TAFE Financial Performance In Victoria

Date —

6 July 2020

Industry Sector/s —
Vocational Education & Training

Summary —

The Victorian Auditor General's Office has undertaken a financial review of the twelve public TAFE colleges in Victoria, highlighting that climbing costs and declining revenues contributed to a net deficit of $43.8 million.

Key Issues —

The Auditor General’s review of the twelve public TAFE colleges determined that although the financial and performance reports of the TAFE sector are reliable, they operated at a significant loss in 2019.

The report notes the as a result of the impact of the Covid-19 crisis on revenues and the added pressures of the 'Free TAFE' policy, it's only due to a financial guarantee offered by the Victorian Government that public TAFE colleges will be able to continue to operate sustainably.

Expenses & Revenue ―

Sector revenue decreased by $11.3 million to $1,206 million (less than 1 per cent); however, sector expenditure increased by $100.4 million (8 per cent) to $1 253 million. Collectively, the public TAFE colleges received $418.6 million in contestable funding in 2019, $78.0 million more than in 2018 due to higher student contact hours and higher enrolments than last year, predominantly due to the introduction of the 'Free TAFE' initiative.

The increase in contestable funding has been partially offset by a reduction in operating grants provided by the Victorian Government. Operating grants in 2019 of $191.3 million compare to $276.4 million in 2018, a 31 per cent decrease.

Fee‐for‐service revenue increased by $25.0 million (7 per cent) during 2019. The sector continues to increase its fee‐for‐service revenue from several streams, including government, and international onshore and offshore sources.

The increase in expenditure was mainly from a $76.9 million (11 per cent) increase in employee benefits. More staff were employed across the sector to meet the higher service demand in relation to 'Free TAFE' and fee‐for‐service revenue, combined with the roll-out if the multi-enterprise workplace agreement.

Net Financial Outcome ―

In 2019, the sector generated a net deficit of $43.8 million. This is a significant decline from the prior year, when a surplus of $67.7 million was generated.

Financial Viability ―

The Auditor General's report assessed that at 31 December 2019 the sector was financially sustainable in the short term, based on its historic performance and reserves. However, there were signs this year that revenue and expenditure policies require review and possible reconsideration according to the Auditor General's report.

Decreasing training revenue has the potential to impact the sustainability of TAFEs. In response to this, on 17 April 2020, the Victorian Government announced funding to support TAFEs to ensure business continuity until 30 June 2020. The funding will assist in meeting employee costs, enhancing online training capacity and maintaining the safety of face‐to‐face training where this needs to occur.

In anticipation of the likely financial impacts that will continue to confront TAFEs, and as result of the ongoing uncertainty due to the pandemic, the Victorian Government issued letters of financial support to all 12 TAFEs. Letters of financial support are an undertaking that  the Victorian Government will provide adequate cashflow to TAFEs, should the need arise, until April 2021. These letters have enabled TAFE financial statements to be prepared on a going concern basis. This then enabled us to conclude that the going concern basis of preparation was appropriate.

The deteriorating financial performance of the public TAFE colleges has underpinned the importance of the Macklin Review that is to make recommendations to ensure Victoria has a quality vocational education and training (VET) system ready to equip Victorians with the skills they need for current and future jobs. The Independent Tertiary Education Council Australia (ITECA) is an active participant in the consultations associated with the Macklin Review.

“When it comes to providing high quality skills to Victorians in a cost-effective way, there is no doubt that independent Registered Training Organisations offer taxpayers the better option. ITECA members typically achieve higher completion rates, higher post-study employment rates and do so with greater levels of student satisfaction,” said Troy Williams, ITECA Chief Executive.

ITECA members are supporting not only the Victorian Government, but also the Australian Government, in reviewing the public investment in vocational education and training. ITECA’s policy advocacy is focussed on delivering the best outcomes for taxpayers when measured from the viewpoint of delivering quality outcomes for students by benchmarks including completion rates, post-study employment outcomes satisfaction levels.

Member Engagement —

ITECA’s ability to play a lead role in matters associated with this issue rests on the advice and guidance of individuals serving on the ITECA Victorian State Committee.  ITECA Membership - it's a great time to get involved.

Further Information —

For more information on this issue please send an email to vic@iteca.edu.au or telephone 1300 421 017.  Stay up to date via Twitter @ITECAust or via Facebook at www.facebook.com/ITECAust.

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