Chairs of Accounting and Finance Forum (Australia and New Zealand)

Chairs of Accounting and Finance Forum (Australia and New Zealand) Chairperson: Professor Garry Carnegie, RMIT University

25 July 2016 Higher Education Reform Feedback Higher Education Group GPO Box 9880 CANBERRA ACT 2601 Submissions by email to: [email protected]

Dear Madam/Sir, Driving Innovation, Fairness and Excellence in Australian Higher Education I am writing on behalf of the Chairs of Accounting and Finance Forum (CAFF) in the capacity as the elected Chairperson. CAAF is a dynamic platform for chairs and heads of accounting and finance in Australia and New Zealand to develop means and new ideas in addressing challenges of the overall objectives of academic endeavours within contemporary higher education systems. CAFF meets every six months and its meetings are conducted with the support of Chartered Accountants Australia and New Zealand (CA ANZ) and CPA Australia. At the last two meetings of CAFF held on 9 December 2015 at CA ANZ, Erskine St, Sydney and on the Gold Coast, Broadbeach on 1 July 2016 preceding the Accounting and Finance Association of Australia and New Zealand (AFAANZ) Annual Conference, there was a considerable discussion about the quality and funding of education programs delivered by Accounting and Finance Schools/Departments in Australian and New Zealand universities. A key issue for chairs and heads, as discussed in these recent CAFF meetings, relates to the widely perceived cross-subsidisation of other disciplines/facilities within Australian universities by Accounting and Finance programs/Departments and Schools. More specifically, this cross-subsidisation is effectively provided by students, and especially international students, who increasingly are having a modest at best and often decreasing proportion of their student fees specifically dedicated to their own education in Accounting and Finance. This has resulted in calls for what is regarded as an overdue reinvestment in Accounting and Finance education and research in Australia. The opportunity to comment in this way is timely, especially in view of a recent report, published in the Australian Financial Review (10 February 2016) based on arguments put by CA ANZ (see Attachment A). Also we wish to draw your attention to Attachment B: Philomena Leung, (2014), ‘International students in Australia: An overview of trends and issues for accounting schools’, in Guthrie, J., Evans, E. and Burritt, R., (eds.), Academic Leadership Series CA ANZ, Vol. 5, pp. 51-66. In her analysis Professor Leung highlights the importance and number of international accounting students to Australian university income. It should be recognised that international accounting students typically pay high fees for their education and that Accounting Departments/Schools are widely acknowledged to be ‘cash cows’ which contribute to funding other disciplines’ activities, particularly research. The paper, Driving Innovation, Fairness and Excellence in Australian Higher Education (May 2016), which sets out options for reform that support the Government’s vision of a stronger, more sustainable system of higher education is an important piece of work.

The paper establishes aspirational criteria for an effective education system, including (p. 8):

1 1. provides genuine choice of higher education opportunities – prospective students’ decisions must be supported by objective, reliable information about the requirements, costs, quality and potential employment outcomes of different study options 2. offers genuine pathways – we need to maintain standards for admission while ensuring that disadvantaged learners are supported to achieve their goals 3. ensures equity of access regardless of personal or economic circumstances and reduces barriers for under-represented groups 4. has incentives and flexibility for institutions to excel and innovate to deliver world class education 5. guarantees quality via effective regulation, non-distortionary funding models and transparency measures that deliver institutional accountability 6. is affordable, and provides a return on investment from both an individual and a national perspective.

The following observations are made on several of these. Genuine Choice and Equity in a Competitive Educational Environment The provision of genuine pathways and support for disadvantaged learners promotes fairness and equity. The discussion of this issue is understandably focused on Australia. However, universities operate in a global market and international fee revenue is important at the institutional and national level. International students may also face some disadvantages, particularly in the development of English language communication skills. Universities need resources to support the international students who, as widely perceived, effectively subsidise Australian higher education. Moreover, supporting the effective integration of international students would enhance the learning environment for all students, in particular in courses where international students comprise a significant proportion of the student cohort. Investment in resources targeted at supporting international students is critical to the delivery of world class education and enhancing and maintaining the reputation of the Australian higher education sector. Funding models can distort costs between courses and have implications for education quality. Both these factors detract from the capacity to offer genuine choices in higher education. Universities contribute to the driving innovation both through research and teaching. While providing subsidies for courses offered by other education providers expands choice at the individual level, it results in increased competition from a sub-sector that does not contribute to innovation through research. It is not clear how subsidising entities that limit their activities to teaching is an effective means of driving innovation in Australia. Driving Innovation, Fairness and Excellence in Australian Higher Education refers to the issue of inconsistency in the allocation of subsidised places across postgraduate courses between institutions. Concern is raised that the inconsistency in availability of subsidised places impedes equitable access and choice, and reduces the opportunity for fair competition between courses. Competition between courses in not limited to price differentiation. Differences in resourcing, which influence the capacity of universities to provide high quality

2 education, can also impede equitable access and choice, and reduces the opportunity for fair competition. Cross-subsidisation is practised in most Australian Universities. Business Schools, in particular, accounting and finance programs, continue to subsidise the investment in research and teaching infrastructure in other discipline areas. This can take various forms, such as the provision of infrastructure and other resources to some areas, and imposing levies on others. While the importance of investing in science, technology, engineering and mathematics is acknowledged, the reliance on fee-based income from Business Schools, to fund such investment is both unsustainable and inconsistent with the stated criteria pertaining to both fairness and education quality. Some courses, including those in accounting and finance, are placed at a competitive disadvantage, both in terms of lower levels of fee subsidies resulting from different bands, and lower resource allocation, both directly and indirectly through the imposition of higher levies or other contributions to funding other areas and activities of the university. Charging higher prices for underfunded courses does not provide value for money for students taking the traditional ‘cash cow’ courses; nor is it a sustainable model for the provision of internationally competitive, world class quality education into the future. More Information for Students and Transparency The provision of reliable information to prospective students is a worthy objective. However, prospective students, and their advisors, need to be made aware of the inherent uncertainty of forward-looking information, such as future employment outcomes. The reliability of information about courses and quality is subject to the capacity of universities to commit to plans. More certainty around funding arrangements would facilitate better planning and facilitate the provision of more reliable information to prospective local and international students. Providing more information does not necessarily guarantee greater transparency. There are many factors that contribute to metrics such as graduate employment outcomes and salaries, student cohort, location, economic factors and the propensity for graduates to continue their studies. Comparisons between courses and between institutions that fail to control for such factors can be misleading. For example, a university that provides more opportunities for students from disadvantaged backgrounds may report lower average graduate salaries notwithstanding a higher level of achievement of the objectives of fairness in Australian higher education. Comparing what such graduates do or earn after completing their degrees is a blunt instrument for measuring the personal and academic development and transformation achieved by students throughout and as a result of their completion of a course. Driving Innovation, Fairness and Excellence in Australian Higher Education further suggests that the indicators or ‘transparency measures’ should also be used as accountability factors. An importance aspect to accountability is its relationship to power, or capacity to influence. It is reasonable to hold a person, or organisation, accountable for something over which they hold a duty, for an outcome for which they have capacity to achieve or, at the very least, to influence. This link becomes somewhat tenuous when applied to measures such as graduate employment or salaries. While Universities may endeavour to enhance students’ graduate outcomes, economic factors such as shifts in unemployment levels and differences in unemployment levels between regions are beyond the control of universities. Attempts to use such simplistic measures to evaluate and compare education quality potentially places at a disadvantage those universities located in regional areas, and those which are more active in pursuing equity objectives.

3 Driving Innovation, Fairness and Excellence in Australian Higher Education emphasises enhancing opportunities for the development of knowledge and skills in the fields of science, technology, engineering and mathematics. The advantages of a strong higher education system include better access to professional services. The realisation of this benefit is contingent upon appropriate resourcing and promotion of high quality education in areas of professional services, such as accounting and finance programs. Cost of Delivery of Higher Education Driving Innovation, Fairness and Excellence in Australian Higher Education notes that the Government is proposing to work with Australian Universities and the higher education sector to investigate the relative cost of delivery of higher education. In this undertaking it is important to appreciate:  How costs are defined (total costs of a course, incremental costs, and so on)

 How costs are measured (inclusions, exclusion, measurement of property values, depreciation, etc.)

 The effect of differences in organisation structure on the measurement of costs at sub- unit levels, course levels

 The effects of differences in course structures on delivery costs (such as the extent of common content across courses)

 Assumptions made in measuring or estimating costs (such as enrolment numbers)

 The treatment of central costs, such as the cost of university-wide functions

 Differences in financing and investment methods, such as whether buildings are owned or leased

 Potential differences in imputed costs between organisations, such as implicit rental on owned buildings, and finance charges. As a forum of chairs and heads of Accounting and Finance Schools and departments we are actively willing to work closely with the Australian government to shape the reforms that support the Government’s vision of an innovative, fair and truly excellent Australian Higher Education system, which is adequately geared to deliver high quality Accounting and Finance courses to local and international students. Sincerely,

Professor Garry Carnegie Chairperson, Chairs of Accounting and Finance Forum Email: [email protected]

Attachments

4 Attachment A: ‘Lee White says Business school rankings drop due to siphoning’, Australian Financial Review, 10 February 2016. Attachment B: Philomena Leung, (2014), “‘International students in Australia: An overview of trends and issues for accounting schools’, in Guthrie, J., Evans, E. and Burritt, R., (eds.) Academic Leadership Series CA ANZ, Vol. 5, pp. 51-66.