academic staff. The FTE numbers used in this figure were provided by each university and are unaudited.

Source: VAGO.

Universities slowed the growth in staff numbers in 2024. However, employee costs still increased by $556 million. 

This can be attributed to several factors, such as:

• wage increases as part of enterprise bargaining agreements
• one-off restructuring costs during 2024
• increased reliance on specialised staff who command higher remuneration
• increased administrative and compliance activities, requiring more staff, such as student support and digital learning support staff.

Revenue growth exceeded expense growth for first time since 2021

Despite the increase in staff costs, revenue growth outpaced expense growth. This is the first time this has happened since 2021, when redundancies related to the COVID-19 response reduced staff numbers.

Figure 23: Percentage change in total revenue and expenses (excluding fair value gains or losses) for the Victorian public university sector compared to the preceding year for 2020 to 2024

Source: VAGO.

The revenue growth over the last 2 years has been crucial to the sector reporting improved financial outcomes.

Policy changes may affect universities differently

Changes to government policy, such as enrolment settings or funding arrangements, could affect future financial outcomes. Most universities still rely heavily on revenue from domestic or international full-fee students, which makes them sensitive to shifts in these areas.

In 2025, the biggest uncertainty for universities relates to the Australian Government's approach to international student places and possible enrolment caps. The sector currently earns about one third of its revenue from teaching international students. 

As shown in Figure 24, universities vary widely in their reliance on this revenue stream. As a result, any changes to international education policy, including any cap on international student enrolments, may affect each university differently, depending on the change and their level of reliance.

The level of reliance each university has on international student teaching revenue has changed over time as international students have returned to study in Australia after COVID-19.

From 2020 to 2022, international enrolments declined, while domestic enrolments were varied. Since then, international student enrolments have grown by 28 per cent, outpacing the 5.6 per cent growth in domestic student enrolment. As a result, universities are increasingly relying on international students as a key revenue source.

Figure 25: Total domestic student EFTSL and international student EFTSL for Victorian public universities from 2020 to 2024

Note: The EFTSL numbers used in this figure were provided by the respective university and are unaudited. They include the EFTSL of universities' onshore and offshore controlled entities.

Source: VAGO.

In 2024, overall the sector taught significantly more domestic students than international students, with domestic student EFTSL more than 68,000 higher than international student EFTSL. 

Other changes that could affect universities’ revenue

Outside of potential adjustments to international education policy, changes to domestic student policies. For example, how CSPs are allocated and funded, may also affect how universities generate revenue from domestic student places. 

Domestic student teaching revenue is a primary source of revenue for universities. So, changes to how CSPs are allocated for domestic student places could have an equal or even greater financial impact than capping international student places.

For example, in 2024 most universities increased international student revenue at a faster rate than domestic student revenue. But Federation University Australia had less international student enrolments in 2024 compared to 2023 and experienced increased domestic student enrolments at a faster rate than the other universities.

Figure 26: Domestic and international student EFTSL figures for Federation University Australia from 2020 to 2024

Note: The EFTSL numbers used in this figure were provided by Federation University Australia and are unaudited.

Source: VAGO.

Changes to how major research funders, such as the Australian Research Council or the National Health and Medical Research Council, distribute research funding could have impacts across the sector, depending on how these funds are distributed. 

In 2024, the Victorian Go8 universities earned 64 per cent of all research income. Other Victorian public universities have been increasing the amount they earn from this source, which is $172 million more in 2024 compared to 5 years ago. But this has only increased their share of research revenue by 1.7 per cent.

Continuing to diversify revenue will help prepare for changes

In February 2024, the Australian Government Minister for Education released the Australian Universities Accord Final Report. The report put forward recommendations for the Australian Government to consider, including matters on international student policy, domestic student policy and research funding.

Despite efforts to diversify revenue to date through investment and other income – which includes contract research, consultancy, partnerships and commercial activities – most universities still significantly depend on one of either domestic or international student teaching revenue. Continuing to seek alternative revenue sources will help to guard universities from potential future impacts to their teaching revenue. 

At the end of 2024, balance sheets remain strong

While risks exist in the future, universities have strong balance sheets with the cash, investments and non-current physical assets held.

At the end of 2024, universities held sufficient cash and liquid assets (which are assets universities can quickly turn into cash) to meet their short-term liabilities. As Figure 27 shows, 7 of the 8 universities have an adjusted liquidity ratio above one. This means their cash and liquid assets exceed their current liabilities. In this ratio, we also count some long-term investments as liquid assets, because even though universities usually keep them for the long term, they could sell them quickly if needed.

La Trobe University had an adjusted liquidity ratio below one. But much of its current liabilities relate to 2025 student fees received in advance of providing the teaching, and its staff's leave entitlements. 

Of its $74.5 million in current employee leave liabilities, La Trobe University only expects to need to settle $18.0 million of this in 2025.

Figure 27: Universities' adjusted liquidity ratios for 2023 and 2024

Source: VAGO.

Internal control snapshot

TAFEs and universities must have an effective internal control system to keep proper accounts and records.

We assessed if TAFEs' and universities' internal controls – which include people, systems and processes – allow them to prepare reliable financial reports and, for TAFEs, also their performance statements.

Overall, internal controls remain adequate for reliable reporting. But there are areas for improvement relating to IT controls and financial reporting areas for TAFEs and universities.

TAFEs and universities can strengthen their internal controls and financial reporting processes by promptly addressing the issues we raise, with a focus on prioritising higher-risk matters. 

Communicating internal control and financial reporting issues

Where we find internal control and financial reporting issues, we bring these to the attention of management and those charged with governance, in line with the requirements of the Australian Auditing Standards. This includes: 

• raising new issues 
• providing updates on unresolved issues we raised in a prior period. 

We do this as part of our audit approach, but not to form an opinion of these controls.

Importance of IT controls

In modern organisations, such as TAFEs and universities, many financial controls exist within the IT systems they use to collect, store and extract financial information. TAFEs and universities rely on the design and operational effectiveness of key IT controls over systems such as:

• general ledger
• student and revenue management
• payroll
• fixed assets.

Weaknesses in IT controls can pose significant risks, especially in the context of financial reporting, data security and overall operational integrity. But just because internal controls exist, it does not mean an entity is automatically protected from cyber-attacks or other data-loss scenarios.

Our audits and the issues we find are concerned with the key finance systems and the controls and processes management have around them to ensure reliable financial reporting. 

We do consider IT security, but we do not necessarily look at the security of the entire IT environment and the protection of it.

More new issues found for TAFEs

In 2024, we found 15 new internal control and financial reporting issues for TAFEs, which is an increase from 5 in 2023, as Figure 28 shows.

Of the issues we identified in 2024, 5 related to IT. The most common IT-related issue, found for 2 of the 12 TAFEs, was weaknesses in how they control access to IT systems. Specifically, current controls are not effectively preventing users, whether through error or intent, from gaining inappropriate access or making unauthorised changes to systems or sensitive data. 

For almost half of the TAFEs (5 of the 12), we also found non-IT control issues. These include financial management controls such as: 

• reconciling between the general ledger and a sub-ledger
• recognising revenue
• storage and retention of invoices and other documentation to verify accounting transactions.

Figure 28: New issues found for the TAFE sector in 2023 and 2024

Note: We excluded low-risk issues because we consider these minor issues or opportunities to improve. Some issues may be both raised and resolved within the same year.

Source: VAGO.

Fewer new issues found for universities

In 2024 we found 4 new internal control and financial reporting issues across 3 universities, which is a decrease from 18 issues across 5 universities in 2023. As shown in Figure 29, of these 2024 issues, 2 relate to IT.

We have seen improvements in the number and types of issues we are finding, with more mature IT systems and controls in place compared to previous years. 

Some universities have planned changes to their IT systems in upcoming years. They will need to maintain this rigour around IT controls as they transition to their new systems.

Figure 29: New issues found for the Victorian public university sector in 2023 and 2024

Note: We excluded low-risk issues because we consider these minor issues or opportunities to improve. Some issues may be both raised and resolved within the same year.

Source: VAGO.

Both TAFEs and universities are closing old issues

Last year in our report Results of 2023 Audits: Technical and Further Education Institutes, we recommended TAFEs place added focus on closing out long-outstanding issues. Likewise for universities in our report Results of 2023 Audits: Universities, we recommended they do the same, specifically on long-outstanding IT issues.

We are pleased to see that both sectors have reduced their number of long-outstanding issues.

For the TAFE sector, there were 14 open prior period issues in 2023 across 6 TAFEs and 10 for 2024 across 7 TAFEs. It is positive to see outstanding prior period IT-related issues reducing from 9 in 2023 to 4 in 2024.

However, with the 15 new issues found in 2024, TAFEs will need to address 25 issues in 2025. We urge TAFEs to concentrate on closing issues within their agreed timeframes during 2025.

Figure 30: The TAFE sector’s unresolved prior period issues from 2020 to 2024

Note: We excluded low-risk issues because we consider these minor issues or opportunities to improve.

Source: VAGO.

For universities, only one prior year issue remained outstanding for 2024, compared to 3 across 2 universities in 2023. 

While the open issue does relate to IT systems, this shows universities have worked to address our concerns raised in our 2023 report about long outstanding IT issues, with only a single university still addressing a prior period issue.

Figure 31: The Victorian public university sector’s unresolved prior period issues from 2020 to 2024

Note: We excluded low-risk issues because we consider these minor issues or opportunities to improve.

Source: VAGO.

Types of IT control issues we find

As noted above, we continue to find weaknesses in IT system controls for TAFEs. Of their prior period unresolved issues, 4 relate to IT control deficiencies. This reflects ongoing weaknesses in their IT control environments.

For universities, we found less issues in 2024 and universities resolved many IT control issues in 2023. But some of these issues had been open for several years before they resolved them.

We would expect IT control issues to be the primary source of findings for modern control environments. But this highlights the ongoing challenge of remaining vigilant in this area.

Common IT control issues identified within TAFEs and universities include the following.

TAFEs and universities are responsible for controls, even in outsourced relationships

Since 2023, TAFEs have used a common cloud-based service provider for their primary finance systems.

Universities also use a variety of cloud-based or outsourced IT service providers for their student management, general ledger and procurement systems.

TAFEs and universities are responsible for governance over controls within IT systems storing their data, whether the TAFE or university controls the system or not. This is because they are responsible for financial and other data collected and stored by their organisation. 

TAFEs' reliance on third-party cloud services

TAFEs have a target to find opportunities to take shared approaches to services and/or administrative systems.

For cloud-based or other outsourced IT services, most of the key controls for these systems are dependent on the IT system. Despite the third-party provider hosting the system, TAFEs are responsible for gaining assurance over the design, implementation and operating effectiveness of these key controls.

TAFEs should take a proactive approach to assessing and obtaining this assurance for any new third-party service providers they engage. Without such assurance, it will be difficult for TAFEs to confirm they are meeting their obligations around data protection. It also limits their ability to mitigate any risks that may exist and protect the integrity of their systems.