Developing a sustainable and equitable solution to the funding pressures facing universities will require changes to the financing and governance frameworks, according to a report released today by the Business Council of Australia.

Releasing the report today, the Chief Executive of the BCA, Ms Katie Lahey, said while the Council recognised the higher education sector was currently funded above the OECD average, universities were facing funding pressures as they sought to deliver excellent and relevant programs.

The report, Developing a Framework for the Financing and Governance of Australian Universities: A Response to the Ministerial Discussion Papers, calls for the development of five fundamental principles to underpin the financing framework for the higher education system so:

• that it is sustainable and reflects the private and public benefits delivered
• it provide incentives to institutions for excellence
• there is reliability and predictability of base funding
• it promotes flexibility and choice
• the system provides for access based on ability, not the ability to pay upfront.

“This is fundamentally important,” Ms Lahey said. “The most critical issue facing the higher education system is the need to strike a balance between institutional financial viability and equity of access.”

The report says the system needs to strike an optimal balance between base funding from the Commonwealth, fees paid by students and income from a range of other revenue sources, along with targeted funds for community service obligations and regional needs, changes to HECS, and an increase in funding to increase access for low Socio-economic and rural students.

“In regards to other sources of revenue, policy makers should perhaps seek only to ensure that the financing framework does not provide obstacles or disincentives … for institutions to pursue other revenue streams.

“The terms on which base funding and fees are regulated should leave institutions with maximum opportunity and incentive to pursue a diversity of other sources, while at the same protecting access based on ability, not ability to pay.”

The report says the changing nature of the financial environment for universities, and their increasing involvement in commercial activities, has significant implications for how universities approach governance and risk management.

“If the complex issues facing many Australian universities are to be successfully addressed, strong, independent and transparent governance processes within each university are needed, it says.

It says universities should have best practice governance arrangements – against which they report – that ensure the core objectives of universities are clearly defined in their governing Acts and the role and responsibilities of governing bodies are clearly articulated.

“The Business Council strongly endorses the view … that the members of university governing bodies should recognise that their overriding responsibility is to further the objectives of the university rather than to advance particular sectional interests.

“Unless the goals of a university’s governing body are aligned with the core objectives of the university, the governance system will act as a hindrance, rather than a spur, towards the achievement of the objectives of the university.”

The report suggests that given the legislative framework of universities, there is a significant opportunity to continue to improve governance structures, reduce red tape and address potential dual reporting requirements through the establishment of national protocols agreed by Federal and State Ministers of Education.

Developing a Framework for the Financing and Governance of Australian Universities: A Response to the Ministerial Discussion Papers