University audit shows sector’s greatest challenges

2016 was the first year revenue from overseas students surpassed that of domestic students

audit cover photo

Hidden under a heavy layer of buzzwords and business jargon, the NSW Auditor General’s recently released 2016 Universities Audit revealed some interesting data concerning our state’s universities. Some of the data is easy to guess (for example, we have far too many students studying the humanities for the number of jobs available, and too few studying STEM fields such as engineering). Other data is more concerning.

Our universities appear to be struggling with handling sensitive data, presenting a serious and continued risk to students and universities. Nearly half of the information security issues plaguing our universities had been flagged in previous audits but are yet to be addressed. Interestingly, when discussing a lack of information security, the audit didn’t mention concerns over students’ personal data, but rather over university research and intellectual property. Many of the security issues relate to handling information — in other words, university staff often have weak passwords and allow inappropriate access to secure data.

Research funding for NSW universities reached $1.1 billion in 2015, with almost two thirds of the money going to the University of Sydney and the University of New South Wales at 36.1 per cent and 30.4 per cent respectively. The government provides some research funding to each university based on its research income in the previous year — universities that receive more non-government research grants are rewarded with more government funding. This system, which encourages universities to form deeper research partnerships with the private sector, means small universities struggle to attain the funding necessary to become an attractive partner in the first place, in turn barring them from the additional government funding they need.

The audit revealed many universities appear to be diverting teaching funding towards research. Data gathered in the 2014-2016 period showed that most universities spend more on research than they earn from research revenue, indicating that funding from other sources has been channelled towards research. The audit report admitted that it would be difficult to assess much of this spending, as “indirect expenditure” is harder to track. However, diverting funds from teaching to research has direct impacts on the quality of education being delivered to students.

Overall, NSW Universities’ rankings have improved, but only two are in the global top 100 according to the Times Higher Education (THE) university rankings. USyd has moved up four spots to 56th, while UNSW has dropped four spots to 82nd. Prominent global ranking systems such as THE rankings place an overwhelming amount of importance on research related factors when determining rankings, which helps to explain universities’ investment in that area.

These rankings may be important in attracting overseas students, who according to the audit, “have significant financial benefits to a university”. Most NSW universities are becoming increasingly reliant on income provided by international students — at USyd, overseas students make up 35 per cent of the 47,706 students currently enrolled. Across all ten NSW universities we have seen a 25 per cent increase in revenue gathered from overseas students in 2016. Last year, for the first time ever, revenue from overseas students surpassed income from domestic students. As the report notes, a continued increase in international student numbers has “significant financial benefits to a university”. However, the audit also stated that a continued increase in international students could pose a real risk to the overall quality of education that our universities are able to deliver.

Overall, the audit revealed some interesting information regarding our universities, but barely glanced over some important issues.

The lack of information security protocols at NSW universities ought to be easily addressed — the audit explicitly states that many problems arise from problems as simple as poor password security. It should be concerning to students that our universities have repeatedly failed to address these issues, many of which were pointed out in previous years’ audits.

The audit suggests that universities are diverting funding from teaching to research but barely uses a paragraph to inform us of this, despite acknowledging the real impact that this can have on the learning experience of students. Its only recommendation in dealing with this is for universities to “design an appropriate process to capture and track all direct and indirect costs associated with research activities”, which is hardly inspired.

Furthermore, our universities’ increasing reliance on international students for income is risky — it is presumptuous to assume that a continued increase in international students is financially sustainable. Most universities address this by “focusing on increasing the geographical diversity in overseas students” in case of events such as localised economic downturns, international incidents, or a fall in reputation.

More positively, every university in the state is currently sitting on a surplus, however five universities still have expenditure growth surpassing revenue growth — a worrying fact given the federal government’s proposed $2.8 billion budget cuts to the higher education sector.

Vice Chancellor Michael Spence.

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