The University of South Australia was established by the University of South Australia Act 1990. The mission of the University is to advance, disseminate and preserve knowledge through the provision of a teaching, learning and research environment which fosters excellence in scholarship, innovation, and social responsibility.
The University operated from six campuses during 2000: City East, City West, Magill, The Levels, Underdale and Whyalla.
During 2000, the following entities were controlled by the University:
Consolidated operations for the year resulted in a surplus of $2.4 million (surplus of $1.3 million in 1999).
Income from fee paying overseas students totalled $28.9 million, an increase of $8.9 million from the previous year total of $20 million.
Section 19 of the University of South Australia Act 1990 provides for the Auditor-General to audit the accounts of the University in respect of each year of operation.
The audit program covered all major financial systems and was directed primarily towards obtaining sufficient evidence to enable an audit opinion to be formed with respect to the Financial Statements and internal control.
The scope of the audit for 2000 included:
· strategic planning
· budgetary control
· payroll
· expenditure
· fixed assets
· revenue.
Consideration was also given to the work of Internal Audit in framing the audit coverage.
Matters arising during the course of the Audit were detailed in a management letter to the Chancellor. The University’s Audit Committee noted the management letter and accepted management’s response. The response was subsequently received by Audit and considered to be satisfactory. The comments in ‘Audit Findings and Comments’ hereunder summarise the major matters raised with the University and the related responses. The responses indicate the University’s approach to cost effective, risk based control.
The University has for some years relied on its Corporate Plan, supported by annual business plans at division and portfolio levels, to focus its activities over the short and longer term through the identification of high level objectives (and related key performance indicators) to be achieved over, generally, a three year timeframe. Measurement of the achievement of these high level objectives is undertaken annually in the context that the Corporate Plan is a rolling plan.
Following a review of these processes, Audit made some suggestions in relation to the University formalising its short-term task orientated elements for any one year of operation through a corporate Business Plan monitored progressively throughout the relevant year.
The University responded that its planning processes were one of the University’s key strengths involving regular monitoring of both financial and non-financial key performance indicators. Detailed operational planning supported this, given that local managers had an important role to play in the planning and review process and are accountable for outcomes within time periods that represent a natural business cycle. The University also noted that its corporate planning and review process is reviewed periodically, most recently in November 2000, to ensure continuous improvement in practices. It was stated that Audit’s comments would be considered in the next review of the planning and review process.
Budgetary control is a critical high-level control utilised by the University. The responsibility for budgetary control has been delegated to cost centre managers. Their work, in turn, supports higher level management reporting and monitoring. A review of monitoring and reporting aspects of budgetary control was undertaken for the 2000year.
From a review of reporting to Council and its committees (with financial monitoring responsibilities), Audit noted some internally identified improvements sought in relation to the monitoring and reporting of the net return of some University activities. Audit noted and supported these aims recognising that not all the necessary information and related systems/processes for detailed net return analysis were, at the time, readily available within the University and that in response, action was underway to facilitate the production of such information. Audit suggested some practical, high-level analysis be prepared in the interim.
Audit also made observations on possible improvements in relation to monitoring and reporting the achievement of the University’s short-term objectives. Recommendations were also made in relation to consistent, periodic and timely reporting and review.
The University responded that it would continue to develop systems and methods to better analyse its varied activities, noting it was a sector wide issue and advising that a major costing consultancy sponsored by DETYA reported in June 2000 that trials of activity-based costing approaches had had mixed success in three universities. It further noted that implementing new costing approaches was a complex matter but costing would be improved as rapidly as resources permit.
The University also indicated that its Finance Committee had guided improvements to financial reporting to the Council, and would continue to do so. It was generally satisfied with the current arrangements. It was noted that the University’s business cycles are such that financial operations may be reported on less frequently than monthly intervals and this also supported the meeting schedules of Council and its committees.
In acknowledgement of the significance of budgetary control in the University’s control environment, Audit reviewed the budgetary control guidelines available to responsible managers within the University for the 2000year. Audit found that budgetary control guidelines were not available to responsible managers for most of the 2000 year.
Audit recommended that the relevant draft guidelines be finalised and promulgated to University employees as soon as practicable and that these guidelines should be reviewed in the context of the University’s operations on a periodic basis. Audit also made recommendations in regard to the guidelines being more prescriptive in relation to the frequency of budget monitoring, providing definition or guidance in relation to criteria and documentation for variation analysis, and retention of documentary evidence of the reviews performed.
The University responded that draft Guidelines for Budget Monitoring had been in use by divisional staff since September 2000 pending review of their suitability in the light of practice. The University supported Audit’s recommendation to finalise the Guidelines and would give due consideration to the detailed issues raised by Audit in their finalisation.
Audit reviewed practices for the 2000 year and found, for a sample of cost centres reviewed, there was limited evidence to confirm regular and timely review and explanation of variances from expenditure budgets. Audit considered that this weakened the related process for approval of significant variances. It was recommended that cost centre managers maintain sufficient evidence that all significant variances have been appropriately explained on a periodic and timely basis and consistently across the University.
The University responded that it supported Audit’s recommendation that cost centre mangers maintain sufficient evidence of the financial review process. It was noted that the nature of the review process is increasingly focused on performance against key indicators and does not necessarily require detailed variance analysis against budget estimates. Consistency in the practice of financial review would be pursued to the extent practicable.
The periodic review by managers of listings of current employees within their cost centres has been a critical high-level control supporting the validity of payroll payments and control over such expenditure. During the course of the audit, Audit found, for a sample of cost centre managers reviewed, limited evidence to confirm that a periodic review of listings of current employees was undertaken and considered that control over such expenditure was lessened. Audit recommended that cost centre managers maintain sufficient evidence that listings of current employees have been periodically reviewed (and on a timely basis).
The University responded indicating the changing nature of payroll and that much staff appointment was now through fixed term contract arrangements. It considered that satisfactory procedures existed for monitoring and control to mitigate risks to an acceptable level including managing contract end dates and planning processes that occur at various points throughout the year (eg budget development, leave management) that require management review of staffing.
A review was conducted of the frameworks supporting performance pay for senior managers and market allowances. Audit did not find any issues in terms of compliance with the University’s ‘Performance Management Guidelines’. Overall, Audit was of the opinion that there was a need for improvement in the processes supporting the awarding of these payments. Audit made suggestions in regard to establishing relevant criteria, documenting the attainment of criteria relative to performance payments and considerations in relation to consistency of application that would, in Audit’s view, improve the process for such payments by evidencing a more transparent and objective process.
The University’s response identified the current context and framework within which performance related payments are made with reference to documentation emanating from the University’s current performance management framework. It indicated that work was in progress that would emphasise the link to the current performance management framework. The University indicated it would ensure that consistency is included in any processes associated with performance pay. It noted that market allowances were introduced solely for retention and attraction purposes and the current development of suitable guidelines to strengthen the process for the allocation and review, if needed, of market allowances but this will remain separate to the performance management process.
The other main matters arising from the audit included:
Payroll — including completeness of leave recording and completion of checklists by staff leaving the University.
Accounts payable — including limiting purchase order authority, segregation of duties, refinement of credit cards limits, expiration of contracts and need for some preferred supplier arrangements.
Revenue — including approval of fees, checking of manual invoices, collecting outstanding fees and policy for monitoring and write-off of certain bad debts.
The University has responded satisfactorily to all of the other matters highlighting its acceptance and/or considerations in relation to the Audit suggestions and having regard to its assessment of risk and feasibility relevant to each matter.
As required by subsection 36(1)(a)(iii) of the Public Finance and Audit Act 1987,the audit of the University of South Australia included an assessment of the controls exercised in relation to the receipt, expenditure and investment of money, the acquisition and disposal of property and the incurring of liabilities.
Audit formed the opinion that the controls exercised by the University of South Australia in relation to the receipt, expenditure and investment of money; the acquisition and disposal of property; and the incurring of liabilities, were sufficient to provide reasonable assurance that the financial transactions of the organisation were conducted properly and in accordance with the law.
The consolidated result of operations for the year was a surplus of $2.4 million (surplus of $1.3 million in 1999), an increase of $1.1 million. The result reflects an increase of $11.3 million in operating revenue (excluding deferred government superannuation contribution) compared to an increase of $10.2 million in operating expenses (excluding deferred government superannuation contribution).
The increase in consolidated operating revenue is due mainly to an increase in revenue from fee paying overseas students, which has continued its previous upward trend up by $8.9 million to $28.9 million from $20million in 1999.
Funding from the University’s main revenue items, Commonwealth Government Grants and the Higher Education Contribution Scheme (HECS), increased by $2.5 million reflecting an increase in the Commonwealth contributions component of HECS of $2.2 million to $52.1 million ($49.9 million).
The following graph reflects the changing composition of revenues over recent years.
The graph highlights the success the University has had in increasing the proportion of revenue from fee-paying overseas students and the significance of those fees in relation to increasing the diversification of the University’s revenue base.
Consolidated operating expenses (excluding deferred government superannuation contribution) increased to $248 million ($237.8 million). The main operating expense of the University (as for most service entities) is employee benefits and this item increased by $10.7 million to $161.2 million from $150.6 million the previous year.
The following graph shows the changes in the academic and non-academic staff salaries components of employee benefits over recent years.
The graph highlights the effects of the University’s changes in staffing from 1997 and the more recent increases in staff salary costs. In 2000, academic staff salaries increased by $2.9 million or 4.8 percent to $64 million ($61.1million) and non-academic staff salaries increased by $2.5 million or 5.1 percent to $52.3 million ($49.7million).