- 1. AUDITOR-GENERALS REPORTFINANCIAL AUDITSVolume Two 2007 The
Legislative Assembly The Legislative Council Parliament House
Parliament House Sydney NSW 2000Sydney NSW 2000 Pursuant to the
Public Finance and Audit Act 1983, I present Volume Two of my 2007
Report. Peter Achterstraat Auditor-General Sydney May 2007
2. GUIDE TO USING THIS VOLUMEThis volume summarises the results
of a number of our financial audits.We have attempted to adopt a
plain English style of writing. This is not always easy when
describing technical issues, but we recognise the diversity of our
readership and their needs.This Volume has three sections. Section
One incorporates The Legislature.Section Two is divided into
ministerial portfolios, each containing one or more government
agencies. Each agencys comment begins with a summary of our Audit
Opinion. This is a key result of each audit. An unqualified audit
opinion means we are satisfied that the agency has prepared its
financial report in accordance with Australian Accounting Standards
(and other mandatory requirements). It also means we believe the
report has no material errors and the scope of our audit has not
been limited. If any of these aspects are not met we issue a
qualified audit opinion and explain why we did this.The next
section outlines any Key Issues we identified during the audit.
These are matters such as:significant findings or outcomes of the
audit any major developments impacting on the agencys role or
activities key repeat findings recommendations to Parliament.The
Audit Opinion and the Key Issues sections represent the more
important findings. By targeting these sections, readers can
quickly understand the major issues facing a particular agency, or
glance through a number of reports to assess the financial health
of a portfolio.Performance Issues cover key financial and
operational statistics we have identified that help understand how
well the agency is performing. Wherever possible we include
comparisons with similar agencies interstate.The next two sections
contain analysis of issues we identified during our audit. While
many of these will include suggestions for improvement, these are
not as significant as the issues outlined in the first two sections
of the agency comment.Control Issues outline any shortcomings we
have observed in the agencys internal checking mechanisms. These
mechanisms should exist to ensure the effective safeguard of assets
and resources.Compliance Issues summarise whether the agency has
complied with selected legislation and other relevant government
requirements.Financial Information summarises the essential
information from each agencys financial report. While this is
sufficient for a broad understanding of the agencys financial
position, readers can access more detailed financial statements in
the agency's annual report or website.Agency Activities summarise
the agencys purpose, services, structure, relevant legislation, and
its web address.While some agency comments in this volume will have
all of the headings outlined here, this will vary depending on the
size of the organisation and the findings of our audit.The Agency
Response appears where the head of an agency does not believe that
the commentary in our Report adequately reflects the agency's
position or actions taken. As we discuss our proposed comments with
agency staff during the drafting process, few agencies ask for a
formal response to be included.Section Three refers to Performance
Audits tabled or in progress at the time of this report. 3.
ContentsSignificant Items
.................................................................................................
iii Services Provided by the Audit Office
.......................................................................
v SECTION ONE The Legislature Audit of Members Additional
Entitlements
...................................................................
3 SECTION TWO Commentary on Government Agencies Minister for
Education and Training
............................................................................
7Technical Education Trust
Funds........................................................................
9Universities
Overview....................................................................................
10Charles Sturt University
.................................................................................
17Macquarie
University.....................................................................................
20Southern Cross University
...............................................................................
26The University of Sydney
................................................................................
30University of New England
..............................................................................
37University of New South
Wales.........................................................................
41University of Newcastle
.................................................................................
55University of Technology,
Sydney......................................................................
61University of Western Sydney
..........................................................................
66University of
Wollongong................................................................................
72UNILINC Limited
..........................................................................................
78Minister for Health
...............................................................................................
79Health Administration Corporation
...................................................................
81Minister for Lands
................................................................................................
85Wild Dog Destruction
Board.............................................................................
87Minister for Primary Industries
.................................................................................
89Department of Primary Industries
.....................................................................
91State Council of Rural Lands Protection
Boards.....................................................
97Trustees of the Farrer Memorial Research Scholarship Fund
..................................... 98Wine Grapes Marketing Board
..........................................................................
99Minister for Sport and
Recreation............................................................................
101Newcastle International Sports Centre Trust
......................................................
103Parramatta Stadium Trust
............................................................................
105Minister for Water Utilities
...................................................................................
107Cobar Water Board
.....................................................................................
109 i 4. Contents
_______________________________________________________________________________________
Premier...........................................................................................................
111Infrastructure Implementation Corporation
....................................................... 113Trustees
of the Anzac Memorial
Building...........................................................
114Treasurer.........................................................................................................
115Crown Employees (NSW Fire Brigades Fire Fighting Staff Death and
Disability)Superannuation
Fund...................................................................................
117SECTION THREE Performance Auditing Performance Audit Reports
Tabled in Parliament since Volume One of 2007
........................ 121 Performance Audits in Progress
..............................................................................
123 APPENDICES Appendix 1: Audit and Audit-Related Services
Requested by the Treasurer ........................ 127 Appendix 2:
Financial Reports Received After Statutory Date (at 4 May 2007)
.................... 128 Appendix 3: Financial Reports Not Received
(at 4 May 2007) ......................................... 129
Appendix 4: Financial Reports Received but Audit Incomplete by
Statutory Date (at 4 May 2007)
............................................................. 130
INDEX
.............................................................................................................
133 ii 5. Significant Items Page Macquarie UniversityInternal
audits preliminary assessment of certain financial management
issues 20 within Macquarie International indicated some
abnormalities with certain expenditures.A signed contract of
employment for the former Vice Chancellor was not available.20The
records maintained for artworks require significant improvement.
During a21 recent independent revaluation of artworks it was
established that ownership could not be proven for a significant
portion of the total value of the collection.The University of
SydneyThe valuation of the Universitys cultural assets needs to be
brought up to date.30Excess annual leave balances held by academics
and general staff continue to 30 grow.The University is still to
complete its Business Continuity Plan.30University of New South
WalesThe University is currently reviewing the scope and operation,
financing and other 41 arrangements for the development of the
operation of its UNSW Asia campus in Singapore.The University is
still awaiting a report from an independent investigator into42
disciplinary action relating to the Co-Operative Research Centre
for Eye Research and Technology (CRCERT), which has been wound
up.University of NewcastleThe Universitys financial position
continued to improve during 2006 with an 55 operating surplus of
$33.5 million being achieved. The surplus reversed the trend of
deficits over the previous six years. The University expects
positive results to continue and has budgeted for an operating
surplus of $15.3 million for 2007. iii 6. The Honourable Speaker
andThe Honourable President andMembers of the Legislative Assembly
Members of the Legislative CouncilSERVICES PROVIDED BY THE AUDIT
OFFICEIn our system of government, Parliament is supreme all
authority for governmental activity ultimately stems from
Parliament. Government agencies are therefore accountable to
Parliament for their use of the resources and powers conferred by
Parliament.As part of its accountability arrangements, Parliament
seeks assurance from an independent source the Auditor-General on
key aspects of government performance and reporting.The purpose of
this letter is to assist Parliaments understanding of the Audit
Office role. It is issued following an election or changes to Audit
Office services.With the help of my Office I will continue to
assist Parliament hold government accountable for its use of public
resources. I will provide independent assurance that government
agencies are performing, and accounting for their performance, in
accordance with Parliaments expectations. MEETING PARLIAMENTS
EXPECTATIONSLegislation provides for me to:audit the Treasurers
Public Accounts and Total State Sector Accounts and the Statement
of Budget Result and express an opinion on the financial reports
audit the accounts of all NSW public sector agencies and express an
opinion on their financial reports. We conduct over 400 of these
audits each year, reviewing budget dependent general government
sector agencies, statutory bodies, state owned corporations,
universities and associated companies examine allegations of
serious and substantial waste of public money under the Protected
Disclosures Act 1994 conduct performance audits to examine the
effectiveness, efficiency and economy of an agencys operations, or
an issue across a number of agencies provide audit or audit-related
services to the Parliament, the Treasurer and Ministers at their
request. A list of these services is provided as an appendix to
this Volume and will be included in the final Volume of the
Auditor-Generals Reports to Parliament each calendar year.v 7.
Financial Report Audits The Audit Office undertakes its financial
report audits in accordance with legislativerequirements and
Australian Auditing Standards. The main purpose of an audit is to
add credibility to a financial report by providing anindependent
audit opinion. The audit opinion provides users of the financial
report with reasonable assurance that itis free of material error
and complies with legislation and applicable accountingstandards.
It does not: provide a guarantee of absolute accuracy in the
financial reportexpress a view on the adequacy of the organisations
systems or the efficiencyand effectiveness of their
operationsguarantee the organisations future viability. A financial
report audit is a combination of systems checks and examination of
a sampleof transactions for all items in the financial report that
are considered material or highrisk in nature. These are items
that, if materially misstated as a result of an error orfraud,
could adversely affect the decision-making process of users of
financial reports.An audit does not examine every transaction of an
organisation, as this would beprohibitively expensive and
time-consuming. It is also important to understand that the
organisations management, not the auditor,is responsible for:
maintaining adequate accounting records and preparing the financial
reportmaintaining a system of internal controls to prevent or
detect errors orirregularities. I recognise that, in the public
sector, financial report audit opinions on their own will notmeet
Parliaments expectations. Firstly, most public sector agencies are
not establishedpurely for financial (profit-making) reasons. They
exist to provide services to the public.Their financial reports
will provide only limited information about these services.
Secondly, Parliament and the public have higher expectations of
probity and properconduct in public sector agencies. Accordingly,
when conducting financial report audits, the Audit Office has
regard to: agency performancewastage of public resourceslack of
probity or financial prudence in the management of public
resourcescompliance by agencies with legislative requirements and
government policiesand procedures. vi 8. Performance AuditsOur
performance audits examine whether an agency is achieving what it
set out to do, and whether it applied its resources economically,
efficiently and within the law. An audit may cover the whole of an
agency or one or more of its activities. It may also cover a single
activity common across a number of agencies.Performance audits are
exhaustive reviews and only cover a few topics each
year.Performance audits comply with legislation and applicable
Australian Auditing Standards. REPORTINGI convey the results of my
audits in a number of reports to the various stakeholders.Financial
Report AuditsAuditor-Generals Report to ParliamentAuditor-Generals
Reports to Parliament present the findings of my financial report
audits of government agencies. These reports comment on high-level
issues and on matters other than financial issues, reflecting the
broader interests of Parliament. Minor matters are reported only
where they are symptomatic of a larger problem or have not been
addressed by the agency after we have raised them in previous
years. I may also report on matters that arise from or relate to my
audit or other functions.Reports are issued each year. The four
main volumes are issued in May, October, November and December each
year and cover the majority of Government agencies and the Total
State Sector.Independent Audit Report to ParliamentThe Independent
Audit Report expresses my opinion on an agencys financial report
and is included in the agencys annual report. Annual reports are
required by legislation to be presented to Parliament by the
responsible Minister within four months of the agencys financial
year-end.The Independent Audit Report tells the reader whether the
financial report complies with the Act (and other statutory
requirements), applicable Australian Accounting Standards and other
mandatory professional reporting requirements. A qualification in
the report means that the agencys financial report does not comply
with these requirements. Most Independent Audit Reports are
unqualified.The Audit Office issues the Independent Audit Report no
later than 10 weeks after receiving the financial report.Statutory
Audit Reports to Boards and MinistersThe Statutory Audit Report
presents the results of the audit and any significant matters. It
is issued to the Treasurer, the Minister and the head of the agency
at the same time as the Independent Audit Report. vii 9. Client
Service Reports to Agencies The Client Service Report is a summary
of audit outcomes, usually addressed to theagencys Audit Committee.
This is only issued to large agencies, normally just before weissue
the Independent Audit Report and Statutory Audit Report. Management
Letters to Agencies A more detailed report is issued to heads of
agencies on matters identified during theaudit and may include
recommendations for operational improvements. These mattersare in
addition to any qualification in the Independent Audit Report.
Performance Audit Reports A report on each performance audit is
presented to Parliament, the Premier, theTreasurer, and the
relevant Minister and agency heads. Procedural Fairness The Audit
Office checks its draft reports with relevant agency staff to
ensure factualaccuracy. I also seek to ensure procedural fairness
or natural justice by inviting Heads ofagencies to submit a comment
on our financial report audit findings for inclusion in myreports
to Parliament. In respect of performance audits, agencies are given
28 days torespond to the report. When an agency responds to a
performance audit, it is included inthe report to Parliament.AUDIT
FEES Agencies are charged for financial report audits. The fee is
based on time and directout-of-pocket expenses plus the goods and
services tax where applicable. Any separateinspections or
examinations under the Act are subject to an additional fee. Costs
are recovered from Treasury for preparation of the Auditor-Generals
Reports toParliament. A contribution from Treasury covers
approximately half the cost ofperformance audits. To check our
efficiency we benchmark our costs against other Australian audit
offices orthe private sector accounting firms, to the extent that
information is available fromthem.QUALITY Under section 48A of the
Act, the Public Accounts Committee appoints a person toreview the
Audit Office at least once every three years. The review examines
theauditing practices and standards of the Auditor-General. The
last review was completedin August 2006. The next review is
expected in 2009. The Audit Offices financial and performance audit
services are independently accreditedas meeting the requirements of
International Quality Standard ISO 9001.Peter
AchterstraatAuditor-Generalviii 10. Section One The Legislature
Audit of Members Additional Entitlements 1 11. Audit of Members
Additional EntitlementsAUDIT STATUSThe audit of the Parliamentary
Remuneration Tribunals (PRT) 2005 Determination is incomplete. At 2
April 2007, four Members have not submitted reconciliations for the
annual Sydney Allowance. The Legislature is currently reconciling
five Members annual Sydney allowance. KEY ISSUESOur key audit
findings were:Late ClaimsThe Legislature receives claims for a
range of entitlements after the 60-day period allowed under the
Determination.The submission of claims after the 60-day period
increases the risk that Members might not have documentation to
support their claims. RECOMMENDATIONSWe recommend that:Members who
claim the Sydney allowance annually submit their Sydney allowance
reconciliations promptly Members submit their expenditure claim
documentation within 60 days. DETAILED FINDINGSSydney AllowanceMore
Members receiving this entitlement annually submitted their
reconciliations on time in 2005-06 than in the previous year.
However, 47 per cent were still late.The status of annual
reconciliations is as follows:Year ended 30 JuneLegislative
AssemblyLegislative Council2006200520062005 Members receiving
entitlement on an annual basis 21 2074 Members reconciliations
submitted on time 14 1111 Source: The Legislature Auditor-Generals
Report to Parliament 2007 Volume Two
____________________________________________ 3 12. Audit of Members
Additional Entitlements
__________________________________________________________Outstanding
Debt and/or Reconciliations of Former MembersThe Legislature
collected an outstanding debt of $8,000 relating to entitlements
from a former member.Another former members 2003 Sydney Allowance
reconciliation has been completed and settled in full.We commented
on these matters in Volume One of the 2006 Auditor-Generals Report
to Parliament.The Role of the PRTThe PRTs principal function is to
determine additional entitlements available to Members of
Parliament.These additional entitlements fall into two
categories:allowances: Electorate Allowance Sydney Allowance
Committee Allowance fixed allocations: Electorate to Sydney travel
Logistic Support Allocation Electorate Mailout Account for Members
of the Legislative Assembly Electorate Charter Transport for
Members of the Legislative Assembly Travelling allowance for
Recognised Office Holders Equipment services and facilities the
Legislature pays the additional entitlements where Members incur
the actual costs. It can either reimburse the Member or pay third
parties (eg travel providers) for services to the Member.The
additional entitlements determined by the PRT are separate
to:Members annual basic salaries, set by the Parliamentary
Remuneration Act 1989 additional salaries paid to Ministers and
certain other office holders, set out in Schedule 1 of the Act as
varying percentages of their basic salaries expense allowances paid
to Ministers and certain other office holders, set out in Schedule
1 of the Act as varying percentages of their basic salaries.Audit
of EntitlementsEach year we audit a sample of Members additional
entitlements and their Sydney Allowances, in accordance with
Australian Auditing Standards, to obtain reasonable assurance
payments to Members comply with the provisions of the PRT
Determination dated 29 June 2005. Our procedures include
examination of evidence supporting individual Members claims. 4
____________________________________________ Auditor-Generals
Report to Parliament 2007 Volume Two 13. Section Two Commentary on
Government Agencies 5 14. Minister for Education and
TrainingTechnical Education Trust FundsUniversities
OverviewUniversities:Charles Sturt UniversityMacquarie
UniversitySouthern Cross University The University of Sydney
University of New England University of New South WalesUniversity
of Newcastle University of Technology, SydneyUniversity of Western
Sydney University of WollongongUNILINC Limited 7 15. Technical
Education Trust FundsAUDIT OPINIONThe audit of the Trusts financial
statements for the year ended 31 December 2006 resulted in an
unqualified Independent Audit Report. FINANCIAL INFORMATION Year
ended 31 December 2006 2005 $000$000Revenue2517Expenses 1714Profit8
3Net assets (at 31 December) 433 425Revenue for the year consisted
wholly of interest. Expenses were for awards presented to students.
TRUST ACTIVITIESThe Trust was established under the Technical
Education Trust Funds Act 1967 and is responsible for investing
trust moneys and awarding prizes to students undertaking courses of
studies at NSW TAFE colleges. Auditor-Generals Report to Parliament
2007 Volume Two ____________________________________________ 9 16.
Universities OverviewThere are ten universities established under
State legislation providing higher education in New South
Wales:Charles Sturt University University of New South Wales
Macquarie University University of Newcastle Southern Cross
UniversityUniversity of Technology, Sydney The University of Sydney
University of Western Sydney University of New EnglandUniversity of
Wollongong AUDIT OPINIONThe audits of the 2006 financial reports of
all ten universities resulted in unqualified Independent Audit
Reports. PERFORMANCE ISSUESFinancial PerformanceThe Australian
Governments Department of Education, Science and Training (DEST)
has identified a number of benchmark indicators for the financial
performance of universities. These measures include liquidity,
diversity of revenue, employee benefits and on-costs and operating
result. The aggregated tables on pages 13 to 15 detail these
benchmarks.LiquidityDESTs benchmark current ratio is based on the
traditional formula of current assets divided by current
liabilities. Because the definition of current liabilities has
changed significantly under Australian Accounting Standards, we
have adjusted the balance reported in each universitys financial
report to present a more useful measure of their liquidity. The
adjustment also allows us to present a ratio that is more
consistent with DESTs benchmark liquidity measure.Australian
Accounting Standards require an entity to report all unconditional
liabilities as current irrespective of when it expects to settle
these liabilities. We have excluded those amounts and replaced them
with the amount universities expect to settle in the next twelve
months.For 2006, three of the ten universities (Charles Sturt
University, University of New South Wales and University of Sydney)
did not meet the DEST benchmark. DEST considers a liquidity ratio
of less than 1.5 as being below its general better practice
guidelines. As in 2005, no universities were above DESTs upper
benchmark of three. This indicates universities are not
underutilising cash relative to their activities.However, another
DEST guideline, the Annual Institutional Assessment Framework,
suggests a current ratio of more than one is low risk, between 0.75
and one is medium risk, and less than or equal to 0.75 is high
risk. Using this benchmark, Charles Sturt University and University
of Sydney would be low risk and the University of New South Wales
would be high risk. 10 ___________________________________________
Auditor-Generals Report to Parliament 2007 Volume Two 17.
_____________________________________________________________________________Universities
OverviewDiversity of RevenueOne way universities can reduce their
financial risks is by diversifying their revenue sources. Each
university has a different capacity to generate revenue. Their
ability to do so depends on factors such as location, size,
perceived standing and student profiles.Universities rely
significantly on revenue from fees and charges. In recent years
most universities have increased revenue from this source. However
in 2006, only Southern Cross University and Macquarie University
recorded an increase in the percentage of fees and charges compared
with total operating revenue. Overall fees and charges as a
percentage of operating revenue decreased from 27.9 per cent ($1.2
billion) in 2005 to 25.9 per cent ($1.2 billion) in 2006.Revenue
from fee-paying overseas students increased by $19.1 million to
$729 million in 2006. This represents 59.7 per cent of total fees
and charges (59.4 per cent in 2005) and 15.5 per cent of total
operating revenue (16.6 per cent). For individual universities,
revenue from fee-paying overseas students as a percentage of total
operating revenue ranged from five per cent for Charles Sturt
University (4.7 per cent) to 29.4 per cent at the University of
Technology Sydney (31.1 per cent).The other major sources of
revenue are Australian Government grants and Higher Education
Contributions (HECS) from the Australian Government and students.
Australian Government grants as a percentage of operating revenue
decreased slightly from 39 per cent ($1.7 billion) in 2005 to 38.7
per cent ($1.8 billion) in 2006. Although HECS from students rose
from $615 million in 2005 to $679 million in 2006, as a percentage
of operating revenue it remained constant at 14.4 per cent. Total
operating revenue for universities rose to $4.7 billion ($4.3
billion).DEST expects Australian Government funding to be not much
more than 50 per cent of operating revenue. All New South Wales
universities continued to achieve this expectation.Employee
Benefits and On-CostsDEST monitors the ability of universities to
meet essential needs by measuring employee benefits and on-costs as
a percentage of total revenue. Nine of the ten universities had
employee benefits and on-costs within DESTs good practice benchmark
of 50 per cent to 70 per cent. The University of Sydney was
marginally below the benchmark.Operating ResultAlthough
universities are not-for-profit organisations, DEST considers the
operating result a useful measure of financial
performance.Universities had a combined surplus of $376 million in
2006 ($194 million). The increase was largely due to the University
of Newcastle, The University of Sydney and the University of
Western Sydney recording significantly higher surpluses. More
information on their performance is included in individual
university comments within this Volume.All universities reported a
surplus for 2006 (eight). As a proportion of operating revenues,
the 2006 surpluses ranged from 1.7 per cent (University of New
England) to 15.7 per cent (University of Sydney). Auditor-Generals
Report to Parliament 2007 Volume Two
___________________________________________ 11 18. Universities
Overview
____________________________________________________________________________Operational
PerformanceThe ratio of equivalent full-time students to full-time
equivalent academics (excluding staff not involved in teaching) is
one indicator of education quality. From an academic perspective
the lower the ratio the better. However, from a financial viewpoint
a lower ratio may translate into higher total salaries and related
costs. This may adversely impact financial performance
benchmarks.At the date of preparing this Report, DEST statistics
for 2006 were not available. Statistics for 2005 show the ratio for
most jurisdictions decreased. New South Wales universities in
aggregate recorded the third highest ratio of all jurisdictions
(third highest in 2004). Their ratios ranged from 18.6 for the
University of New South Wales to 34.3 for Charles Sturt University.
Charles Sturt University advised us the student staff ratio is
inflated because DEST calculations do not include all teaching
staff accredited by the University. Charles Sturt University
further advised that the ratio also excludes other staff closely
associated with the learning and teaching process. Jurisdiction
Number of EFT FTE Student : Academic UniversitiesStudents
AcademicsRatio 20052005 2005 2004 2003New South Wales
10199,0577,73325.7 26.0 26.9Victoria 8176,7206,73626.2 26.5
27.1Queensland 7129,9984,64428.0 29.1 28.5South Australia3
46,7631,90724.5 25.4 24.9Western Australia5 68,5242,68325.5 25.3
25.6Tasmania 1 12,65252124.3 25.6 23.6Northern Territory
12,93115818.6 16.8 27.3Australian Capital Territory 2 19,40687922.1
22.3 22.7 Source: Australian Government Department of Education,
Science and TrainingAggregated Results of Operations, Financial
Position and Performance IndicatorsAs in previous years we have
eliminated deferred income and deferred expenses for superannuation
from the tables.As mentioned previously in this Report, the
Australian Accounting Standards require an entity to report all
unconditional liabilities as current irrespective of when it
expects to settle the liability. We have excluded those amounts and
replaced them with the amounts universities expect to settle in the
next 12 months.The tables on the following pages aggregate the
results of operations, financial positions and performance
indicators for the universities and their controlled entities. 12
___________________________________________ Auditor-Generals Report
to Parliament 2007 Volume Two 19.
_____________________________________________________________________________Universities
OverviewPERFORMANCE INFORMATION Charles SturtMacquarieSouthern
Cross Sydney 2006 20052006 2005 20062005 2006 2005 $m $m$m $m $m$m
$m $m Abridged Income Statements (year ended 31 December)Total
revenue261.1 235.7 415.7390.0 119.6110.0 1,211.01,033.9 Total
expenses 244.7 222.3 399.9367.0 114.3108.7 1,020.5923.6 Outside
equity interest/other-- -------- -- 0.1(0.3) Operating result 16.4
13.415.823.0 5.31.3190.6 110.0Abridged Balance Sheets (at 31
December)Total assets 642.5 560.9 1,229.5 1,243.3209.7209.4
3,778.93,785.9 Total liabilities138.4 152.5 281.3 325.6 43.3 48.2
654.4785.3 Net assets 504.1 408.4 948.2 917.7166.4161.2
3,124.53,000.6Performance Indicators (at 31 December)Current ratio
(a)1.2 1.51.71.8 2.22.0 1.32.2 Australian Government grants as a %
of total revenue (b)40.6 42.728.328.2 45.5 45.7 38.2 40.8 HECS as a
% of total revenue (b)22.4 22.012.313.0 22.2 22.0 10.2 11.3 Fees
and charges as a % of total revenue (b)17.2 18.045.343.5 15.5 15.3
18.4 19.5 Employee Benefits and on-costs as a % of total revenue
(c) 58.9 59.357.054.3 57.3 59.4 49.0 53.3 Operating result as a %
of total revenue (d)6.3 5.73.85.9 4.41.215.7 10.6 Student numbers
EFT (000)* nya18,656nya 19,891 nya7,735nya36,024 Students per
academic* nya 34.2 nya28.7nya 30.8nya 22.5 Key: All data except
Student numbers and Students per academic are based on the
universities financial reports. They reflect the key indicators set
out in the February 2000 Department of Education, Science and
Training publication Benchmarking: A Manual for Australian
Universities. That publication considers: (a)Current Ratio an
indicator of liquidity. Good practice is a ratio of more than 1.5
to less than three. (b)Diversity of Revenue Universities should
reduce financial risks from reduction or failure of an incomesource
by having three or four major income sources with none below 5 per
cent for any one source andpreferably all above 15 per cent.
Reliance on Australian Government funding should be
decreasing,preferably to not much more than 50 per cent.
(c)Employee Benefits and on-costs as a percentage of Total Revenue
Good practice is between 50 per centand 70 per cent. (d)Operating
Result as a percentage of Total Revenue The essence of good
practice is to have a reasonablesafety margin that should be
positive other than in exceptional years, the rationale for which
should bereported in the universitys annual report. *Source:
Australian Government Department of Education, Science and
Training: Publications HigherEducation Statistics Collection. The
academic numbers represent Teaching Only and Teaching
andResearchnya Not yet available Auditor-Generals Report to
Parliament 2007 Volume Two
___________________________________________ 13 20. Universities
Overview
____________________________________________________________________________
New EnglandNew South WalesNewcastle Technology, Sydney 20062005
20062005 2006 20052006 2005 $m$m $m$m $m $m$m $m Abridged Income
Statements (year ended 31 December)Total revenue191.0186.1
947.1882.9 383.7344.3426.1407.6 Total expenses 189.4187.1
925.1869.1 348.2351.6407.1394.1 Outside equity interest/other1.6 --
--(0.4)0.4 -- -- -- Operating result3.2(1.0)22.0 13.435.9(7.3)19.0
13.5Abridged Balance Sheets (at 31 December)Total assets 379.4396.2
1,958.11,992.6 969.7873.31,143.1 1,105.5 Total
liabilities155.2182.6 712.5752.3 240.3260.3337.9 393.1 Net assets
224.2213.6 1,245.61,240.3 729.4613.0805.2 712.4Performance
Indicators (at 31 December)Current ratio (a) 1.51.5 0.71.3 1.8 1.1
1.51.1 Australian Government grants as a % of total revenue (b)
47.9 46.5 39.1 40.242.844.3 31.7 31.6 HECS as a % of total revenue
(b) 19.7 19.79.68.716.317.1 17.6 16.4 Fees and charges as a % of
total revenue (b)23.7 25.0 30.1 34.219.521.8 36.7 38.6 Employee
Benefits and on-costs as a % of total revenue (c) 58.8 56.5 58.4
57.151.762.9 57.5 58.7 Operating result as % of total revenue (d)
1.7(0.6) 2.31.5 9.4(2.1)4.53.3 Student numbers EFT
(000)*nya9,772nya27,051nya17,605nya 21,997 Students per academic*
nya 22.9nya18.6nya25.4nya 29.0Key: All data except Student numbers
and Students per academic are based on the universities financial
reports.They reflect the key indicators set out in the February
2000 Department of Education, Science and Trainingpublication
Benchmarking: A Manual for Australian Universities. That
publication considers:(a)Current Ratio an indicator of liquidity.
Good practice is a ratio of more than 1.5 to less than
three.(b)Diversity of Revenue Universities should reduce financial
risks from reduction or failure of an income source by having three
or four major income sources with none below 5 per cent for any one
source and preferably all above 15 per cent. Reliance on Australian
Government funding should be decreasing, preferably to not much
more than 50 per cent.(c)Employee Benefits and on-costs as a
percentage of Total Revenue Good practice is between 50 per cent
and 70 per cent.(d)Operating Result as a percentage of Total
Revenue The essence of good practice is to have a reasonable safety
margin that should be positive other than in exceptional years, the
rationale for which should be reported in the universitys annual
report.*Source: Australian Government Department of Education,
Science and Training: Publications Higher Education Statistics
Collection. The academic numbers represent Teaching Only and
Teaching and ResearchnyaNot yet available 14
___________________________________________ Auditor-Generals Report
to Parliament 2007 Volume Two 21.
_____________________________________________________________________________Universities
OverviewWestern SydneyWollongongTotal20062005 2006 2005
20062005$m$m $m $m $m$m Abridged Income Statements (year ended 31
December)Total revenue 405.9363.2 350.4326.5 4,713.2 4,280.2 Total
expenses363.1354.2 323.4308.5 4,335.7 4,086.2 Outside equity
interest/other -- -- (2.0) 0.5 (1.5)(0.2) Operating
result42.89.025.0 18.5 376.0 193.8Abridged Balance Sheets (at 31
December)Total assets879.4851.1 682.6681.5 11,872.911,699.7 Total
liabilities 150.1173.4 168.8204.1 2,882.13,277.3 Net
assets729.3677.7 513.8477.4 8,990.88,422.4 Performance Indicators
(at 31 December)Current ratio (a)1.71.4 2.72.11.41.6 Australian
Government grants as a % of total revenue (b) 44.3 42.940.4
32.938.739.0 HECS as a % of total revenue (b) 26.3 24.713.5
13.114.414.4 Fees and charges as a % of total revenue (b)17.3
19.032.4 35.425.927.9 Employee Benefits and on-costs as a % of
total revenue (c) 55.1 61.951.1 51.154.456.6 Operating result as %
of total revenue (d) 10.62.5 7.15.78.04.5 Student numbers EFT
(000)*nya24,035nya16,291nya199,057 Students per academic*
nya32.7nya27.9nya 25.7Key: All data except Student numbers and
Students per academic are based on the universities financial
reports.They reflect the key indicators set out in the February
2000 Department of Education, Science and Trainingpublication
Benchmarking: A Manual for Australian Universities. That
publication considers:(a)Current Ratio an indicator of liquidity.
Good practice is a ratio of more than 1.5 to less than
three.(b)Diversity of Revenue Universities should reduce financial
risks from reduction or failure of an income source by having three
or four major income sources with none below 5 per cent for any one
source and preferably all above 15 per cent. Reliance on Australian
Government funding should be decreasing, preferably to not much
more than 50 per cent.(c)Employee Benefits and on-costs as a
percentage of Total Revenue Good practice is between 50 per cent
and 70 per cent.(d)Operating Result as a percentage of Total
Revenue The essence of good practice is to have a reasonable safety
margin that should be positive other than in exceptional years, the
rationale for which should be reported in the universitys annual
report.*Source: Australian Government Department of Education,
Science and Training: Publications Higher Education Statistics
Collection. The academic numbers represent Teaching Only and
Teaching and Research nyaNot yet available Auditor-Generals Report
to Parliament 2007 Volume Two
___________________________________________ 15 22. Universities
Overview
____________________________________________________________________________CONTROL
ISSUESOur audits highlighted opportunities for universities to
improve internal controls. These opportunities have been identified
in letters we have issued or will be issuing to university
management. We refer to more significant items in individual
university comments within this Volume. COMPLIANCE ISSUESNational
Governance ProtocolsWe tested each Universitys compliance with the
Australian Governments National Governance Protocols for Public
Higher Education Institutions. We generally found all Universities
complied with the protocols.The Australian Government developed a
set of National Governance Protocols for Public Higher Education
Institutions under section 230-10 of the Higher Education Support
Act 2003. The protocols aim to strengthen university governance
by:increasing the responsibilities of university councils in
overseeing commercial activities requiring councils to discharge
their responsibilities in a transparent way, and ensuring the
protection of the public interest. OTHER ISSUESOffshore
ActivitiesUniversities continue to broaden their revenue sources by
operating and investing in offshore activities. These opportunities
may reduce some financial risks through diversifying revenue,
however, they increase other operational, financial and reputation
risks. To minimise the potential impacts of these risks each
University needs to ensure its governance procedures continue to
effectively identify and mitigate the risk exposures generated by
their overseas operations and controlled entities. 16
___________________________________________ Auditor-Generals Report
to Parliament 2007 Volume Two 23. Charles Sturt UniversityAUDIT
OPINIONThe audit of the financial reports of the University and its
controlled entities for the year ended 31 December 2006 resulted in
unqualified Independent Audit Reports. PERFORMANCE
ISSUES(Comparative performance data on all universities appears in
the Universities Overview section earlier in this Volume. The
information shown below is based on consolidated financial
statements.)The Universitys current ratio (a measure of its
financial liquidity) was 1.2 at 31 December 2006, down from the
previous years 1.5. At this level it is below the States average
and the minimum level identified by the Australian Governments
Department of Education, Science and Training (DEST) good practice
parameters. The calculation of the current ratio excludes
non-current investments of $99.8 million redeemable at short
notice.Australian Government grants as a percentage of operating
revenue decreased, from 42.7 per cent in 2005 to 40.6 per cent in
2006. This is above the States average of 38.7 per cent but
continues to be within the DEST good practice parameter.Employee
benefits and on-costs as a percentage of operating revenue
decreased from 59.3 per cent in 2005 to 58.9 per cent in 2006. This
is higher than the States average of 54.4 per cent but within the
DEST good practice parameter. COMPLIANCE ISSUESWe tested whether
the University complied with the Australian Governments National
Governance Protocols for Public Higher Education Institutions. The
results of our testing were satisfactory. CONTROL ISSUESWe
identified certain opportunities for the University to improve
existing procedures. We will further discuss them with University
staff and where appropriate report them to management. The more
significant areas related to the measurement of employee benefits,
inventory records and accounts payable. OTHER ISSUESThe University
of Sydneys Orange Campus was formally transferred to Charles Sturt
University on 1 July 2006. The transfer arrangements included
payment of $1.0 million to University of Sydney. The net assets
transferred ($35.2 million) comprised land, buildings, plant,
equipment, library collection, livestock (valued at $36.8 million)
and acceptance of liabilities to employees totalling $1.6
million.The transfer of Orange Campus also resulted in control of
Rural Australia Foundation Limited passing from the University of
Sydney to Charles Sturt University (effective 31 December 2006).
Auditor-Generals Report to Parliament 2007 Volume Two
___________________________________________ 17 24. Charles Sturt
University___________________________________________________________________________FINANCIAL
INFORMATIONThe consolidated financial information includes the
financial reports of the University and the following controlled
entities:Mitchell Services Limited Rivservices Limited Olive Street
Services Limited Charles Sturt Services Limited Charles Sturt
Foundation Limited Charles Sturt University Foundation Trust Rural
Australia Foundation Limited Campus Pre-School IncorporatedAbridged
Income Statements Year ended 31 December
ConsolidatedUniversity20062005 2006 2005$000 $000$000$000Australian
Government grants 106,111 100,735106,111 100,735Higher Education
Contribution Scheme58,38751,763 58,38751,763Australian Government
loan programs 12,643 6,916 12,643 6,916Fees and charges44,99442,350
44,99442,350Other 39,75234,006 33,31823,784Deferred income
superannuation (21,472) (2,191) (21,472) (2,191)TOTAL
REVENUE240,415 233,579233,981 223,357 Employee benefits and
on-costs 153,862 139,709149,127 135,232Depreciation18,61217,596
18,61217,596Other 72,96865,132 72,04359,866Deferred expense
superannuation(21,472) (2,191) (21,472) (2,191)TOTAL EXPENSES
223,970 220,246218,310 210,503 OPERATING RESULT16,44513,333 15,671
12,854Deferred income and deferred expenses reflect movements in
the actuarially assessed liability for employees who are members of
the State Governments defined benefit superannuation plans. Because
the Australian Government funds these movements they do not impact
the operating result.Employee benefits and on-costs reflect
increases in salary rates and the number of employees, largely due
to the transfer of Orange Campus. 18
___________________________________________ Auditor-Generals Report
to Parliament 2007 Volume Two 25.
___________________________________________________________________________Charles
Sturt UniversityAbridged Balance Sheets At 31
DecemberConsolidatedUniversity200620052006 2005$000 $000
$000$000Current assets37,48237,75635,87037,063Non-current assets
605,043 523,184 599,338 518,137TOTAL ASSETS 642,525 560,940 635,208
555,200 Current liabilities 46,50139,73846,36039,725Non-current
liabilities 91,872 112,62391,848 112,623TOTAL LIABILITIES138,373
152,361 138,208 152,348 NET ASSETS 504,152 408,579 497,000
402,852The increase in non-current assets is mainly due to the
revaluation of land and buildings ($44.9 million) and the
previously mentioned transfer of Orange Campus.UNIVERSITY
ACTIVITIESThe University is constituted under the Charles Sturt
University Act 1989. It mainly:provides educational facilities of
university standard provides distance education for students within
New South Wales and elsewhere disseminates and increases knowledge
and promotes scholarship confers degrees of Bachelor, Master and
Doctor and awards diplomas and other certificates.For further
information on the University, refer to www.csu.edu.au. CONTROLLED
ENTITIESThe six companies controlled by the University are limited
by guarantee. Operating costs of Charles Sturt Foundation Limited
(the Trustee of Charles Sturt University Foundation Trust) have
been met by the Trust. The Trustee has no other transactions.With
the exception of Rural Australia Foundation Limited, the four other
companies do not impact on the consolidated operating result
because the net costs of their operations are fully met by the
University, ensuring nil operating results. The total expenditure
of these four companies in 2006 was $4.8 million ($4.7 million in
2005). These companies do not own any property, plant and equipment
and their liabilities are offset by receivables from the
University.The operation of Charles Sturt Foundation Trust resulted
in an operating surplus of $734,000 ($5.0 million, reflecting the
transfer of dissolved Trusts). Net assets of the Trust were $7.1
million ($5.7 million). The increase is largely due to revaluation
of investments ($681,000) and a contribution of $303,000 on 31
December 2006 from Rural Australia Foundation Limited (equivalent
to the companys net assets).Following the above mentioned
contribution Rural Australia Foundation Limited reported a loss of
$305,000 for the year.Campus Pre-School Incorporated reported a
surplus of $42,000 ($31,000). The Pre-Schools net assets at 31
December 2006 were $11,000 (net deficiency of $31,000).
Auditor-Generals Report to Parliament 2007 Volume Two
___________________________________________ 19 26. Macquarie
UniversityAUDIT OPINIONThe audit of the financial reports of the
University and its controlled entities for the year ended 31
December 2006 resulted in unqualified Independent Audit Reports.
PERFORMANCE ISSUES(Comparative performance data on all universities
appears in the Universities Overview section earlier in this
Volume. The information shown below is based on consolidated
financial statements.)The Universitys current ratio (a measure of
its financial liquidity) was 1.7 at 31 December 2006. At this level
it is higher than the State average of 1.4 and within the
Australian Governments Department of Education, Science and
Training (DEST) good practice parameters.Australian Government
grants as a percentage of operating revenue for the year increased
slightly to 28.3 (28.2 in 2005). This is significantly lower than
the States average of 38.7 per sent and represents the lowest level
of reliance on Australian Government grants of all
universities.Employee benefits and on-costs as a percentage of
operating revenue increased from 54.3 per cent in 2005 to 57 per
cent. This is higher than the States average of 54.4 per cent but
within the DEST good practice parameter. COMPLIANCE ISSUESWe tested
whether the University complied with the Australian Governments
National Governance Protocols for Public Higher Education
Institutions. The results of our testing were satisfactory. OTHER
ISSUESMacquarie InternationalThe University requested internal
audit to conduct a preliminary assessment of certain financial
management issues within Macquarie International. Based on the
initial assessment, expenditures in travel and entertainment
appeared excessive and not consistent with University policy;
certain expenditures appeared to be personal in nature; and
potential conflicts of interest were noted and it was unclear how
they were considered or addressed. Internal audit has recommended
further scrutiny and review. The Independent Commission Against
Corruption has been advised of the initial assessment of the issues
and the University has sought its advice on how to progress
enquiries.Leave Paid to the Former Vice ChancellorA signed contract
of employment for the former Vice Chancellor was not available.
Consequently, we could not confirm certain termination payments to
the conditions of employment. According to University records the
former Vice Chancellor took only 30.5 hours of recreation leave
during 19 years of service at Macquarie University and was paid for
2,504 hours (357 working days) recreation leave. The former Vice
Chancellor was not considered part of the Universitys 2003-2006
Enterprise Agreement which allows recreation leave to accumulate up
to a maximum entitlement of 280 hours. 20
___________________________________________ Auditor-Generals Report
to Parliament 2007 Volume Two 27.
_____________________________________________________________________________
Macquarie UniversityArtwork CollectionThe records maintained for
artworks require significant improvement. The artworks fixed asset
register does not detail the individual works of art. The
University maintains these details in a separate database which is
not complete in all instances. In addition, there is no evidence of
any formal reconciliation between the artworks fixed asset register
and the database nor are regular stock counts conducted on the
artworks. These matters will be included in a letter to
management.The University recently had the artworks independently
revalued. This resulted in a decrement in value of $465,000, which
has been reflected in the financial report at 31 December 2006.
During this revaluation process, it was established that ownership
could not be proven for items making up a significant portion of
the total value of the collection. However, there is sufficient
evidence to indicate the University controls these assets for
accounting purposes, and they have been included in the Universitys
assets at 31 December 2006, which is consistent with the accounting
treatment in prior years. CONTROL ISSUESWe identified opportunities
for improvement to internal controls and have discussed them with
University staff. These include:credit card policies and the
expenditure acquittal process effective review of the
reconciliation of inter company balances review of useful lives of
assets fully written down but still in use long outstanding credit
balances for student debtors.We will include these matters in a
letter to management FINANCIAL INFORMATIONThe consolidated
financial information includes the financial reports of the
University and the following controlled entities:Macquarie Graduate
School of Management Pty Limited Access Macquarie Limited Centre
For Money, Banking And Finance Limited Australian Proteome Analysis
Facility Ltd Learning Activity Management System International Pty
Ltd Learning Activity Management System Foundation Limited Biotrack
Australia Pty Ltd. Auditor-Generals Report to Parliament 2007
Volume Two ___________________________________________ 21 28.
Macquarie University
_____________________________________________________________________________Abridged
Income Statements Year ended 31 DecemberConsolidated University
200620052006 2005 $000 $000 $000$000Australian Government
grants117,432 110,084 117,432 110,084Higher Education Contribution
Scheme 51,18050,68451,18050,684Fees and charges188,462 169,519
172,968 154,748Other58,57759,69455,65553,976Deferred income
superannuation(38,490)580 (38,490)580TOTAL REVENUE 377,161 390,561
358,745 370,072 Employee benefits and on-costs236,720 211,646
212,992 188,742Depreciation 26,24524,61325,66624,042Other 136,962
130,692 143,381 133,180Deferred expense superannuation (38,490)580
(38,490)580TOTAL EXPENSES361,437 367,531 343,549 346,544 OPERATING
RESULT 15,72423,03015,196 23,528Fees and charges increased mainly
due to an additional $13.5 million in international fee paying
students. Fees from overseas students were $111 million in 2006
($97.9 million).Employee benefits and on-costs increased because of
rises in award rates and higher staff levels.Deferred income and
deferred expenses reflect movements in the actuarially assessed
liability for employees who are members of the State Governments
defined benefit superannuation plans. Because the Australian
Government funds these movements, they do not impact the operating
result.Abridged Balance Sheets At 31 DecemberConsolidated
University 200620052006 2005 $000 $000 $000$000Current assets
179,676178,848 174,998 169,069Non-current assets 1,049,8701,064,420
1,047,670 1,062,478TOTAL ASSETS 1,229,5461,243,268 1,222,668
1,231,547 Current liabilities 135,162 110,620 134,827
102,573Non-current liabilities 146,156 214,957 145,524 214,185TOTAL
LIABILITIES 281,318 325,577 280,351 316,758 NET ASSETS948,228
917,691 942,317 914,789Non-current liabilities decreased largely as
a result of a reduction in the deferred State superannuation
liability of $39.3 million. 22
___________________________________________ Auditor-Generals Report
to Parliament 2007 Volume Two 29.
_____________________________________________________________________________
Macquarie UniversityUNIVERSITY ACTIVITIESThe University is
constituted under the Macquarie University Act 1989. It
mainly:provides educational facilities at university standard
establishes facilities to provide courses of study, gives
instruction to and examines external students and provides courses
of study or instruction at such levels of attainment as the
Universitys Council considers appropriate to meet the special
requirements of industry, commerce, or any other section of the
community disseminates knowledge and promotes scholarship confers
degrees of Bachelor, Master and Doctor and awards diplomas and
other certificates.For further information on the University, refer
to www.mq.edu.au. CONTROLLED ENTITIESMacquarie Graduate School of
Management Pty Limited (MGSM)MGSM is a company limited by shares.
The company promotes management education and conducts educational
programs and research in management. For further information on the
School refer to www.gsm.mq.edu.au. Year ended 31 December 20062005
$'000 $'000Revenue 27,61126,420Expenses27,60126,416Profit10 4Net
assets (at 31 December)2,383 2,372Access Macquarie LimitedAccess
Macquarie Limited is a company limited by guarantee. The company
provides project management services to assist University academics
to bid for and manage applied research, consulting, testing and
training projects for industry, government and the professions. For
further information on the company refer to www.access.mq.edu.au.
Year ended 31 December 20062005 $'000 $'000Revenue
13,52112,572Expenses13,55611,805(Loss)/profit(35)767Net assets (at
31 December)3,791 3,826 Auditor-Generals Report to Parliament 2007
Volume Two ___________________________________________ 23 30.
Macquarie University
_____________________________________________________________________________Centre
for Money, Banking and Finance Limited (CMBF)CMBF is a company
limited by guarantee. It provides consulting and educational
services to the finance industry, administers courses on behalf of
Macquarie University and makes donations to the University as the
company may determine. Year ended 31 December 20062005 $'000
$'000Revenue 2,0721,752Expenses1,8731,635Profit199117Net assets (at
31 December) 669470Australian Proteome Analysis Facility
LtdAustralian Proteome Analysis Facility Ltd is a company limited
by guarantee. It administers the Major National Research Facility,
which provides high-level technology in proteomics to the
Australian biotechnology community. Year ended 31 December 20062005
$'000 $'000Revenue 919 839Expenses887 818Profit 3221Net assets (at
31 December)7845Learning Activity Management System (LAMS)
International Pty LtdLAMS International Pty Ltd is a company
limited by shares, incorporated in February 2004. It develops and
sells LAMS software and provides support services for deploying
software. Macquarie University owns 55 per cent of the ordinary
shares in the company. Year ended 31 December 20062005 $'000
$'000Revenue 345472Expenses5561,072Loss211600Net assets (at 31
December) 787576The company continues to incur losses. Late in 2006
the company was restructured resulting in reduced staff costs and
overheads. Macquarie University has agreed to provide continued
financial support to ensure the company will be able to meet its
debts as and when they fall due. 24
___________________________________________ Auditor-Generals Report
to Parliament 2007 Volume Two 31.
_____________________________________________________________________________
Macquarie UniversityLearning Activity Management System (LAMS)
Foundation LimitedThe LAMS Foundation Limited is a company limited
by guarantee, incorporated in February 2004. It manages research
and development into LAMS software and the concept of learning
Design. The Foundation collaborates with LAMS International to
foster the adoption and implementation of LAMS across all education
sectors. There were no financial transactions recorded for the
year. Year ended 31 December 20062005 $'000 $'000Revenue
----Expenses--207Loss--207Net assets (at 31 December) ----Biotrack
Australia Pty Ltd Biotrack is a company limited by shares providing
environmental monitoring and assessment services to government and
private sector clients. It ceased trading during 2006. Year ended
31 December 20062005 $'000 $'000Revenue
666120Expenses133400Profit/(loss) 533 (280)Net assets (at 31
December)27 (506) OTHER BODIES ASSOCIATED WITH THE
UNIVERSITYMacquarie University Professorial Superannuation
SchemeThe Macquarie University Professorial Superannuation Scheme
provides superannuation benefits for professorial staff and their
dependants. It was closed to new members in 1987. The Scheme is not
a controlled entity of the University.The liability for benefits
payable under the Scheme was actuarially determined to be $17.6
million at 30 June 2004. The University provided $17.6 million to
meet these emerging costs. Year ended 30 June 20062005 $'000
$'000Net assets available to pay benefits at 1
July5,7025,903Contributions and investment revenue 13,8321,833Other
revenue 162213Benefits and expenses(1,379)(2,242)Income tax expense
(178)(5)Net assets available to pay benefits at 30
June18,1395,702Sydney Educational Broadcasting Limited (SEBL)Refer
to the University of Technology, Sydney comment on page 65 for
observations on SEBL. Auditor-Generals Report to Parliament 2007
Volume Two ___________________________________________ 25 32.
Southern Cross UniversityAUDIT OPINIONThe audit of the financial
reports of the University and its controlled entities for the year
ended 31 December 2006 resulted in unqualified Independent Audit
Reports. PERFORMANCE ISSUES(Comparative performance data on all
universities appears in the Universities Overview section earlier
in this Volume. The information shown below is based on
consolidated financial statements).The Universitys current ratio (a
measure of its financial liquidity) was 2.2 at 31 December 2006,
slightly above the previous years two. At this level it is well
above the State average of 1.4 and within the Australian
Governments Department of Education, Science and Training (DEST)
good practice parameters.Australian Government grants as a
percentage of operating revenue decreased, from 45.7 per cent in
2005 to 45.5 per cent in 2006. The University has the second
highest level of reliance on Australian Government grants of all
universities and is significantly higher than the States average of
38.7 per cent. Nevertheless it is within the DEST good practice
parameter.Employee benefits and on-costs as a percentage of
operating revenue decreased from 59.4 per cent in 2005 to 57.3 per
cent in 2006. This is higher than the States average of 54.4 per
cent but within the DEST good practice parameter. CONTROL ISSUESWe
identified opportunities for improvements to internal controls and
reported them to the University. COMPLIANCE ISSUESWe tested whether
the University complied with the Australian Governments National
Governance Protocols for Public Higher Education Institutions. The
results of our testing were satisfactory. FINANCIAL INFORMATIONThe
consolidated financial report includes the financial results of the
University and the following controlled entities:Norsearch Limited
Australian Plant DNA Bank Limited Biobank Pty Limited 26
___________________________________________ Auditor-Generals Report
to Parliament 2007 Volume Two 33.
_________________________________________________________________________
Southern Cross UniversityAbridged Income Statements Year ended 31
DecemberConsolidated University20062005 2006 2005$000
$000$000$000Australian Government grants54,38650,244
54,38650,244Higher Education Contribution Scheme26,59624,178
26,59624,178Fees and charges18,52716,800 18,52716,243Other
20,08218,753 20,01216,250Deferred income
superannuation(7,463)(53)(7,463)(53)TOTAL REVENUE112,128
109,922112,058 106,862 Employee benefits and on-costs68,57265,296
68,17363,524Depreciation 6,054 5,4516,048 5,354Other 39,65937,903
39,49137,155Deferred expense superannuation
(7,463)(53)(7,463)(53)TOTAL EXPENSES 106,822 108,597106,249 105,980
OPERATING RESULT 5,306 1,3255,809882Australian Government Grants
increased due to additional base funding of $3.7 million,
reflecting budgeted increases in student numbers. Fees and charges
increased by $2.2 million due to increased international student
fees. Other revenue of the University increased by $3.7 million,
due mainly to the transfer of the printery and environmental
analysis laboratory from Norsearch Limited on 1 January
2006.Deferred income and deferred expense reflect movements in the
actuarially assessed employee superannuation liability for
employees who are members of a State Government defined benefit
superannuation plan. Because the Australian Government funds these
movements, they do not impact the operating result.Abridged Balance
Sheets At 31 DecemberConsolidated University20062005 2006 2005$000
$000$000$000Current assets37,72329,684 36,23227,565Non-current
assets 171,965 179,681165,522 172,815TOTAL ASSETS 209,688
209,365201,754 200,380 Current liabilities 25,31116,547
25,10614,885Non-current liabilities 17,96031,654 17,95432,555TOTAL
LIABILITIES 43,27148,201 43,06047,440 NET ASSETS 166,417
161,164158,694 152,940Net assets increased by $5.3 million, largely
due to an increase in cash of $5.2 million. Cash holdings increased
partly due to a lower than budgeted Australian Government student
load and reduced capital outlay. Auditor-Generals Report to
Parliament 2007 Volume Two
___________________________________________ 27 34. Southern Cross
University
_________________________________________________________________________UNIVERSITY
ACTIVITIESThe University is constituted under the Southern Cross
University Act 1993. It mainly:provides educational facilities of
university standard having particular regard to the needs of the
north coast region of the State preserves, extends and disseminates
knowledge through scholarship, research, creative works consultancy
and internal and external teaching.For further information on the
University, refer to www.scu.edu.au CONTROLLED ENTITIESNorsearch
LimitedNorsearch Limited is a company limited by guarantee. It is
controlled by Southern Cross University and its operations consist
of conferencing and continuing education. The company transferred
its printery and environmental analysis laboratory to the
University on 1 January 2006.Norsearch Limited is currently
negotiating the acquisition of a number of business operations from
the Southern Cross University Student Union. The operations are
located at the Lismore Campus. Year ended 31 December 20062005 $000
$000Revenue1,200 4,404Expenses 1,486 4,199(Loss)/profit (286)205Net
assets (at 31 December)1,271 1,558Revenue and expenses decreased
due to the transfer of the majority of the companys operations to
the University from 1 January 2006.Australian Plant DNA Bank
LimitedAustralian Plant DNA Bank Limited is a company limited by
guarantee. It is controlled by Southern Cross University.The
consolidated financial report of Australian Plant DNA Bank Limited
includes the financial results of the company and its controlled
entity, Biobank Pty Limited.Australian Plant DNA Bank Limiteds
purpose is to maintain a bank of Australian native plant DNA and to
perform related research and development. 28
___________________________________________ Auditor-Generals Report
to Parliament 2007 Volume Two 35.
_________________________________________________________________________
Southern Cross University Year ended 31 December
ConsolidatedAustralian Plant DNA BankLimited 2006 2005 20062005
$000$000$000 $000Revenue 2 26 226Expenses 14 29 824(Loss)/profit
(12)(3) (6)2Net assets (at 31 December)28 403945Revenue decreased
due to less consulting fees being earned this year compared to the
prior year.Biobank Pty LimitedBiobank Pty Limited is a proprietary
company limited by shares. It is controlled by Australian Plant DNA
Bank Limited.Biobank Pty Limiteds purpose is to hold and maintain
the DNA of native Australian plants and other species of economic
significance. Year ended 31 December 20062005* $000
$000Revenue----Expenses 65Loss 65Net liabilities (at 31
December)115 * period commencing 9 February 2005OTHER BODIES
ASSOCIATED WITH THE UNIVERSITYNational Marine Science Centre Pty
LtdRefer to the University of New England comment on page 40 for
observations on the National Marine Science Centre Pty Ltd.
Auditor-Generals Report to Parliament 2007 Volume Two
___________________________________________ 29 36. The University
of SydneyAUDIT OPINIONThe audit of the financial reports of the
University and its controlled entities for the period or year ended
31 December 2006 resulted in unqualified Independent Audit
Reports.The audit of the financial report of the Institute for
Magnetic Resonance Research is still in progress. PERFORMANCE
ISSUES(Comparative performance data on universities appears in the
Universities Overview section earlier in this Volume. The
information shown below is based on consolidated financial
statements.)The Universitys current ratio (a measure of its
financial liquidity) was 1.3 at 31 December 2006, a decrease on the
previous years 2.2. It is marginally below the good practice
parameters set by the Australian Governments Department of
Education, Science and Training (DEST) and the State average of
1.4.Australian Government grants as a percentage of operating
revenue decreased from 40.8 per cent in 2005 to 38.2 per cent in
2006. It is slightly lower than the States average of 38.7 per cent
and within the DEST good practice parameter.Employee Benefits and
on-costs as a percentage of operating revenue decreased from 53.3
per cent in 2005 to 49 per cent in 2006. This is better than the
States average of 54.4 per cent and the DEST good practice
parameters. CONTROL ISSUESWe identified some opportunities for the
improvement in accounting and administrative procedures and have
reported them to management. These include:The Universitys cultural
assets have not been subject to recent comprehensive valuations.
The last comprehensive valuation of the Macleay and Nicholson
Museums was undertaken in 1998 and 1997 respectively while the
Universitys JB Power Art Collection was last valued in 1994. The
University has applied a generic index in 2003 and again in 2006 to
increase the value of these assets, however these adjusted values
may not reflect the fair value at balance date. Comprehensive
valuations will be undertaken in 2007 and 2008. The University is
planning to review its research library collection for obsolete
items in 2007. This may result in a significant accounting
adjustment for these items in the 2007 financial report. In 2005
and 2006 we reported that the University began identifying and
writing-off obsolete items of plant and equipment. Further work is
required in 2007 to complete this process. Last year we reported
that a significant number of academic and general staff held leave
balances in excess of the maximum accrued leave entitlements
allowed under the Universitys leave policy. In 2006 these excess
balances continued to increase. In May 2006, the University
introduced provisions within separate staff agreements for academic
and general staff to manage excess leave. The provisions require
the University to notify relevant staff to reduce excess leave
balances within a specified period. Leave not cleared within the
timeframe would be forfeited unless special circumstances exist. We
understand there has been no effective application of those
provisions to date. We reported in previous years that the
University had not completed a Business Continuity Plan. While
there was further progress on this project in 2006, it is still to
be finalised. 30 ___________________________________________
Auditor-Generals Report to Parliament 2007 Volume Two 37.
__________________________________________________________________________
The University of SydneyCOMPLIANCE ISSUESNational Government
Protocols for Public Higher Education InstitutionsWe tested whether
the University complied with the Australian Governments National
Government Protocols for Public Higher Education Institutions. The
results of our testing was satisfactory. OTHER ISSUESTransfer of
Orange Campus to Charles Sturt UniversityThe Orange Campus was
formally transferred from the University of Sydney to Charles Sturt
University (CSU) on 1 July 2006. The transfer included land,
buildings, plant, equipment, library collection, livestock and
inventory with a fair value of $36.8 million and reduced the
Universitys employee provisions by $1.8 million.CSU paid the
University $1.0 million as consideration for the transfer of the
Orange Campus, however, CSU acknowledged that the University
combined book value of Orange Campus components is in excess of
$10.0 million. CSU paid the University one dollar as consideration
for the transfer of the Orange land.CSU has managed the campus
since 1 January 2005. Legislation passed in 2006 formally enabled
the transfer to take place.Capital Expenditure ProgramThe
University has a major capital expenditure program in place. The
capital budget for 2007 to 2009 totals $659 million. It comprises
three large capital development programs: Campus 2010 and Building
for the Future program; $185 million, Campus 2025' program; $222
million and 'Teaching Hospital Development program; $77.5 million,
and property acquisitions $39.5 million and other capital works
$135 million.Under the Campus 2010 and Building for the Future
program the School of Information Technologies building was
completed in March 2007 with a forecast total cost of $44.6
million. Construction commenced on two other major projects under
the program, the Faculty of Law building ($93.0 million) in March
2007 and the Central Student Services building ($67.6 million) in
November 2006. Both these projects are due for completion late in
2008.The Campus 2025 Program' planning has commenced and proposes
expenditures of $15.0 million for 2007, $61.0 million for 2008 and
$146 million in 2009.The 'Teaching Hospital Development program
includes expenditures of $38.5 million for 2007, $12.0 million for
2008 and $27.0 million in 2008. The program includes capital
contributions for a major research and education facility at Royal
North Shore Hospital and an education and research building at
Nepean Hospital. Auditor-Generals Report to Parliament 2007 Volume
Two ___________________________________________ 31 38. The
University of Sydney
__________________________________________________________________________FINANCIAL
INFORMATIONThe consolidated financial information includes the
financial reports of the University and its controlled
entities.Abridged Income Statements Year ended 31 December
Consolidated University200620052006 2005$000 $000
$000$000Australian Government grants 462,595421,503462,595
421,503Higher Education Contribution Scheme 123,366117,017123,366
117,017Fees and charges 223,146201,438223,146
201,438Other401,945293,910401,380 292,329Deferred income
superannuation(129,419) (11,863)(129,419)(11,863)TOTAL
REVENUE1,081,6331,022,0051,081,068 1,020,424 Employee benefits and
on-costs 593,253550,778591,704 550,229Depreciation49,887 44,488
49,02944,488Other377,314328,626376,351 327,626Deferred expense
superannuation (129,419) (11,863)(129,419)(11,863)TOTAL EXPENSES
891,035912,029887,665 910,480 OPERATING RESULT
190,598109,976193,403 109,944Fees and charges mainly comprised
fee-paying overseas students $148 million ($137 million in 2005),
fee-paying local students $30.4 million ($30.1 million), continuing
education $11.2 million ($9.1 million), summer school fees $8.8
million ($1.5 million) and course fees $7.2 million ($7.1
million).Other income included investment income $116 million
($82.9 million), consulting and contract research income $105
million ($76.7 million), gain on disposal of assets $57.2 million
($9.3 million), contributions from organisations $31.5 million
($30.1 million) and donations and bequests $26.5 million ($28.4
million). Investment income increased mainly due to higher returns
from managed funds in 2006. The gain on disposal of assets included
$55.7 million recognised on sale of shares.Other expenses mainly
comprised teaching and research grants $84.7 million ($63.9
million), scholarships, grants and prizes $55.7 million ($48.8
million), repairs and maintenance $35.5 million ($32.2 million),
travel, related staff development and training $31.7 million ($26.8
million), consultants and contractors $26.4 million ($24.0 million)
and bad and doubtful debts $6.5 million ($304,000). The increase in
bad and doubtful debts of $6.2 million is mainly due to provisions
provided for student union loans and a loan to the Institute of
Magnetic Resonance Research.Deferred income and deferred expenses
reflect movements in the actuarially assessed liability for
employees who are members of the State Governments defined benefit
superannuation plans. Because the Australian Government funds these
movements, they do not have an impact on the operating result. The
increase in deferred income and deferred expenses is mainly due to
an increase in the discount rate used by the actuary from 5.3 per
cent in 2005 to six per cent in 2006. 32
___________________________________________ Auditor-Generals Report
to Parliament 2007 Volume Two 39.
__________________________________________________________________________
The University of SydneyPrior period errors adjusted in the
financial report included:a reduction of $20.6 million in library
assets resulting from a write-down in the value of superseded items
which were replaced by digitised versions of some collections an
increase of $18.3 million in intangible assets due to the
recognition of digitised (electronic) serial collections as an
asset (previously expensed).Abridged Balance Sheets At 31 December
ConsolidatedUniversity 200620052006 2005 $000 $000 $000$000Current
assets177,677302,928 179,644 302,284Non-current
assets3,601,2003,482,931 3,589,526 3,471,447TOTAL
ASSETS3,778,8773,785,859 3,769,170 3,773,731 Current liabilities
204,961209,326204,029 208,813Non-current liabilities
449,380575,983449,380 575,948TOTAL LIABILITIES
654,341785,309653,409 784,761 NET ASSETS3,124,5363,000,550
3,115,761 2,988,970Current assets decreased by $125 million, mainly
due to decreases in cash equivalents ($87.9 million). This decrease
was more than offset by increased non-current assets, particularly
increases in managed funds investments of $191 million.Non-current
liabilities decreased by $127 million, mainly due to the decrease
in defined benefit superannuation liability ($127 million).Net
assets comprise statutory funds that have conditions attached to
their use (for example trusts, bequests and certain grants) $590
million, asset revaluation reserves of $289 million and retained
surpluses of $2.2 billion. UNIVERSITY ACTIVITIESThe University of
Sydney is established by the University of Sydney Act 1989. The
University creates, preserves, transmits and applies knowledge
through teaching, research, creative work and other forms of
scholarship.For further information on the University, refer to
www.usyd.edu.au. CONTROLLED ENTITIESThree companies controlled by
the University were deregistered during the year. These comprised
I-Care Medical Pty Ltd (deregistered on 24 March 2006), Nucleos Pty
Ltd (10 December 2006), and Ucom Seventeen Pty Ltd (26 November
2006). Three companies, the Bosch Institute, the Sydney Institutes
of Health and Medical Research and the Institute for Magnetic
Resonance Research came under the control of the University during
2006.Rural Australia Foundation Limited ceased to be a controlled
entity of the University of Sydney upon transfer of the orange
campus to Charles Sturt University from 1 July 2006.
Auditor-Generals Report to Parliament 2007 Volume Two
___________________________________________ 33 40. The University
of Sydney
__________________________________________________________________________Wentworth
Annexe LimitedThe company was incorporated in 1987 as a company
limited by guarantee. It mainly administers building projects
associated with the University of Sydney Union. All costs of the
company are reimbursed by the Union. Year ended 31 December
20062005 $'000 $'000Revenue24Expenses 24Surplus----Net assets (at
31 December)----I-Care Medical Pty LimitedI-Care Medical Pty Ltd
was incorporated in April 2000 as a company limited by shares. The
University holds 83 per cent of the equity. The company was set up
to commercialise technology treatments of age-related macular
ocular degeneration.The company was deregistered on 24 March
2006Period ended Six Months 24 Marchended 31 2006 December 2005
$000 $000Revenue----Expenses -- 1Deficit-- 1Net assets
----Elastagen Pty LimitedElastagen Pty Ltd was incorporated in 2003
as a company limited by shares. The Company was set up to take
commercial advantage arising out of patents. The University holds
100 per cent of the equity. Year endedSix Months 31 December ended
31 2006 December 2005$000$000 Revenue10671 Expenses 184 158 Deficit
7887 Net assets 287 209 34
___________________________________________ Auditor-Generals Report
to Parliament 2007 Volume Two 41.
__________________________________________________________________________
The University of SydneyUcom Sixteen Pty LtdUcom Sixteen Pty Ltd
was incorporated in November 2004 as a company limited by shares.
The company was set up to take commercial advantage arising out of
patents. The university holds 100 per cent of the equity. Year
endedSix Months 31 December ended 31 2006 December 2005$000$000
Revenue 3746 Expenses36 (45) Surplus1 1 Net assets 2 1Institute for
Magnetic Resonance ResearchThe audit of the Institute of Magnetic
Resonance Research is still in progress. We have recognised a
number of significant issues which we have referred to
management.Non-operating Controlled EntitiesThe following
controlled entities each had no activities up to 31 December
2006:Ucom Six Pty Ltd set up in 2001, its objective is to
commercialise technology relating to therapy for cancer and other
conditions Ucom Seven Pty Ltd set up in 2002, its objective is to
take commercial advantage arising out of patents Ucom Eleven Pty
Ltd set up in 2003, its objective is to take commercial advantage
arising out of patents Ucom Twelve Pty Ltd set up in 2003, its
objective is to take commercial advantage arising out of patents
Ucom Fourteen Pty Ltd, Ucom Fifteen Pty Ltd, and Ucom Seventeen Pty
Ltd set up in November 2004, their objective is to take commercial
advantage arising out of patents. Ucom Seventeen was deregistered
on 26 November 2006 Nucleos Pty Ltd set up in 2002, its objective
is to commercialise technology that will be applied to agents that
may measure and affect the ageing process. The company was
deregistered on 10 December 2006 The Bosch Institute incorporated
in 2006 as a public company, limited by guarantee. Its objective is
the advancement of public health and medical research activities to
improve the health of individuals and the community The Sydney
Institutes of Health and Medical Research incorporated in 2006 as a
public company, limited by guarantee. Its objective is the
advancement of public health and medical research activities to
improve community health. Auditor-Generals Report to Parliament
2007 Volume Two ___________________________________________ 35 42.
The University of Sydney
__________________________________________________________________________OTHER
BODIES ASSOCIATED WITH THE UNIVERSITYUnited States Studies Centre
LtdThe company was set up on 9 November 2006. The companys
objective is to deepen the appreciation and understanding of the
United States (US) and to strengthen the relationship between
Australia and the US through increasing awareness and promoting
collaborative research. The company had no activities up to the
period ended 31 December 2006.University of Sydney Professorial
Superannuation SystemThe University of Sydney Professorial
Superannuation System provided superannuation benefits for
professorial staff. The System was closed to new members in January
1981. The System is not deemed to be a controlled entity of the
University as defined by Australian Accounting Standard AAS24,
Consolidated Financial Reports.The audit of the financial report
for the year ended 31 December 2006 resulted in an unqualified
Independent Audit Report. Year ended 31 December 20062005 $'000
$'000Net assets available to pay benefits (at 1 January) 31,743
32,156Contributions and investment revenue 9,3127,847Benefits and
expenses6,8808,260Net assets available to pay benefits (at 31
December) 34,175 31,743The last triennial actuarial valuation at 31
December 2003 disclosed an unfunded superannuation liability of
$27.9 million. 36 ___________________________________________
Auditor-Generals Report to Parliament 2007 Volume Two 43.
University of New EnglandAUDIT OPINIONThe audit of the financial
reports of the University and its controlled entities for the year
ended 31 December 2006 resulted in unqualified Independent Audit
Reports. PERFORMANCE ISSUES(Comparative performance data on
universities appears in the Universities Overview section earlier
in this Volume. The information shown below is based on
consolidated financial statements.)The Universitys current ratio (a
measure of its financial liquidity) was 1.5 at 31 December 2006
(1.5 at 31 December 2005). At this level it is higher than the
State average and equal to the minimum level identified by the
Australian Governments Department of Education, Science and
Training (DEST) good practice parameters.Australian Government
grants as a percentage of operating revenue increased from 46.5 per
cent in 2005 to 47.9 per cent. The University continues to have the
highest level of reliance on Australian Government grants of all
universities and is significantly higher than the States average of
38.7 per cent.Employee benefits and on-costs as a percentage of
operating revenue increased to 58.8 per cent in 2006 (56.5 per
cent). This is above the States average of 54.4 and is within the
DEST good practice parameter. CONTROL ISSUESWe identified
opportunities for improvement in internal controls, and reported
them to management. There were no repeat issues from the previous
years audit. COMPLIANCE ISSUESWe tested the Universitys compliance
with the Australian Governments National Governance Protocols for
Public Higher Education Institutions. The results of our testing
were satisfactory. FINANCIAL INFORMATIONThe following consolidated
financial information includes the financial reports of the
University and its controlled entities:Agricultural Business
Research Institute Ltd UNE Partnerships Pty Limited Services UNE
Limited International Livestock Resources and Information Centre
Ltd. Auditor-Generals Report to Parliament 2007 Volume Two
___________________________________________ 37 44. University of
New
England_________________________________________________________________________Abridged
Income Statements Year ended 31 DecemberConsolidated University
200620052006 2005 $000 $000 $000$000Australian Government
grants91,418 86,50191,41884,563Higher Education Contribution
Scheme37,597 36,72437,59736,724Fees and charges45,209
46,44934,68936,494Other 18,407 16,42312,73413,519Deferred income
superannuation (27,123)(384)(27,123) (384)TOTAL
REVENUE165,508185,713 149,315 170,916 Employee benefits and
on-costs 113,313105,084 104,92398,828Depreciation11,810
10,83711,04410,277Other 64,295 71,21058,09365,735Deferred expense
superannuation(27,123)(384)(27,123) (384)TOTAL EXPENSES
162,295186,747 146,937 174,456 OPERATING RESULT3,213
(1,034)2,378(3,540)The increase in revenue excluding the $27.1
million decrease in the Australian Government deferred
superannuation liability, was mainly due to a $6.9 million increase
in Australian Government grants, that largely comprised the
following: Australian grant schemes and other grants ($2.6
million), scholarships ($2.1 million) and higher education loans
program $875,000. The decrease in expenses was due to the decrease
in the Australian Government deferred superannuation
liability.Abridged Balance Sheets At 31 December
ConsolidatedUniversity 200620052006 2005 $000 $000 $000$000Current
assets51,327 48,16241,06536,265Non-current assets 328,108348,083
317,632 339,642TOTAL ASSETS 379,435396,245 358,697 375,907 Current
liabilities 48,155 46,10044,80741,651Non-current
liabilities107,044136,543 106,234 135,436TOTAL
LIABILITIES155,199182,643 151,041 177,087 NET ASSETS 224,236213,602
207,656 198,820 UNIVERSITY ACTIVITIESThe University is constituted
under the University of New England Act 1993. It:provides
facilities for educational and research at university standard
disseminates and increases knowledge provides courses of study
across a range of fields, and carries out research to meet
community needs38 ___________________________________________
Auditor-Generals Report to Parliament 2007 Volume Two 45.
_________________________________________________________________________University
of New Englandparticipates in public discourse confers degrees of
Bachelor, Master and Doctor and awards diplomas and other
certificates provides teaching and learning that engage with
advanced knowledge and inquiry, and develops and provide