Commercial Activities Guideline

Document Number	000554
Date Approved	2 July 2004
Date Last Amended	10 July 2009

1. Introduction

The University of Newcastle Act 1989 empowers the University to undertake commercial activities that are consistent with the University’s functions and compliant with conditions laid down in the Act.

These Guidelines address the expectations of the Act that the University develop a set of guidelines specifying the processes and procedures to be followed in the conduct of University commercial activities.

These Guidelines should be read in conjunction with other University policies and procedures listed as supporting documentation below, particularly the Delegation of Authority Policy, Business Development Framework (BDF) Policy and BDF Procedure.

2. Policy Scope

These Guidelines apply to “any activity engaged in by or on behalf of the University in the exercise of commercial functions or any other activity comprising the promotion of, establishment of, or participation in any partnership, trust, company or other incorporated body, or joint venture, by or on behalf of the University that is declared by the University to be a University commercial activity” (S21A of the Act).

The operations of the University’s controlled entities are also within the scope of these Guidelines.

These Guidelines are required under the University of Newcastle Act and have the authority of a Council endorsed policy within the University of Newcastle’s policy framework.

3. Policy Intent

This document defines the nature and scope of the commercial activities which the University is required to formally record, monitor and review. It provides clear advice on the principles that must guide the evaluation of commercial activity proposals and the approval and monitoring of commercial activities.

3.1 Objectives

These Guidelines and related documents seek to ensure optimal benefits for the University through:

due diligence in the assessment of commercial activities;
appropriate governance and administration of commercial activities;
proper risk assessment and risk management of commercial activities; and
appropriate monitoring and reporting on commercial activities.

4. Relevant Definitions

In the context of this document:

Act means the University of Newcastle Act 1989;

approval authorities means those officers, committees, panels or boards to whom the Council has delegated authority to approve commercial activities;

associated entity means an entity, including an unincorporated entity such as a partnership, over which the investor has significant influence and that is neither a subsidiary nor an interest in a joint venture (Source: AASB 128);

commercial means of, or pertaining to commerce: i.e the buying or selling of goods and services;

commercial activity means

i. “any activity engaged in by or on behalf of the University in the exercise of commercial functions, or any other activity comprising the promotion of, establishment of, or participation in any partnership, trust, company or other incorporated body, or joint venture, by or on behalf of the University that is declared by the University to be a University commercial activity” as defined under S21A of the Act);

ii. any other activity deemed by Council to be a commercial activity for the purpose of these Guidelines including those that:

benefit the University commercially or allow commercial exploitation by the University;
have the main purpose of profit and involve the exchange of money for goods or services;
entail exposure of the University to risk; and/or
allow managers of the activity a degree of independence in relation to the production or supply of the good/service and the price at which it is provided;

control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities (Source AASB 124);

controlled entity means a company of which the University or Council has control, as defined in the Australian Accounting Standards, through having the capacity to dominate the decision-making, directly or indirectly, in relation to the financial and operational policies of the company, so as to enable the company to operate with the University in pursuing the objectives of the University;

delegate means a person, committee or entity to whom the Council delegates a function under these Guidelines or under the delegations provision under the Act;

joint venture is a contractual arrangement whereby two or more parties undertake an economic activity which is subject to joint control. Joint control exists when two or more venturers (parties) together can control the making of major decisions in relation to the economic activity (Source AASB 131);

proposal means any proposal for the University to participate in a commercial activity;

related party is related to an entity if it controls, is controlled by or is under common control with the entity; has an interest in the entity that gives it significant influence over the entity or has joint control over the entity (Source AASB 124);

risk means the chance of something happening that will have an impact on the achievement of the University's objectives and is measured in terms of consequences and likelihood; in the context of these Guidelines risk includes:

i. financial loss

ii incurring a legal liability;

iii. loss or damage to the reputation of the University;

iv. impairment of the conduct of the University’s principal functions under S6 of the Act;

v. adverse tax or duty consequences to the University;

vi. fraud and/or corruption; and

vii any other type of risk determined by the Council to be a risk for the purposes of these Guidelines;

sponsors/manager/managing unit means those persons responsible for proposing, managing and or controlling the operation of a commercial activity of the University on a day-to-day basis.

5. Policy provisions / principles

In accordance with the Act, the University may, for its benefit, undertake commercial activities in order to: provide services and facilities for staff and students; meet the needs of the community through teaching and research; or generate resources for the promotion of the University’s object and functions.
The University may undertake commercial activities alone or in partnership with others. Commercial activities may be undertaken anywhere within or outside Australia.
Commercial activities may include the commercial exploitation or development of any facility, resource or property owned by the University or of any facility or resource in which the University has a right or interest e.g. intellectual property which the University may wish to commercialise. The University identifies the following as commercial activities:
- acquisition or disposal of real property for commercial purposes;
- commercial leases (other than ‘peppercorn’ rental);
- retail activities;
- sponsorships or strategic commercial partnerships;
- the establishment and operations of all controlled entities;
- the establishment and operations of associated entities, related entities or joint ventures to which the University is a party in the exercise of a commercial function; and
- any other Memorandum of Understanding, Agreement, Licence Agreement, or other commercial agreement entered into where revenue or contribution by the University will exceed an amount of $100,000 per annum in any one year.
The assessment of whether proposals for commercial activities potentially exceed the $100,000 threshold will be based on the full cost if the proposal including cash or in-kind resources. The proposal will be assessed in its entirety and must not be separated into component parts to circumvent the threshold figure.
The above list of commercial activities is not exclusive as and other activities will be assessed as they arise according to the definitions and criteria set out in these Guidelines.

vi. Activities which are generally excluded from the provisions of these Guidelines are identified in Appendix 1.

5.1 Preliminary Evaluation of a Proposal or Activity

i. Proposals for commercial activities must be evaluated in terms of:

the overall benefit to the University taking into account the opportunity costs, impact on University activities and the non-financial benefits;
exposure to risk (including exposure to liability or the risk of corruption) and appropriate risk management procedures;
financial accounting requirements;
legal due diligence requirements (including due diligence of each proposal participant);
the effect of ownership and the value and protection of intangible property including intellectual property and resources;
insurance requirements and coverage;
the source and level of funding or resources required;
compliance with competitive neutrality principles (in accordance with NSW Treasury publications such as NSW Government Policy Statement on the Application of Competitive Neutrality and relevant University policies);
market analysis;
projected cash flow; and
expected rates of return.

ii. Preliminary evaluation of the proposal will be conducted by the sponsor in conjunction with other business units such as Risk and Commercial Services, Legal Services and Financial Services.

iii. In assessing insurance requirements, the University will determine the appropriate level of coverage based on its appetite for risk. However, where the level of uninsured risk exceeds $100,000 the Council will be advised through the Audit and Risk Management Committee.

5.2 Conditional Approval

i. Upon completion of the preliminary evaluation of the proposal, conditional approval of a commercial activity will be granted by the relevant Deputy Vice-Chancellor (depending upon the nature of the commercial activity) or the Vice-Chancellor. The Deputy Vice-Chancellor or Vice-Chancellor may seek the advice of Executive Committee prior to granting conditional approval.

ii. A delegate can not grant conditional approval if they are also the sponsor or manager of the activity.

iii. If conditional approval for a commercial activity is granted by a Deputy Vice-Chancellor, this must be reported to the Vice-Chancellor. The Vice-Chancellor will be responsible for reporting to the Council in a timely manner on the evaluation process undertaken for those proposals granted conditional approval.

iv. Conditional approval will be granted for a period of up to 12 months and will lapse if the proposed commercial activity does not progress to final evaluation within this period.

5.3 Final Evaluation of a Proposal or Activity

i. Final approval of a proposed commercial activity will be contingent on the documentation of additional appropriate governance structures and supporting procedures. These will conform to the requirements detailed in the other relevant University policies and procedures but, where relevant, must include:

recommendations regarding corporate governance structures (such as the appointment of directors and managers, agreements between shareholders, partners or participants);
selection of appropriate legal, taxation or accounting structures;
preparation of transaction documents (including warranties, indemnities and limitations of liability);
establishment of accounting and auditing procedures and reporting mechanisms to the Council;
identification of appropriate exit strategies including termination and asset distribution to protect the interests of the University;
evidence of appropriate risk assessment (including obtaining of all necessary insurance);
confirmation of University funding and/or external funding if required;
obtaining of independent legal and/or accounting advice if the investment by the University exceeds $1,000,000 or if the Council or its delegate determines that the risks inherent in the commercial activity warrant such advice;
documentation relating to any registered conflict of interest for the commercial activity; and
certification that the governance provisions and documentation for the proposal agreement satisfy the requirements set out here.

5.4 Final Approval

i. Final approval for commercial activities will be based on the review of documentation gathered in both the preliminary and final stages of evaluation.

ii. Authority for the final approval of commercial activities rests with the delegate identified in the University’s Delegations of Authority Policy and associated Delegations Schedules.

iii. A delegate can not grant final approval if they are also the sponsor or manager of the activity.

iv. Not withstanding the provisions of the Delegations of Authority Policy and associated Delegations Schedules, any proposed commercial activity which involves the receipt or expenditure by the University of an amount in excess of $1,000,000 will require approval by the Council.

v. Before granting final approval for a proposal, the appropriate approval authority will review the findings and recommendations of the evaluation process and the documentation prepared in accordance with Clause 5.3. If the proposal requires the Council’s approval, the Finance and Capital Development Committee will conduct this review.

vi. When a commercial activity is approved by a delegated authority, the Finance and Capital Development Committee will be advised of the approved commercial activity for reporting to the Council.

vii. When the Council approves, or notes an already approved, commercial activity the activity will be included in the University’s Commercial Activities Register.

5.5         Register of Commercial Activities

i.          In accordance with the Act (S21C), a Commercial Activities Register will be established and maintained for the University and its controlled entities.

ii.                The Register shall be designated and dealt with as “commercial in confidence”. It shall be directly accessible by members of the Council.

iii.               The Council or its delegate may authorise the University Secretary to alter any details included in the Register if:

the University Secretary considers that the details are inaccurate or incomplete; or
there is a change in a proposal or in a commercial activity which necessitates a change in the details in the register.

iv.              The University’s Commercial Activities Register will be reviewed annually. For those commercial activities listed on the register, the sponsor of each commercial activity will be responsible for initiating a full review at least once every three years in accordance with the evaluation processes described in these Guidelines. Outcomes will be recorded in the Register including justification for continued activity and/or any significant changes.

v.                Changes to and outcomes of the review of the Commercial Activities Register will be reported to the Council.

vi.              Responsibility for the maintenance of the Commercial Activities Register rests with the University Secretary.

5.6 Protection against Conflict of Interest

i. To ensure the probity and integrity of decisions in relation to commercial activities, provisions of the University’s policies and procedures relating to conflict of interest must be adhered to such that:

members of the Council or its committees,
senior officers of the University, and
sponsors, managers or approvers of commercial activities

will register any interest in any company, institution or other entity which is or is proposed to be involved in, or would benefit from, any commercial activity of the University.

ii. Those registered as having an interest in a particular commercial activity:

may not vote in respect of the commercial activity or proposal; and
may not participate in any discussion by the Council or the relevant committee about the commercial activity or proposal.

iii. The register of interests will be open to inspection by any member of the Council, the Auditor-General of NSW and any representative of the NSW Minister or NSW Treasurer.

iv. The University Secretary will be responsible for maintaining the register of interests and reporting annually to the Council through the Audit and Risk Management Committee.

5.7 Prevention of Corruption, Fraud, Maladministration and Waste

i. Commercial activities must be managed in a way that complies with the University’s obligations as a public authority, and to minimise the risk of corruption, fraud, maladministration or waste. Staff involved in the activity must adhere to the Code of Conduct and to all policies of the University including those relating to the management of the University’s finances and resources.

5.8 Delegated Authority

i.                  The Council may delegate by resolution any or all its functions in relation to the commercial activities of the University (other than this power to delegate) to any member of the Council, a committee of the Council, or any authority or officer of the University, or any other person or body prescribed by the University’s by-laws.

ii.                If the Council delegates functions in relation to commercial activities it must ensure that the person or people to whom the functions are delegated, have the appropriate commercial experience or have access to advice from an appropriately qualified person.

iii.               The Council may rely on the advice of the Vice-Chancellor or other authorised delegates in meeting the compliance requirements set out in these Guidelines.

5.9       Controlled Entities

i.                Commercial activities conducted independently by controlled entities must be recorded in the University’s Commercial Activities Register.

ii.                The controlled entity will report annually to Council on the nature and extent of their commercial activities as part of the schedule of reporting requirements associated with the University’s Controlled Entities Governance Framework Policy – through which the Council exercises its responsibility for approval, monitoring and oversight of the controlled entities.

iii.                Controlled entities will, nevertheless, immediately notify the University of Newcastle of any new commercial activities or any changes to existing commercial activities, where:

it might reasonably be expected that the activity will be conducted for the substantial purpose of generating a commercial benefit for the University; and/or
might potentially expose the University to a risk of financial liability.

iv. The boards of controlled entities will be responsible for ensuring that evaluation, risk management and accountability processes for commercial activities are followed in accordance with the requirements of the Act and these Guidelines.

v. Nothing in these Guidelines derogates the responsibilities that directors on boards of controlled entities have under the Corporations Act.

6. Essential Supporting Documents

University of Newcastle Act 1989 - Other 000369

Business Development Framework Policy (under development)

Business Development Framework Procedure (under development)

Commercial Activities Register

Delegation of Authority Policy

7. Related Documents

Code of Conduct

Conflicts of Interest Policy - 000934

Controlled Entities Governance Framework Policy - 000863

Corporations Act 2000

Fraud and Corruption Prevention Policy - 000472

Intellectual Property Policy - 000831

Paid Outside Work Policy - 000835

Schedule of Controlled Entity Reporting Requirements - 000903

Strategic Plan, Building Distinction 2007-2011

TENDERS (Contracts valued at or over $100,000) Policy - 000776

Appendix 1 – Activities generally not considered to be commercial in nature

The following activities generally will not constitute a commercial activity of the University but may still be subject to evaluation, risk and approval processes prescribed elsewhere. It is an indicative rather than exhaustive list.

i. the acquisition of services, facilities, equipment or other assets by or on behalf of the University used predominantly for the provision of scholarship, research and teaching;

ii. agency agreements undertaken in the course of providing teaching and learning services;

iii. third party (teaching related) commercial contracts relating to delivery of the University’s core functions of teaching and learning;

iv. consultancy arrangements where staff are providing consultancy services as covered by the University’s Paid Outside Work Policy;

v. research activities that do not involve the commercial exploitation of University intellectual property;

vi. an investment activity permitted by Schedule 2 of the Act;

vii. the sale or provision of services, goods, facilities or equipment to academic or administrative units within the University;

viii. University purchases, sales, hiring, leasing, licensing, provision of services and other routine operational activities as provided for in University policies and procedures and University delegations, when these are of a minor nature and present no risk to the University;

ix. charitable fundraising or sponsorship activities conducted by or on behalf of the University;

x. an activity that is funded solely under the Higher Education Funding Act or Commonwealth Government research funding programs (excluding the provision of HECS funded places for students under agreement with a party other than the Commonwealth Government);

xi. infrastructure services (e.g. cleaning; IT; advertising/marketing)

xii. services on a cost-recovery basis (e.g. gown hire; sale of printed materials).

xiii. Health Services (including clinical);

xiv. cooperative research projects;

xv. any activity involving the management, maintenance, restoration or improvement of University lands, buildings or other assets in accordance with a capital management plan approved by the Council; or

xvi. activities which are clearly not commercial and which involve no significant risk to the University, such as publicly funded higher education teaching and research activities.

Approval Authority	Council
Date Approved	2 July 2004
Date Last Amended	10 July 2009
Policy Sponsor	Vice-Chancellor
Policy Owner	University Secretary
Policy Contact	Director, Corporate Services
Amendment History	6 July 2011 - Updated list of Essential Supporting Documents due to a number of policies being replaced by the new Conflicts of Interest Policy - 000934 (which was approved by Council 18 March 2011) Amended Policy Contact 24 March 2010 Ministerial approval of Guidelines received October 2009. New version of Guidelines approved by Council 10 July 2009 C09-029 Amended: 12 December 2003, 2 July 2004 Approved: Council, 10 May 2002

Policy Library