Understanding Finance


How Universities Work

Universities are complex and unique organisations. They teach students of all ages, in almost every subject you can think of, on green campuses, in bustling cities, and at a distance, to learners in their own homes. They expand human knowledge by undertaking research in a mind-boggling range of areas. They are key anchors in their local communities, and regional hubs of economic activity. They are major employers, magnets for national and international collaboration, and an important pillar of civil society. No other kind of organisation comes close to the variety and scale of universities’ educational, entrepreneurial, charitable, and social activity.

Having a unique place in the world requires an unusual business model, that facilitates a wide range of operations. It also requires a unique way of accounting for how universities generate and spend their income and create value for all their stakeholders. It is a topic that is little- or often mis-understood beyond the walls of university committee meeting rooms. These pages contain a range of resources that explain how universities operate and create value, and how their finance teams account for it all. If you have any feedback or comments, please get in touch with Matt


A guide to Understanding University Finance


Over the years BUFDG has worked to improve understanding of university business models and financial accounting. In 2019 we launched an accessible new guide, Understanding University Finance, to be a useful companion for the broad church of university stakeholders and brave Annual Report explorers. In its first year, the guide has been downloaded over 5,000 times. 

The guide builds on the 2011 publication An Insider’s Guide to Finance and Accounting in Higher Education that was published jointly by number of sector bodies including BUFDG. It will be updated in January 2021 to reflect, among other things, updates to the terminology used in the 2020 financial statements.

Download the Understanding University Finance guide


A guide to Accounting for Pensions in HE


We are delighted to announce that the much anticipated BUFDG Guide to Accounting for Pensions in Higher Education was published in September 2020.  Miles Hedges, who retired as Finance Director at The Open University in 2016, has written the guide to help explain what to many is a mystery. It is written for university governors, non-accounting staff, students, staff representatives and student representatives as well as for Finance Directors and colleagues in finance teams tasked with producing financial statements and accompanying notes.

The Guide is not a 30-minute quick-read to furnish the reader with full understanding of a topic that takes accountants many hours to learn. Rather, it is designed to help readers who start with different levels of understanding to navigate the numbers and extensive notes to the accounts to appreciate why pension schemes can cause significant impacts on universities’ reported results and reserves. The technical content of the chapters increases and we don’t expect all readers will read to the very last chapter. Each chapter can be the end, depending on the reader’s appetite and requirement for knowledge. To the enthusiastic and determined reader, however, perseverance to the end, several times, will be rewarded by a new level of understanding.

This Guide is not a commentary on the rights or wrongs of pension schemes’ funding strategies or their valuation methods and is written with the aim of improving understanding of financial statements and universities’ financial positions. We also hope that it will equip readers with enough knowledge to ask more questions. Please feel free to share and circulate the guide freely. Feedback is very welcome.


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