Volume Two 2013 focusing on Universities

MPs complying with the rules

New South Wales Members of Parliament are largely complying with the requirements of the Parliamentary Remuneration Tribunal’s Determination, including temporary staff payments and expenditure.

“I am pleased that Members have heeded the message from my previous review and are no longer approving time worked by their temporary staff in advance,” said the Auditor-General, Mr Peter Achterstraat. “It is also welcoming that my review of 2011-12 expenditure found fewer exceptions than last year,” he added.

The review still found some material exceptions, including:  

• 9 Member claims were not submitted for payment within 60 days of receipt or occurrence of the expense

• 8 Members did not return their unspent Sydney Allowance amounts by 30 September 2012

• 16 Members did not complete an annual declaration stating the benefits accrued by way of loyalty/incentive schemes were used only for Parliamentary duties and not for private purposes.

“Of the eight Members who had not returned their unspent Sydney Allowance amounts by 30 September 2012, I am pleased to report that all have subsequently repaid all or most of the unspent money, with only $11,133 still outstanding at the end of March 2013,” said Mr Achterstraat.

The timing of expenditure by Members of their Electorate Mail-out Account was an area of concern for the Auditor-General.

“It is pleasing that Members spent some $3.0 million, or 15 per cent, less than expected on additional entitlements during 2011-12, however, I am concerned by the timing of their Electorate Mail-out Account expenditure,” said Mr Achterstraat.

“There was a large spend-up in February 2011, just before the March State election, and another one in June 2012, just before forfeiting any unused portion of their entitlement. The timing could create a negative perception within the NSW public,” he added.

While no evidence of electioneering or political campaigning leading up to the March 2011 State election was found by the Department of Parliamentary Services, the Auditor-General warned of the heightened risk of this occurring given the unusually high spend just before the election.

“To reduce this risk, I have recommended the Parliamentary Remuneration Tribunal consider introducing a blackout period of Electorate Mail-out Account expenditure before a State election,” said Mr Achterstraat.

The average total spend per month across the two years was $392,000. However, Members spent a total of $1.5 million in the month of February 2011 and $1.6 million in the month of June 2012.

The Electorate Mail-out Account provides Legislative Assembly Members with annual funding to meet the cost of preparing and distributing newsletters to their electorate. They cannot use these funds for any other purpose, such as electioneering or political campaigning. Any unused Electorate Mail-out Account funds are forfeited at the end of each financial year.

Governance Improvements in the University sector

The Auditor-General reports improvements in the governance structures of the State’s ten universities, citing a reduction of key issues found and reported in the audits of their financial statements.

“Universities are complex entities operating in a competitive environment in challenging times,” said Mr Peter Achterstraat. “I am satisfied that NSW universities, as a whole, had good governance structures to best manage risks last year.”

A measure of good management of financial risks is the number of new key issues found by the Auditor-General and reported to the Minister and Parliament. 

“This year, no new key issues are reported within the individual university comments in my Volume Two report,” said Mr Achterstraat. “Furthermore I issued only six qualified opinions out of 94 opinions in the university sector for 2012. This is a good improvement from previous years.”

Most universities are reducing their excess annual leave balances, following previous recommendations by the Auditor-General for universities to examine the reasons why excessive leave balances for their staff were continuing to increase.

“Excessive leave balances cause an increase in liabilities over time and can impact detrimentally on the health and wellbeing of staff,” said Mr Achterstraat. “This is why it is pleasing to see a reduction in the annual leave balances. It’s good for business and good for people.”

Mr Achterstraat congratulated the NSW universities for the increased professionalism of their peak Financial Officers Group meetings. The meetings now incorporate guest speakers from major organisations specialising in providing early warnings on new risks to the university sector.

“I am also pleased that finance committees are challenging the ongoing need for controlled entities,” said Mr Achterstraat. “The number of controlled entities continues to trend down, with 84 as at 31 December 2012, compared with 90 the previous year.”

The Auditor-General’s Volume Two, 2013, reports on the audits of all ten NSW Universities’ 2012 financial statements.

Universities superannuation still not fully funded

NSW and Australian Governments have not reached agreement on funding NSW Universities’ $4.7 billion of superannuation liabilities.

“Balances held by the trustee for State-defined benefit superannuation are critically low for some NSW universities,” said the NSW Auditor-General, Mr Peter Achterstraat.

“Reserve balances held by the trustee for some universities have fallen to a level where the trustee has asked universities for a funding plan,” he added.

“I strongly recommend that NSW universities and the Australian Government agree on a funding plan for their State-defined benefit superannuation schemes,” said Mr Achterstraat. “Discussions began in 2011 and are still ongoing in 2013,” he added.

Universities need funding agreements with the Australian Government that clearly indicate the amount and timing of superannuation payments so universities make similar contractual commitments with trustees to ensure full benefits flow to their employees in retirement.

At 31 December 2012 the unfunded superannuation liability for the ten NSW Universities was $4.7 billion, an increase of 9.3 per cent on last year. The liability has continued to increase since 2009.

NSW Universities strong contributor to Australian Economy

Tertiary students from overseas are a significant source of revenue for NSW universities and a strong contributor to the Australian economy overall.

Overseas students studying at Australian tertiary institutions, here and overseas, contributed a total benefit of $15.3 billion in 2011-12, with NSW universities accounting for $5.5 billion.

“NSW universities are strong contributors to the Australian economy,” said the Auditor-General, Mr Peter Achterstraat. “Australia has benefited from overseas student course fees and the money these students spend on goods and services.”

Revenue to NSW universities from overseas student fees increased by 44.4 per cent since 2008 and fees from domestic students increased by 29.8 per cent.

“Overseas student fees continue to be a significant revenue stream for universities,” said Mr Achterstraat. “Fees received per overseas student were on average close to three times those received from a domestic student,” he added.

Student numbers in NSW universities increased during 2011 by 4,622 (1.9 per cent) to 245,404 with overseas students representing 23.6 per cent of all enrolled students at the end of 2011. 

Capital expenditure across all ten universities in 2012 increased from 2011 by $200 million and was 2.4 times greater than depreciation charges.

“Universities have significant capital facilities and I am pleased that there has been a good investment in planned capital expenditure,” said Mr Achterstraat. “I am also pleased to find that backlog maintenance at NSW universities has decreased by $94 million to $669 million.”

The Auditor-General’s Volume Two, 2013, reports on the audits of all ten NSW universities’ 2012 financial statements.

Further information

Emily Watson, Governance Manager, 02 9275 7408, 0425 329 363, email emily.watson@audit.nsw.gov.au