17 April 2015


The controversial NSW Independent Commission Against Commission has released a 36 page paper on Learning the hard way: managing corruption risks associated with international students at universities in NSW.

ICAC states that the paper seeks
to examine the broader factors at play that are contributing to the challenges currently being faced by universities in NSW. 
These factors include: „
  • the competitive nature of the international student industry „ 
  • the capabilities of the universities to engage in such a business „ 
  • market strategies adopted by universities „ 
  • management of intermediaries „ 
  • internal intertwining of business development and compliance functions. 
ICAC also seeks "to share the changes that various universities have adopted that go some way to ameliorating the situation",  including strategies for
  • reducing credential fraud 
  • raising English-language literacy scores 
  • managing the tension between the compliance and business development functions within universities. 
The paper states
Chapter 1 sets out the highly competitive nature of the international tertiary education industry and how that environment has driven universities in NSW to accept students with lower academic capabilities in order to meet revenue needs. Some students consequently struggle to pass because of the gap that has developed between student capabilities and university academic demands. This has become conducive to corruption, and can lead to cheating, inducements to academics, academic exploitation of struggling students, and internal pressures to turn a blind eye to academic misconduct or to allow students to pass who would otherwise fail. 
Chapter 2 examines the challenges for universities in NSW in developing effective market strategies. The internal operational arrangements of those universities – as loosely coupled organisations – have translated into a somewhat ad hoc approach to market choice. Individual academics have tied universities in NSW to markets based on personal contacts and interests. Even after international student offices were established, market strategies continued to focus on revenue with cost and risk peripheral considerations. The result was often that the universities were operating in a large number of often corrupt markets, seeking revenue without consideration of the cost of managing students with low capabilities. The risks associated with document fraud and false English-language proficiency test results are often seen as something that can be resolved during admission screening. 
The Commission found that some universities had benefitted from including explicit cost and risk considerations in market decisions by: 
  • restricting the ability of academics to enter into agreements on behalf of the university 
  • understanding the full-cost profile of international students, particularly the ongoing and significant cost of managing the gap between student capability and academic demands 
  • assessing risk in markets and using this assessment to develop organisational responses tailored to the specific market risks 
  • leveraging university strengths, where possible, to develop niche international operations capable of attracting higher-capability students.
Chapter 3 addresses the challenges of operating in numerous markets through large numbers of intermediaries. Rather than concentrating on dominance in a small number of markets, universities in NSW frequently spread themselves across many markets. The distribution costs and development of capabilities in so many different markets mean intermediaries are the only feasible option. In some cases, local intermediaries have significant market power, with the option to divert students to other universities if there are onerous demands placed on them by any one university. 
Universities in NSW are, therefore, limited in their ability to enforce contracts, demand audit access or demand tighter checking of students. At the other extreme, some universities have hundreds of small education agents spread across many markets, making the logistics of oversight difficult. 
The risk of students with false credentials being put forward by the agents is high, with all universities in NSW experiencing misconduct by some of their agents. Some universities in NSW have taken steps to improve the situation by: „ 
  • altering incentive structures applied to agents to better encourage the provision of quality students „ 
  • reducing the number of overseas agents „ 
  • increasing due diligence on and monitoring of agents, particularly focusing on the use of fine-grained data analysis of student issues „ 
  • forming closer relationships with trusted agents „ 
  • developing partnerships with overseas institutions as an alternative to agents. 
Chapter 4 deals with the internal tension between a university’s academic standards compliance function and its business development function. 
Good business practices dictate that, where business development activities are likely to cause direct violation of the rules and goals of an organisation, the compliance function is separated from the business development function. Further, where the business development function is heavily incentivised, the compliance function is commensurately strengthened. 
This has generally not been the case in universities in NSW. Compliance and business development have been intertwined with targets and incentives tied to the development role without matching improvements in the compliance role. The effect is to encourage the admission of less academically capable students, to turn a blind eye to their academic misconduct, and to find ways to pass these students. 
While few universities in NSW have addressed the broader issue of separation of compliance and business development, some actions that have been taken include: „ 
  • integrating the international student office’s information technology (IT) systems with the university’s systems to ensure that the international student office can be held accountable for the quality of students entering the university „ 
  • matching the strength of the university’s academic standards compliance system with business development risks (for example, appointing an independent representative from another university to sit on academic standard committees or auditing of course standards by well-regarded Australian and overseas academics) „ 
  • separating the compliance function from the business development function, as feasible (for example, moving admission out of international student offices that are responsible for marketing and recruitment, and limiting the impact of international student numbers on faculty budgets).
ICAC notes that
Universities in NSW find themselves facing what is referred to as a “wicked problem”. 
There is no way around the fact that some of the international students the universities can attract will struggle to meet university standards; or that the universities are reliant on their revenue but limited in how far they can lower standards. There is no simple solution that will effectively eliminate the gap between the capabilities of the students and the academic demands of the universities, and no easy way to eliminate the corruption pressures created by the gap. 
According to information provided to the Commission, universities in NSW are fully aware that the international student industry is fraught. For almost 30 years, they have experienced problems such as fake qualifications, questionable agent behaviour, visa-driven enrolments, nepotism in offshore campuses, loss of intellectual property to partners, unwitting involvement in offshore bribery, cheating and plagiarism, academics exploiting students and students offering inducements to staff. These problems have been costly and, when made public, embarrassing. 
While the central tension between student capability and academic demands cannot be completely resolved, there are actions that can be taken to reduce the gap and the pressures created by it. For example, since universities in Australia began recruiting full-fee paying international students, some have been: „

  • learning from the risks created and have dealt with them by reducing the number of agents to more manageable levels „

  • shifting to partnerships where there are mutual interests „ 

  • increasing due diligence of intermediaries „ 

  • changingagent incentives to align motivations with university interests „ 

  • changing internal business incentive arrangements to separate compliance and revenue generation 

  • „ centralising the recruitment activities of the universities to improve the way this function is overseen.