23rd April 2014

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Financial health of HE under the new system Matt Sisson

An article in this week’s Times Higher analyses the financial health of the sector following the first full year of £9,000 tuition fees. It looks at fee income, surpluses, capital investment, pay awards, and borrowing, and features comment from current BUFDG Chair Bob Rabone, as well as previous Chair Andrew McConnell.

The article places the small decrease in overall surpluses (down from 4.5% of income to 3.7%) in the context of student number volatility, as well as general uncertainty over the future of the current fees system. Whilst post-92 institutions appear to enjoy marginally higher surpluses on average, all institutions are facing the challenge of self-funding capital expenditure now government funding has significantly reduced, as well as ‘building a war-chest’ in uncertain times, whilst balancing wage pressures.

An example of the kinds of challenges HEI managers face is explained by Bob Rabone, who according to the THE outlined that “the fall in surpluses may have something to do with increased volatility in student numbers under the new system. A decrease in numbers will hit income before a university has a chance to reduce its costs in line with the decline. But a rise in home undergraduate numbers is likely to produce only a marginal financial benefit – given that any increase in student numbers requires more spending on teaching or accommodation”.

The article also outlines the pressures from plans for the sector to increase capital expenditure from £2.6bn to £3.9bn, funded by a mixture of cash reserves and borrowing. HEFCE projections show that “net liquidity is expected to fall by £1,173 million to £6,224 million by 31 July 2014, below the projected sector borrowing level”. Andrew McConnell highlights how this is new territory for the sector: “Cash reserves are falling, borrowing is increasing” he says, “that is the only way you can fill the gap if you’re not generating enough cash. In the time I’ve been in the sector, I think the sector has always had more cash than debt.”

Finally, picking up on last week’s newsletter from the International Unit which had mixed news on international student numbers, Bob Rabone commented that overseas income is “often portrayed as being icing [on the cake], or some sort of cherry – and it is not. It is fundamental to institutions.” 

Click to read the THE article in full. 

What procurement documentation do you need? Matt Sisson

Following the results and feedback from the institutions who have now completed Procurement Maturity Assessments, the PMA team and HEPA are working together to build a suite of model documents, advice and guidance to support all institutions in the development of best practice. These will also be part of the Procurement Journey where relevant.

We have begun the project, focussing initially on how to create an exceptional Procurement Strategy, and a model document will be provided. We are also looking at Sustainability/CSR best practice with suggested clauses for documentation. Details will be available in the resource section of HEPA within the next two weeks.

Our next project is up to you!  What would you like us to produce?  As a reminder, the nine attributes, measured in the PMA are:

  • Governance
  • Organisational
  • Sustainability /Corporate and Social Responsibility
  • Supplier Strategy and Policy
  • Reporting and KPIs
  • IS/P2P
  • Resources and Skills
  • Category Management
  • Collaboration

We can generate whatever documentation you feel will help you develop and measure your practises in the above areas.  Please email Judith Russell with your ideas and suggestions. We will listen and create!

Benchmarking against yourself? Matt Sisson

Why do we ‘benchmark’ against other institutions? That’s the question posed by Stephen Yorkstone, Senior Consultant for Sustainable Futures at Edinburgh Napier University, writing in the Times Higher this week. He admits that there are some perfectly good reasons for doing so, but he also wonders whether HEIs could gain as much from looking harder at themselves, as well as organisations in completely different fields. After all, “as any school child will tell you, trying too hard to copy what the cool kids are doing only ends in tears”.

Of ‘benchmarking against ourselves’, he explains that “We understand our own institutions uniquely well. It is tough to take a long, hard look in the mirror, for doing so may reveal a few unexpected warts – but it can also induce smiles of recognition as people realise that they have already done some pretty amazing work in the past. And that means they can do some pretty amazing work again.” Alternatively, benchmarking against wildly different organisations can be useful for gaining unique insights. He suggests improvements in class timetabling might be understood through comparing it to turnover of aircraft at terminal gates, and lists an example where colleagues from his Estates team redesigned handling helpdesk calls following a visit to a military base. He then advocates a risk-taking approach:

“Having obtained such insights, institutions need the confidence to stand out from the crowd and to implement the new ideas. This is easy to say but much harder to do, especially in an era of performance measures and league tables. But surely it is misguided to spend an excess of effort on examining how competitors have done on such measures or to try to copy blindly those to whose positions we aspire. Going out on a limb is likely to be the best way to maximise our own performance, and the example we set will also enrich the sector as a whole.”

Other bits. Dan Wake

Jisc is seeking additional members for its Audit Committee, and is particularly keen to hear from Finance Directors. If you are interested in joining the Committee, please contact Joanna Potter, Jisc Governance Manager, for further information.

The Guardian suggests that the Competition and Markets Authority is to launch an enquiry about whether universities “could be breaking consumer protection law by changing degree courses once their students are already enrolled and their fees banked.” 

HEFCE has found that the reduction in the number of students studying part-time higher education since 2009 is “overwhelmingly concentrated in undergraduate qualifications other than first degrees.” 

Barnett Waddingham has produced a university update that includes a pensions newsletter, the results of its annual University Accounting Survey, and its latest report on “Current Issues in Pensions Financial Reporting”.

Finally, the BUFDG Job of the Week is Tax Manager at the University of Edinburgh. More vacancies can be found on the BUFDG jobs page.