Volume Two 2015 focusing on Universities

NSW university sector in sound financial position but sustainability risks are emerging

Generally, NSW universities are in a sound financial position, but average operating margins are falling and operating expenditure is growing faster than operative revenue.
The university sector’s average operating margin fell from 6.6 per cent in 2013 to 4.8 per cent in 2014 and combined operating expenditure grew 0.9 per cent more than operating revenue. Employee expenses in 2014 increased by an average of 5.1 per cent and other expenses by 5.8 per cent.

Operating expenditure grew at a faster pace than operating revenue at six of the ten NSW universities.

Debt levels low but increasing

The combined debt for all ten universities has been steadily increasing but remains low relative to their ability to service interest costs.
The combined debt is now 10.1 per cent of equity, up from 8.5 per cent in 2013 and 4.4 per in 2010. Universities’ borrowings totalled $1.4 billion at 31 December 2014, an increase of $283 million on the prior year.
Financial reports unqualified

Internal controls at NSW universities are appropriately designed and operating effectively to produce reliable and timely financial reports. All ten universities’ 2014 financial statements received unqualified audit opinions.
As in previous years, information security issues are exposing universities to security attacks, data integrity issues, fraud and identity theft. Some universities have weak processes for reviewing user access to systems and for terminating access when needed. It is disappointing that over a quarter of the issues raised by the Audit Office in 2013 were not addressed in 2014.

Other common issues at some universities included poor controls over payroll processing and weaknesses in compliance frameworks.

Risk management needs to improve

In most universities, risk management processes were not fully standardised and enforced. They are often applied inconsistently and risk reporting is sometimes reactive and not able to systematically support decision-making.
In the university with the most mature risk management framework, risk awareness is evident at each business level. Executive management uses a top-down approach to communicate strategic risks and risk owners at operational levels conduct risk management workshops to identify key risks and escalate issues to management. 
The university with the least mature framework for risk management is yet to embed a risk aware culture, where risk management is integral to the daily operations of the university.
All universities have taken steps to improve their enterprise risk management framework.


During 2014, the number of equivalent full time students in NSW universities increased by 2.7 per cent to 262,514 with overseas students representing 22.6 per cent. The number of overseas students fell in three universities in 2014 following falls at six universities in 2013.
The fee received per overseas student has increased by an average of 6.1 per cent per annum since 2010. Fees received per domestic student increased by an average of 5.2 per cent per annum over the same period.

Domestic student fees are significantly subsidised by the Australian Government.

Further Information

Please contact Barry Underwood on 9275 7220 or 0403 073 664; email: barry.underwood@audit.nsw.gov.au