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 a teaching, learning and research environment which fosters excellence in scholarship, innovation, and social responsibility.
The University operated from six campuses during 1999: City East, City West, Magill, The Levels, Underdale and Whyalla.
During 1999, the following entities were controlled by the University:
Techsearch Incorporated — Until July 1995 Techsearch Incorporated provided a range of services to University staff to support commercial activities. As from July 1996, these services were provided by the University with the operations of Techsearch Incorporated gradually winding down. Effective from 1 July 1999, Techsearch Incorporated ceased operations.
ITEK Pty Ltd — Effective from 1 July 1999, the University established ITEK Pty Ltd and ITEK Trust which provide University business incubation and technology commercialisation services.
University of South Australia Foundation Incorporated — The main purposes of the Foundation are to generate interest in the University and to attract broadly based levels of philanthropic support for the benefit of the University.
Consolidated Operations for the year resulted in a surplus before abnormal items of $1.3 million (surplus of $10.1 million in 1998).
Commonwealth grant funding (including research grants) and Higher Education Contribution Scheme funding increased by a net $3.7 million to $183.0 million.
Income from fee paying students totalled $24.3 million ($22.7 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 1999 included:
Accounts payable
Salaries and wages
Revenue, Receipting and Banking
Commercial Projects, Research Grants and Scholarships
Budgetary Control and Management Reporting
Risk Management
Property, Plant and Equipment.
Consideration was also given to the work of Internal Audit in framing the audit coverage.
The audit of the University of South Australia Foundation Incorporated was performed by the Auditor-General. The audits of Techsearch Incorporated and ITEK Pty Ltd were performed by a private accounting firm.
Matters arising during the course of the audit were detailed in a management letter to the Vice Chancellor to which a satisfactory response was received. The comments provided to the University and the related responses are summarised in 'Audit Findings and Comments' hereunder. The matters raised did not result in an adverse audit opinion of the overall control environment.
As reported last year, the operational and related financial responsibilities of the University have been devolved to the cost centre manager level over recent years. This has required the establishment and/or consolidation of responsibilities of the different levels of cost centre managers in order to highlight to them the associated increased accountability. It also requires the clear communication of these responsibilities and the management of the impact of this fundamental change in management philosophy. Audit noted that the responsibilities of cost centre managers had been consolidated into a document that was, however, only in draft form and that this exposed the University's operations to a number of risks as cost centre managers may misinterpret responsibilities or may not be aware of all of their responsibilities.
The University has responded that it continues to have management responsibilities distributed across local and central administrative areas and that in more recent years, the balance has shifted towards more local responsibility. This reflects a change in the approach towards control, where the emphasis has moved away from reliance on excessive checking to one of greater accountability by the manager initiating the transaction. Managers are supported in their responsibilities by appropriate operating frameworks and provision of adequate training. The broad responsibilities of managers are contained within their duty statements. The University indicated that as well as finalising the document incorporating the responsibilities of cost centre managers, it would have discussions with managers to ascertain the extent to which they might remain unclear about their responsibilities in the current operating environment and the capacity for further documentation to assist in making responsibilities clear. Should further documentation be helpful in making responsibilities clear, this would be developed.
The University has made significant progress in relation to the identification and assessment of its risks. This has provided the University with a framework against which strategic decisions can be made in relation to the efficiencies and effectiveness of its operations. Audit noted that the risk management strategy evolving from the process to date did not appear totally cohesive or to have filtered down to the operational level. In particular, where risks identified extended beyond an individual cost centre, there did not appear to be a full understanding by all effected parties of its potential impact or a collaborative approach to its mitigation. It was also noted that decisions regarding the efficiency and effectiveness of the University's operations made against the resultant framework needed to be clearly documented in order to ensure the integrity of decisions.
The University has advised that it will re-examine its risk management guidelines to ensure that where a risk has been identified that extends across cost centres, the potential impact is understood by all affected cost centres and a collaborative approach to its mitigation is adopted. In addition, the University indicated that although decisions in accordance with agreed risk management plans are documented to the extent appropriate for the decisions being made, there will be a number of on-going activities in which decisions may not be formally documented but which should be consistent with risk management plans.
The University has, over a number of years, compiled policies and procedures to be used by officers in governing their actions in carrying out University operations. These policies and procedures are available to officers through a number of mediums. Audit noted instances during the course of the audit where, because of the significant change in operations, the policies and/or procedures were not being followed because they were out of date and as such there was a risk that the intended principle would not be properly applied. Audit recommended that all changes to policies and procedures be made in the context of the strategic direction of the University and be appropriately promulgated using the most functional medium.
The University advised that it was the intention of the University to review policies and procedures on a regular basis in the context of the strategic direction of the University. In the event that a significant change in operations occurs, the related policies and procedures will reflect that change on a timely basis and be promulgated using effective communication mediums.
In Audit’s opinion, the preceding matters resulted in a range of financial compliance matters being raised with the University, in particular, in relation to the processing of payroll and accounts payable transactions.
The University indicated that these matters would be resolved as appropriate and in consideration of its changing control environment.
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, before abnormal items, was a surplus of $1.3 million, a decrease of $8.8 million. The result reflects an increase of $17.5 million in operating expenses compared to an increase of $8.7 million in operating revenue.
The primary reason for the increase in operating expenses over operating revenue is the impact of the University’s enterprise bargaining process. In addition, planned upgrades to certain facilities were undertaken during the year and, as a result of a net increase in property, plant and equipment and a change in accounting policy (refer Note 2), there was also a net increase in depreciation expenses.
The increase in operating revenue is due mainly to a net increase in funding from the Commonwealth of $3.7 million. While grant funding decreased by $1.6 million, Higher Education Contribution Scheme (HECS) funding increased by $5.3 million. In addition, income from fee paying students has continued to increase, up by $1.6 million to $24.3 million.
The following graph reflects the changing composition of revenues over recent years.
