Australian teaching costs ‘not well understood’

Deloitte report suggests teaching costs have accelerated as funding stalls

August 9, 2019
Accounting, accountancy, finance
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Australian universities struggle to delineate between their teaching and research spending, and some have no idea of the cost differentials between undergraduate and postgraduate education – even though higher degree students are 28 per cent more expensive to teach than undergraduates.

A new study has found that the nation’s universities have a patchy understanding of how much they spend on their core activities. The report, by consultants Deloitte, also found massive variations in the cost of teaching in different fields and at different institutions.

And while funding for undergraduate teaching is organised around eight “clusters” of disciplines – with each cluster attracting different subsidies and tuition fees – most universities organise the accounting of their costs around their faculty structures.

This forces them to make “several additional assumptions” when they try to map their teaching costs against the fields of education which underpin their funding, the report says.

“Universities varied in the sophistication of their cost data collection and reporting abilities,” says Deloitte, which collected data on 25 universities in 2017. “Most recognised there was scope for improving the accuracy of their cost allocation process.”

The research marks Deloitte’s third attempt to capture universities’ teaching and scholarship costs, following similar exercises in 2011 and 2016. Further studies have been scheduled this year and next to help cultivate “a more comprehensive, systematic and streamlined data collection process”, the report says.

Melbourne tertiary education consultant Justin Bokor said that understanding cost relativities was becoming essential for universities, with growth in demand set to outstrip funding increases in the coming years. He said that universities wanting to admit more students would need to be able to anticipate the costs with precision.

But he said that their capacity to do this had improved as they recruited more staff from corporate Australia. “Nearly all of the chief operating and financial officers have had long years of industry experience and they’ve brought those practices into universities,” he said.

Peter Bentley, policy adviser to the Innovative Research Universities mission group, said that the Deloitte reports had also helped foster understanding of course delivery costs. “This exercise has encouraged universities to be more systematic in how they attribute their spending on teaching,” he said.

The study found that A$17,300 (£9,700) a year was required to teach a full-time undergraduate student, on average, with costs at individual institutions varying by almost A$9,000.

Veterinary studies was the most expensive discipline, averaging A$46,800 across the sector and up to A$70,000 or more at some universities. “Mixed field” and “society and culture” courses were the cheapest to teach, averaging A$9,600 and A$14,200 respectively.

Postgraduate education proved A$4,900 more expensive to deliver than bachelor’s courses, on average, with veterinary courses again the most expensive at A$82,600. Communications and media studies courses were the cheapest at A$16,900.

Dr Bentley said that for universities analysing how many enrolments they could afford, average course costs mattered less than the “marginal” costs of accepting additional students.

The report, completed in January, has been released quietly by the education department – in contrast to the 2016 version, which received a high-profile launch from then education minister Simon Birmingham.

The earlier report’s finding that teaching costs had risen modestly was used by Mr Birmingham to justify proposed funding cuts. The new report suggests that costs rose much more steeply between 2015 and 2017 than in previous years.

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