16 May 2016 
Matt Sisson, Projects and Membership Manager
HEFCE has decided to collect EBITDA and adjusted operating cash flow information as defined by BUFDG in the July forecasts (template to be released this week) to help them complete modelling to determine a new approach to financial commitments, which they expect to introduce from 1 August 2017.
BUFDG in consultation with Funding Councils developed the alternative Adjusted Net Operating Cashflow metric as a better indicator to assist with determining financial commitment thresholds. However, as there is not yet an historical track record of reliable data HEFCE has decided, in consultation with BUFDG Metrics Group, to collect both the Adjusted Net Operating Cash Flow and EBITDA in parallel for the next financial forecast cycle.
To support this, the FRG has updated the HE definition for EBITDA. The changes are minimal, taking into account that FRS3 and FRS17 accounting standards have been withdrawn. The BUFDG Metrics Group concluded that EBITDA is a less useful metric under FRS102, and would require judgemental changes to make it useful. However, FRG thought it useful to update the EBITDA definition to reflect the withdrawal of FRS3 and FRS17 in case some want to continue using it.
HEFCE has confirmed that Higher education institutions’ existing financial commitment thresholds, based on the July 2015 forecasts or any increased threshold agreed by HEFCE since the forecast, will be extended until 31 July 2017 while they undertake the modelling. Any increase in financial commitments due to a change of treatment under the new SORP will be accommodated under a higher threshold if required.
If you have any queries email Andy Beazer or ring him on 0117 931 7223.
