The University's finances in 2012

As part of its annual report, the University publishes its audited financial statements, in line with mandatory federal government guidelines.

The University also publishes a ‘financial review’ as part of the report, which includes an explanation of the University’s income and expenditure.

This page summarises the financial review of 2012.

  • The overview explains the University’s overall financial position, including how it is restricted in how it can use much of its revenue.
  • The section on the University’s operating revenue explains where our funds come from. The principal sources of revenue are income from students, federal and state government funding, income from research and consultancy activities, and income from private sources (such as philanthropic income).
  • The section on operating expenses breaks down what the University needed to spend to fund continuing operations.
  • The section on expenditure on assets breaks down 2012 spending as part of the University’s long-term capital expenditure plan to assure its future sustainability as a leading research-intensive university.

The full financial review can be found on pages 66 to 75 of the annual report. Download the financial review of 2012 (479 KB, PDF).


Overview

The University of Sydney recorded an operating result of $136.1 million for the financial year ended 31 December 2012, which represented growth of $43.5 million, or 47 percent, over the 2011 operating result of $92.6 million.

The growth in the operating result can be largely attributed to a change in accounting policy that now recognises unrealised investment gains in the operating margin (see below for further detail). The growth was enhanced by strong investment returns generated by the University’s philanthropic funds during 2012.

This result also included several items that can only be used for specific purposes and which are therefore quarantined from funding the day-to-day operations and capital works programs of the University.

After making allowance for these and other factors, the University’s financial statements reveal a negative operating margin for the year ended 31 December 2012 of $46.3 million (2011: deficit $77.4 million).

 

2012

$M

2011

$M

GROWTH

$M

GROWTH

%

Operating revenue1 1,736.5 1,597.1 139.4 8.7
Operating expenses2 1,600.4 1,504.5 95.9 6.4
Operating result 136.1 92.6 43.5 47.0
Adjusted for:        
Philanthropic funds3 (78.0) (72.2) (5.8) (8.0)
Investment funds3 (29.1) (10.9) (18.2) (167.0)
Capital grants3 (53.9) (54.5) 0.6 1.1
Specific purpose grants3 (21.4) (32.4) 11.0 34.0
Net available operating margin (46.3) (77.4) 31.1 40.2

1. For further information, see Section 1 on operating revenue
2. For further information, see Section 2 on operating expenses.
Note also that 2011 operating expenses included impairment of available-for-sale assets of $19.8 million.
3. Figures include internal rate of return and reflect net margin. Certain philanthropic and investment funds are restricted and unavailable for general use.


Quarantined items contributing to the operating result included the following.

  • A large proportion of the philanthropic funds managed by the University must be invested in perpetuity. Under the terms of many of the endowments, some investment income derived from these investments must be retained to maintain the real value of the endowment and is not therefore available to fund day-to-day operations.
  • A number of capital grants have been received to fund specific infrastructure projects.
  • A range of research and education grants that must be applied to specific projects.

Funding provided by the Commonwealth, which predominantly contributes to the University’s net available operating margin, continues to shrink as a proportion of the overall income generated by the University. This places increasing reliance on income generated from other sources in order to meet the University’s ongoing operating expenditures and capital works requirements.

During 2012, the University ‘early adopted’ the Australian Accounting Standards Board (AASB) 9 ‘Financial Instruments’ accounting standard. The impact of this decision has been to reclassify investment earnings generated on the University’s pool of investment funds from equity to the income statement. As a result, the University recorded an additional $61.6 million of investment income in 2012 (2011: N/A).

These investment earnings include substantial unrealised gains that do not generate cash receipts for the University. To the extent that cash is generated, the majority of the income is derived from endowment funds, which can only be used for the specific purposes nominated by the donor and are therefore not available to meet the University’s day-to-day operational requirements.


Operating revenue

The 2012 operating revenue of $1,736.5 million was $139.4 million more than in 2011. The following table and chart show the major components of this increased revenue.

 

2012

$M

2011

$M

GROWTH

$M

GROWTH

%

Income from students (incl. HECS and FEE-HELP)  600.4 548.0 52.4 9.6
Research and consultancy activities  492.6 475.3 17.3 3.6
Commonwealth Government operating grants  294.1 276.7 17.4 6.3
Income from private sources  275.8 256.4 19.4 7.6
Capital grants  70.9 38.9 32.0 82.3
NSW Government operating grant  2.7 1.8 0.9 50.0
Total  1,736.5 1,597.1 139.4 8.7
A pie chart showing the breakdown of operating revenue sources.

Income from students

The 2012 growth in income from students of $52.4 million was mainly attributable to additional fees generated through Australian Government financial assistance programs, including $18.3 million from FEE–HELP (a 41.6 percent increase over 2011), $28.1 million from HECS–HELP and $2.7 million from SA–HELP.

While growth in full fee-paying international student numbers slowed in 2012, full fee-paying students continued to provide significant sources of income to the University, and once again accounted for a larger proportion of income than that derived from HECS–HELP payments.

A pie chart showing the breakdown of operating revenue sources.

Income from students 2002–12 ($M)

A pie chart showing the breakdown of operating revenue sources.

Commonwealth Government funding

The overall level of Commonwealth funding grew by $68.8 million in 2012 to $761.2 million, a rise of 10 percent.

This growth was driven mainly by an increase in capital funding of $26.3 million, an additional $23.1 million in teaching and learning grants, funding increases of $9.8 million from other Commonwealth agencies and an additional $6.7 million in funding generated through the Department of Industry, Innovation, Science, Research and Tertiary Education (DIISRTE). The majority of the capital funding growth was Commonwealth funding for the University’s capital works program, including the construction of the building for the Charles Perkins Centre.

The continued growth in income from student fees and HECS, together with the relative decline of funding received from Commonwealth operating grants, means that the proportion of University revenue received from HECS and student fee income has grown considerably since 2002 (2012: 34.6 percent; 2002: 28.6 percent). Most of this increase is attributable to student income. The proportion of University revenue received through Commonwealth operating grants has declined over the same period (2012: 16.9 percent; 2002: 19.5 percent).

The University continues to feel financial pressure as a result of the continuing decline in financial support from the Commonwealth as a percentage of total revenue.

 

2012

$M

2011

$M

GROWTH

$M

GROWTH

%

DIISRTE research funding  149.5  142.8  6.7  4.7
Other Commonwealth agencies – research  144.6  134.8  9.8  7.3
Australian Research Council  76.4  72.6  3.8  5.2
Scholarships  25.7  26.5  (0.8)  (3.0)
Commonwealth research funding  396.2  376.7  19.5  5.2
Teaching and learning operating grants  294.1  271  23.1  8.5
Capital funding  70.9  44.6  26.3  59.0
Total Commonwealth funding  761.2  692.3  68.9  10.0

Research and consultancy activities

Income received by the University for research, collaborative research and consultancy activities increased by $17.2 million in 2012, or 3.6 percent, to $492.6 million. Commonwealth research funding of $396.2 million represented 80.4 percent of the total funding in this category.

 

2012

$M

2011

$M

GROWTH

$M

GROWTH

%

Commonwealth research funding 396.2 376.7 19.5 5.2
Industry research grants 24.7 20.8 3.9 18.8
Foundations and individual research grants 17.1 15.1 2.0 13.2
NSW Government research grants 15.8 18.0 (2.2) (12.2)
Local collaborative research funds 15.6 18.5 (2.9) (15.7)
Overseas collaborative research funds 15.2 16.5 (1.3) (7.9)
Consultancies  8.0  9.7 (1.7) (17.5)
Total research and consultancy income 492.6 475.3 17.3 3.6
 

2012

$M

2011

$M

GROWTH

$M

GROWTH

%

Research grants 15.8 18.0 (2.2) (12.2)
Operating grants 2.7 1.8 0.9 50.0
Total NSW Government grants 18.5 19.8 (1.3) (6.6)

Income from private sources

The major components of this income group were as follows:

 

2012

$M

2011

$M

GROWTH

$M

GROWTH

%

Investment income 116.4 76.3 40.1 52.6
Philanthropic income 50.8 79.4 (28.6) (36.0)
Commercial and other activities 56.0 48.1 7.9 16.4
Contributions from external organisations 29.8 30.7 0.9 (2.9)
Other fees and charges 17.2 16.1 1.1 6.8
Sponsorship income 5.6 5.8 (0.2) (3.4)
Total income from private sources 275.8 256.4 19.4 7.6

Philanthropic income

The University’s philanthropic fundraising program had an exceptional year in 2012, breaking all previous records. During the year, $80 million (2011: $79 million) in pledged and receipted funds were committed through the University’s various programs. Of this total, $50.8 million (2011: $79.4 million) was receipted in the year ended 31 December. This was a particularly remarkable achievement given that the previous record year, 2011, included the gift to the University of a Picasso painting that raised $20 million at auction.

A highlight of 2012 was the commitment from John Grill, an alumnus and distinguished business executive, for a gift of $20 million to establish a world-class centre for project leadership as a collaborative partnership between the Business School and the Faculty of Engineering and Information Technologies.

Other philanthropy highlights in 2012 included the following.

  • Bequest income exceeded $20 million for the third consecutive year.
  • 1,409 donors supported scholarship provision within the University.
  • Ten faculties each raised more than $1 million.
  • There were 5,511 first-time donors.
  • Large individual donations continued to be very significant, with 56 percent of the total funds raised being donated through 10 individual donors and 84 percent of all funds raised being contributed by 124 donors.

Distribution of donations to the University during 2012

A triangle showing the distribution of donations to the University during 2012. It shows the majority of donations ($45,000,000) came from 10 donors.


Operating expenses

The 2012 operating expenditure of $1,600.4 million was $95.9 million, or 6.4 percent, higher than that for 2011.

 

2012

$M

2011

$M

GROWTH

$M

GROWTH

%

Salaries 750.6 708.6 42.0 5.9
Payroll on-costs 192.7 186.3 6.4 3.4
Total employee benefits 943.3 894.9 48.4 5.4
Other operating expenses 235.5 199.8 35.7 17.9
Teaching/research grants and scholarships 201.5 187.0 14.5 7.8
Depreciation and amortisation 108.9 103.8 5.1 4.9
Buildings and grounds maintenance 59.5 61.4 (1.9) (3.1)
Consultants and contractors 35.5 37.8 (2.3) (6.1)
Impairment 16.2 19.8 (3.6) (18.2)
Total expenses 1,600.4 1,504.5 95.9 6.5


During 2012, a number of assets (including a number of buildings which are due to be replaced as a result of the University's capital works program) were retired, with a resulting expense impact of $14.5 million. In addition, non-capitalised infrastructure enhancements to the value of $17.4 million, associated with the University's information technology and property management operations, were charged to profit and loss in 2012. These were made up of project-related preliminary costs and project costs incurred on programs with a value below the University's capitalised costs limit. In accordance with University policy, these have been charged to profit or loss. The University continues to have a large maintenance backlog that is being addressed.

Total employee benefits increased by $48.4 million, or 5.4 percent, in comparison to 2011. Of the overall increase in salaries, $32.9 million related to growth in academic salaries, inclusive of $13.3 million related to growth in termination payments. Non-academic employee costs increased by $15.5 million, or 3.8 percent, of which $5 million related to growth in termination payments made as a result of restructuring activities carried out in 2012. Academic part-time teaching salaries constituted 8.5 percent of the total academic salaries (2011:9.3 percent).

A pie chart showing the breakdown of expenses. The majority come from total employee benefits


Expenditure on assets

In accordance with its 2011–15 Strategic Plan the University has committed to a long-term capital expenditure plan to assure its future sustainability as a leading research-intensive university. This includes funding for state-of-the-art buildings, information and communications technology, and library infrastructure to support the University’s core teaching and research activities.

In 2012, the University incurred capital expenditure of $252.9 million, which was $59.3 million or 30.6 percent more than in 2011.

The substantial increase in capital expenditure incurred in 2012 was due to the continuing investment in major projects such as the building for the Charles Perkins Centre, the completion of the Nepean Clinical School at Nepean Hospital, the commencement of the Abercrombie Precinct Development for the Business School and a number of projects funded by federal government schemes such as the Better Universities Renewal Fund.

In addition to the above incurred expenditures, the University entered into capital expenditure commitments totalling $223.9 million (2011: $272.7 million).

Where the capital expenditure incurred was greater than the operating surplus, the balance was funded from a new borrowing facility established during 2012.

 

2011

$M

2012

$M

GROWTH

$M

GROWTH

%

Land and buildings 6.6 6.8 (0.2) (2.9)
Equipment 15.6 20.9 (5.3) (25.4)
Capital works – software 29.4 27.2 2.2 8.1
Capital works – buildings 192.6 128.3 64.3 50.1
Other 8.7 10.4 (1.7) (16.3)
Total capital expenditure 252.9 193.6 59.3 30.6