Volume Two 2012 focusing on Universities
The Legislature
MPs not following the rules
A report released to Parliament today by the NSW Auditor-General, Mr Peter Achterstraat, found some Members of Parliament approved temporary staff payments before work had been performed and $20,486 of unspent allowances had not been returned.
Additional Temporary Staff
The Auditor-General also issued a recommendation to Members not to approve time worked by additional temporary staff before the work had been done.
My audit found instances where Members approved payments to additional temporary staff before work had been done,” said Mr Achterstraat. “Members who do this are in contravention of a direct instruction from the Clerk of the Legislative Assembly and the Members Handbook not to engage in this practice.”
It is a basic principle of good governance to not sign for work that has not yet been delivered and I would remind Members not to approve additional temporary staff claim forms before the actual work has been done.”
Sydney Allowance
The Sydney Allowance is paid to Members who reside in non-metropolitan electorates to cover additional costs associated with staying in Sydney to attend parliamentary business. Unspent monies are to be returned annually. “Members must meet all their financial obligations on time, and this includes paying back an allowance they didn’t use,” said Mr Achterstraat.
Universities Overview
NSW Universities in surplus
The NSW Auditor-General, Mr Peter Achterstraat, today reported that all ten NSW universities achieved operating surpluses in 2011, with the University of NSW achieving the highest surplus of $88.9 million followed by the University of Sydney with $88.5million. “In 2010, only eight universities achieved surpluses, so I am pleased to see a surplus for all ten universities in NSW,” said Mr Achterstraat.
“There has also been an improvement in the achievement of government financial performance benchmarks. Four NSW universities achieved all four benchmarks, compared to two last year.”
The Auditor-General noted that universities continue to face funding challenges for employee long service leave and annual leave obligations. Universities had long service leave obligations of $571 million, an increase of 23 per cent on last year.
“While most universities are reducing excess annual leave balances, managing leave is a continual challenge,” said Mr Achterstraat. “High levels of unused leave are a red flag for any organisation raising both financial and work, health and safety risks,” he said. Mr Achterstraat also highlighted the impact of an ageing workforce on universities’ cash balances in the future.
“The increasing demand for funds to payout the entitlements of an aging workforce creates liquidity risks for the universities,” he said.
The Auditor-General’s Volume 2, 2012, reports on the audits of all ten NSW universities’ 2011 financial statements.
Universities’ funding hole for super liabilities
There is a critical need for NSW universities to negotiate funding arrangements for superannuation liabilities with the Australian Government as universities face increasing employee retirements.
“I have reported the need for funding arrangements between universities and the Australian Government since May 2009,” said the NSW Auditor-General, Mr Peter Achterstraat, following the release of his financial audit report to Parliament today.
“In just one year, superannuation liabilities for universities have increased from $3 billion in 2010 to $4.3 billion in 2011, with the University of NSW and The University of Sydney comprising 50 per cent of this amount.”
The universities’ Vice-Chancellors’ Committee has approached the NSW and the Australian Governments to progress this issue and while the Auditor-General is encouraged by the engagement of actuaries to determine allocation of funding between the governments he urges a rapid conclusion to the matter.
“It is critical for the governments to quickly complete their negotiations and sign funding agreements with each university,” he said. “A funding timetable must be determined to enable universities to manage their cash flows and inform the superannuation schemes’ trustee.” The Auditor-General’s Volume 2, 2012, reports on the audits of all ten NSW universities’ 2011 financial statements.
Major capital works planned for NSW universities
NSW universities have committed billions of dollars towards major construction of new state-of-the-art facilities and to improve infrastructure and services. “This is an exciting time for our universities,” said the NSW Auditor-General, Mr Peter Achterstraat, following the release of his financial audit report today. “Between 2010 and 2013, NSW universities plan to have spent over $5 billion collectively on major building and enhancement projects.”
The Auditor-General noted that universities are planning to spend $3.1 billion on capital projects in the next two years. “Major projects are planned for 2012 and 2013, which will benefit students, staff and local economies,” said Mr Achterstraat.
New facilities include:
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University of NSW’s Tyree Energy Technologies Building, which has facilities for research into clean energy
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University of Sydney’s development of the Charles Perkins Centre to deliver world-class research into obesity, diabetes and cardiovascular disease
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University of Technology’s Dr Chau Chak Building to provide teaching, learning, research and office accommodation for the University’s Business School
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University of Western Sydney’s campus regeneration project which includes building refurbishments and new student residences
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Wollongong University ‘s development of its Innovation Campus and student accommodation
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Southern Cross University’s development of its Gold Coast campus.
Universities are forecasting borrowings will fund 33 per cent of the 2012 capital programs.
“Increased borrowings bring increased risks from exposure to interest rate variability and managing cash flows to meet repayments over a number of years,” noted Mr Achterstraat. In addition, other risks associated with constructions can come from late delivery and specification changes.
“It is important for universities’ project steering committees to closely monitor projects to ensure the expected benefits are achieved within budgeted costs and timeframes,” said Mr Achterstraat.
Maintenance Backlog
The increase in universities’ facilities has ongoing maintenance implications.
Maintenance expenditure across all NSW universities was $192 million. Despite a 27 per cent increase in maintenance expenditure over last year, the maintenance backlog remains high at $763 million, down from $782 million last year.
The Auditor-General’s Volume 2, 2012, reports on the audits of all ten NSW universities’ 2011 financial statements.
Charles Sturt University
Achievements by Charles Sturt University
The My University website has recognised Charles Sturt for producing graduates who have an 85 per cent success rate in gaining employment.
“I congratulate the University on its success,” said the NSW Auditor-General, Mr Peter Achterstraat, following the release of his financial audit report to Parliament today.
In a year where all ten NSW Universities reported financial surpluses from their operations, Charles Sturt University’s surplus more than doubled to $38.7 million.
The Auditor-General noted that universities continue to face funding challenges for employee long service and annual leave obligations. Charles Sturt University had long service leave obligations of $27 million, an increase of 17.4 per cent on last year.
The Auditor-General highlighted the University’s progress with its $270 million, five-year capital development plan, which includes a childcare centre at Thurgoona and a Life Sciences building at Wagga Wagga. He was pleased to note the University largely funded the $76.9 million capital spend last year through operating surpluses and investments rather than borrowings.
The Auditor-General’s Volume 2, 2012, reports on the audits of all ten NSW universities’ 2011 financial statements.
Southern Cross University
Southern Cross University moves into surplus
Southern Cross University has reversed its prior year deficit of $565,000 to report a surplus of $7.6 million for 2011. While all ten NSW Universities reported surpluses in 2011, only the country universities reported improved results from the previous year.
“A financially viable university supports the local community’s economy and jobs,” said NSW Auditor-General, Mr Peter Achterstraat, following the release of his financial audit report to Parliament today. “Regional universities have performed well in 2011 and their communities can be proud of them,” he added.
The Auditor-General’s report revealed Southern Cross University to be the most reliant university on Australian Government Grants, which amounted to 53.4 per cent of its total revenue. His report also highlights that universities can reduce financial risks by diversifying their revenue sources.
The University secured funding of $32 million for its $90 million Gold Coast Campus development from the Australian Government in 2011. Some of this funding will be used to build the headquarters of the SCU College. The college will contribute to the medium and long term sustainability of the University by providing a pathway for students currently not academically prepared for University. The University will need to borrow $45 million to complete the Gold Coast Campus project.
The Auditor-General noted that universities continue to face funding challenges for employee long service and annual leave obligations. Southern Cross University had long service leave obligations of $14 million, an amount similar to the previous year.
The Auditor-General’s Volume 2, 2012, reports on the audits of all ten NSW universities’ 2011 financial statements.
University of New England
Achievements by the University Of New England
“The University of New England has reversed last year’s operating deficit to a surplus this year of $12.5 million,” reported the NSW Auditor-General, Mr Peter Achterstraat, in his financial audit report to Parliament today.
“While all ten NSW Universities reported surpluses in 2011, only the country universities reported improved results from the previous year. A financially viable university supports the local community’s economy and jobs,” said Mr Achterstraat.
The Auditor-General noted that universities continue to face funding challenges for employee long service and annual leave obligations. The University of New England had long service leave obligations of $20 million, an amount similar to the previous year.
Student numbers increased by 5.4% in 2011. The University advised that it was one of only a few Australian universities where the number of international students on campus increased. The University attributes this growth to its commitment to diversity in recruitment including the range of countries it recruits students from.
The University gained an Australian Government grant of $36.6 million to be used on key projects including the establishment of a Future Campus at Parramatta and the redevelopment of University courseware for online delivery. The Auditor-General’s Volume 2, 2012, reports on the audits of all ten NSW universities’ 2011 financial statements.
University Of New England must address maintenance backlog
Essential building works and repairs to residential colleges are unlikely to be undertaken as the University of New England is slow to address its maintenance backlog. The ongoing deferral of maintenance work at the University of New England is a concern for the NSW Auditor-General, Mr Peter Achterstraat, as highlighted in his report released to Parliament today.
Last year, the Auditor-General highlighted the urgent need for the University to replace its ageing infrastructure and address its growing backlog of maintenance at a cost of approximately $76 million. To date, the University has been unable to source the funding it needs to address the entire backlog. “Over $45 million of this cost relates to critical rehabilitation works for residential colleges,” said Mr Achterstraat.
“Without these works, the colleges are at risk of not complying with applicable building related legislation.” The University’s limited capital works program has enabled the backlog of maintenance to remain steady over the last three years, but the Auditor-General warns it is likely to rise again from 2012.
“Unless $3 million per annum is spent solely on deferred maintenance, the backlog figure will again increase,” said Mr Achterstraat. “I urge the University to find a long term solution to its maintenance backlog problem.” The Auditor-General’s Volume 2, 2012, reports on the audits of all ten NSW universities’ 2011 financial statements.
Major project delays at University Of New England
Capital expenditure delays at the University of New England were highlighted as a concern of the NSW Auditor-General, Mr Peter Achterstraat, in his report released to Parliament today. “Approximately one-third of planned capital expenditure by the University of New England in 2011 was delayed,” said Mr Achterstraat.
“While I understand progress on projects was slow because of design changes and other delays, the University must ensure work progresses on their planned major projects in 2012.” Capital expenditure to improve infrastructure, teaching facilities and network services in 2011 totalled $21 million, $10 million less than budgeted.
The University expects this year’s capital expenditure, including last year’s delayed expenditure, will total $38 million.
The Auditor-General’s Volume 2, 2012, reports on the audits of all ten NSW universities’ 2011 financial statements.
University of Newcastle
Achievements by the University Of Newcastle
In a year where all ten NSW Universities reported financial surpluses from their operations, the University of Newcastle reported a surplus of $29 million for 2011.
“A financially viable university supports the local community’s economy and jobs,” said NSW Auditor-General, Mr Peter Achterstraat, following the release of his financial audit report to Parliament today.
The University of Newcastle has been awarded an overall maximum rating of five stars from the QS Stars international benchmarking system.
“I congratulate the University on its success,” said Mr Achterstraat. “This is a great achievement.”
Work has commenced on building additional student accommodation to house up to 750 students. This project is estimated to cost $85 million, which the University expects to recoup through the income generated from the accommodation.
Newcastle continues to have the lowest proportion of its staff with excess annual leave balances of all 10 NSW universities.
“Lowering excess annual leave liabilities is critical for any business,” said Mr Achterstraat. “It is good from a workplace health and safety perspective and it makes sound financial sense as lower payouts are required when staff resign.”
The Auditor-General’s Volume 2, 2012, reports on the audits of all ten NSW universities’ 2011 financial statements.
No business cases to support $600 million spend on projects
The University of Newcastle has not prepared business cases for at least two major projects to determine whether they will be viable, cost effective and benefit the University.
The NSW Auditor-General, Mr Peter Achterstraat, in his financial audit report released to Parliament today, was critical of the University of Newcastle for the absence of business cases for two large projects estimated to cost nearly $600 million.
The University did not prepare a business case to support a contribution of $26 million it made towards a clinical research facility at John Hunter Hospital campus, nor has it prepared one to support its proposal to build the new city campus, expected to cost $562 million.
“For a contribution of $26 million, I would expect a business case to have been prepared by the University, which sets out the basis for its decision and expected costs and benefits of the project,” said Mr Achterstraat.
“For the past 2 years I have recommended the University conduct a cost benefit analysis of its proposal to build the new city campus and this still has not been done,” he added. “The University runs the risk of committing to a project that may not be viable or achieve maximum benefit for the University, wasting taxpayers’ money.”
Mr Achterstraat recommends the University prepare a formal business case to support all major financial decisions.
The Auditor-General’s Volume 2, 2012, reports on the audits of all ten NSW universities’ 2011 financial statements.
Staff use University credit cards for personal expenses
The University of Newcastle risks major credit card fraud unless its controls guiding personal expenditure are tightened.
The misuse of credit cards was one of several issues concerning the NSW Auditor-General, Mr Peter Achterstraat, in his financial audit report released to Parliament today.
“The misuse of credit cards is occurring at the University of Newcastle at an unacceptably high rate,” said Mr Achterstraat. “During the year, 93 employees used their credit cards for personal expenses totalling $20,177, nine cards were cancelled and 253 people had their credit cards suspended.” Mr Achterstraat acknowledged personal expenditure using the University’s credit cards had halved since the previous year and that the University had successfully recovered the money, but he believes misuse of the cards is still excessive.
“With annual credit card expenditure again close to $20 million, the misuse of credit cards costs time and money and has serious reputational risks and implications for the University,” he said.
“The University must to do more to improve its controls and minimise the risk of credit card misuse continuing.” The Auditor-General’s Volume 2, 2012, reports on the audits of all ten NSW universities’ 2011 financial statements.
University of Western Sydney
Major capital works for University of Western Sydney
The University of Western Sydney plans to spend $381 million over the next three years on major capital works to improve its infrastructure, teaching facilities and new student residences.
The new residences will accommodate the increase in students expected by the University by 2014. The University anticipates it will need to house 3,000 more students than it does currently. The NSW Auditor-General, Mr Peter Achterstraat, following the release of his financial audit report to Parliament today, highlighted the importance of the University having adequate facilities and accommodation for all its students across its six campuses in Sydney’s west.
“The University spent $111 million in 2011 and $108 million in 2010 funded by a combination of grants from the Australian Government, internal funds and borrowings,” said Mr Achterstraat. “These capital works will benefit students, staff and local economies.” Future capital expenditure will be increasingly funded by borrowings. The University has access to a $128 million loan facility of which $44 million was drawn down in 2011.
“Increased borrowings come with increased risks from exposure to the variability of interest rates and managing cash flows to meet repayments over a number of years,” said Mr Achterstraat.
“These risks will need to be carefully managed by the university.” Mr Achterstraat also pointed out that the increase in facilities will have ongoing maintenance implications. The Auditor-General’s Volume 2, 2012, reports on the audits of all ten NSW universities’ 2011 financial statements.
University of Wollongong
Achievements by the University of Wollongong
In a year where all ten NSW Universities reported financial surpluses from their operations, the University of Wollongong reported a surplus of $38 million for 2011.
“A financially viable university supports the local community’s economy and jobs,” said NSW Auditor-General, Mr Peter Achterstraat, following the release of his financial audit report to Parliament today. “Another financial positive for the University was maintaining its AA credit rating after a review by Standard & Poor’s in 2011,” he added.
The Auditor-General noted that universities continue to face funding challenges for employee long service and annual leave obligations. The University of Wollongong had long service leave obligations of $45 million, an increase of 12.5 per cent on last year.
The University was awarded the maximum ‘Five Stars’ rating from the QS Stars international benchmarking system. The University also received a five star result in the 2012 Good Universities Guide. The guide revealed the University was number one in New South Wales in a new category targeting domestic graduates. “I congratulate the University on its successes,” said Mr Achterstraat.
The Auditor-General’s Volume 2, 2012, reports on the audits of all ten NSW universities’ 2011 financial statements.
University of Wollongong more accommodating
There is only one available bed for every four international on-campus students at the University of Wollongong. “The University has a shortage of student residential accommodation,” said the NSW Auditor-General, Mr Peter Achterstraat, in his financial audit report released to Parliament today.
“Over the last 2 years to 31 December 2011, there was an increase of only 10 student beds compared to an additional 2,101 Wollongong based students,” Mr Achterstraat said.
“I am pleased the University is responding to this shortage,” he added. The University has acquired the former Hotel IBIS and converted it to student accommodation in January 2012.
The University is also constructing another 360 beds in self-catered units and is developing private rental support processes to provide more affordable accommodation to its students.
"With many universities competing for students, having sufficient affordable student accommodation is an advantage,” said Mr Achterstraat. The Auditor-General’s Volume 2, 2012, reports on the audits of all ten NSW universities’ 2011 financial statements.
University of Wollongong goes it alone on campus development
The University of Wollongong is terminating its joint venture to develop the remaining stages of its Innovation Campus, which it will now complete itself. The status of the campus development was one of several issues reported by the NSW Auditor-General in his financial audit report released to Parliament today.
The University advised it will not incur any penalties for terminating its arrangement with its joint venture private sector partner,” Mr Achterstraat said.
The University entered into the joint venture arrangement in 2004 to develop the campus over a 10 to 15 year period. Six buildings have been completed at a total cost of $164 million. Mr Achterstraat noted that the University has not experienced major delays or major cost overruns on its major capital projects.
“All completed projects were delivered within the University’s original estimated timeframe and within the original budgeted cost or lower,” he said.
The University spent $78 million on capital works in 2011 and is planning to spend $185 million over the next 5 years.
“With the level of capital projects being undertaken, achieving on time and on budget results has positive impacts for the University and the community,” added Mr Achterstraat. The Auditor-General’s Volume 2, 2012, reports on the audits of all ten NSW universities’ 2011 financial statements.
Emily Watson, on 02 9275 7408 or 0425 329 363 and email emily.watson@audit.nsw.gov.au