In this part of the report, we summarise the financial outcomes of the university sector for the year ended 31 December 2017 and comment on the sustainability of the sector in the context of information we obtained and observed during our audits.

The detailed data and calculations that underpin our commentary are provided in Appendix E, which lists our financial sustainability indicators, risk assessment criteria, benchmarks and the results of each indicator for each of the universities over the five financial years 2013 to 2017.

Accountability

Responsibility of public entities to achieve their objectives in reliability of financial reporting, effectiveness and efficiency of operations, compliance with applicable laws, and reporting to interested parties.

Activity-based funding

Method of allocating funding based on unit prices for each activity undertaken and the volume of that activity an entity is to perform.

Figure D1 shows the risk ratings applied to issues raised in management letters. It also details what they represent and the expected time line for the issue to be resolved.

Figure D1
Risk definitions applied to issues reported in audit management letters

Figure E1 shows the indicators used to assess the financial sustainability risks of universities in Part 4 of this report. These indicators should be considered collectively and are more useful when assessed over time as part of a trend analysis.

Our analysis of financial sustainability risk in this report reflects on the position of each university.

Figure E1
Financial sustainability risk indicators

Figure B1 lists the entities included in this report. It details the date an audit opinion was issued to each entity for their 2017 financial reports, and the nature of the opinion.

Figure B1
Audit opinions issued for universities and their controlled entities

We have consulted with DET and the eight public universities in Victoria, and we considered their views when reaching our audit conclusions. As required by section 16(3) of the Audit Act 1994, we gave a draft copy of this report, or relevant extracts, to those agencies and asked for their submissions and comments. We also provided a copy of the report to the Department of Premier and Cabinet.

Responsibility for the accuracy, fairness and balance of those comments rests solely with the agency head.

Responses were received as follows:

Effective internal controls help entities to reliably and cost-effectively meet their objectives. Entities require well-designed and efficient internal controls to help them deliver reliable, accurate and timely external and internal financial reports.

2.1 Financial report audit opinions

Independent audit opinions add credibility to financial reports by providing reasonable assurance that the information reported is reliable and accurate. A clear audit opinion confirms that the financial report presents fairly the transactions and balances for the reporting period, in keeping with the requirements of relevant accounting standards and applicable legislation. We carried out our financial audits of the entities in the university sector in accordance with Australian Auditing Standards.

Eight universities and their 50 controlled entities make up the public university sector in Victoria. Their principal activities are providing higher education and conducting research. Figure 1A summarises the income sources and outputs of the sector.

Figure 1A
Victorian universities' funding sources and key outputs