1.1 Sector overview
Eight universities and their 51 controlled entities make up the public university sector in Victoria. Collectively, they make a significant contribution to the state and national economy through their principal activities of higher education and research.
The universities provide higher education services to both domestic and international students. Enrolments have grown steadily by around 4 per cent each year since 2012, and there were about 370 000 students enrolled in 2016.
Over the past five years, foreign students have consistently accounted for around 30 per cent of total enrolments. As most foreign students pay full fees, they are a significant source of revenue for most universities.
The sector has progressively increased its international operations in an effort to diversify and broaden its reach to international students. This includes establishing overseas offices and campuses, developing partnerships with foreign higher education providers, and offering distance learning and cloud-based options.
The research conducted by the sector contributes to expanding knowledge and improving efficiency, with broad and far-reaching benefits. Higher Education Research and Development statistics show Victoria had the second highest expenditure—behind New South Wales—on higher education research and development in 2014.
Aside from research and education, universities also engage in a number of other income-generating activities, including providing student accommodation, health and fitness facilities and other services, to supplement and support the experiences of their staff and students.
To fund their operations, the sector relies primarily on student fees and government funding. Figure 1A provides an overview of the sector's operations.
Overview of the university sector
(a) 2016 student enrolment and completion data was not available as at 10 May 2017.
(b) excludes postgraduate research awards.
Source: VAGO and the Australian Government Department of Education and Training Higher Education Statistics Data Cube (uCube).
1.2 Legislative and financial reporting framework
The universities and their controlled entities are subject to a range of accountability and reporting frameworks, with many and varied reporting requirements. As a result, universities' financial reporting is complex.
At the state level, universities fall within the definition of a public body under the Financial Management Act 1994 (FMA). As a result, they must comply with the reporting and other requirements of the FMA, particularly in the preparation of their annual financial reports.However, the universities are not controlled by the state of Victoria, and their financial results are not part of the state's annual financial report.
From the perspective of the Commonwealth, universities:
- are registered with the Federal 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 the majority of their grant funding from the Commonwealth Government, and fall withinthe 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 for research and other grants, also impose financial reporting requirements on the universities. The Commonwealth requires some of these reporting requirements to be included in universities' annual financial reports. As a result, the disclosures in universities' annual financial reports exceed the requirements of the Australian Accounting Standards.
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 Commissions Act 2012.
1.3 What we cover in this report
In this report, we provide information on the outcomes of our financial audits of the eight Victorian universities and their 51 controlled entities for the year ended 31 December 2016. The financial results of controlled entities are consolidated into those of their respective parent entities, and we do not discuss them separately in this report.
We identify and report on the key matters arising from our audits, and provide an analysis of the information included in the universities' financial reports.
Figure 1B outlines the structure of this report.
2 Results of audits
Comments on the results of the financial report audits of the public universities and their controlled entities for the 2016 financial year.
3 Internal control
Summarises the internal control issues observed during our audits and comments on the fraud control frameworks in place across the sector.
4 Financial sustainability
Provides an insight into the university sector's financial outcomes, including sustainability risks and challenges.
Appendix B provides a list of all 59 entities included in this report, and details the financial audit opinions issued for the year ended 31 December 2016.
We carried out the financial audits of these entities under section 8 of the Audit Act 1994 and Australian Auditing Standards. Each entity pays the cost of its audit.
The cost of preparing this report was $125 000, which is funded by Parliament.