BUFDG Digest - 22 May 2024

BUFDG

This week’s Digest comes to you from the University of Birmingham’s lovely Edgbaston campus where BUFDG member CFOs and FDs have gathered for the BUFDG Annual Meeting. It’s great to see so many members getting together, connecting, and catching up with each other, and of course we always love to see our members in person!

We held the BUFDG AGM this morning, and have just published our Annual Report for 2023-24 (covering March 2023 to February 2024) – read the report and watch the highlights video here (in our new web-based format).

FINANCIAL SUSTAINABILITY

The big news from the past couple of weeks was the release of the OfS Brief ‘Navigating financial challenges in higher education’. The brief ‘outlines the main financial risks facing the sector, and shares examples of successful and unsuccessful steps universities and colleges have taken to respond to financial difficulties’. It is based on OfS ‘analysis of the latest annual financial returns from universities and colleges, and the intelligence … gathered in 2023 and 2024 to date. It also explains the OfS’s regulatory role in relation to these issues’. The brief shows that, while there is ‘considerable variation in the financial positions of individual institutions’, overall surplus levels for the sector as a whole fell by almost half between 2021-22 and 2022-23 from £2,290m to £1,284m, and operating cash flow fell from £4,795m to £2,907m. And, in aggregate, HEPs expect to weaken still further in the short term. In 2022-23 93 HEPs reported a deficit, and 108 are forecasting a deficit for 2023-24, though forecasts then show some level of recovery across the sector with 74 forecasting a deficit in 2024-25.

The recovery plans for many HEPs rely on projections to increase student recruitment significantly, but the OfS believes these plans are ‘likely to be unrealistic for many institutions’. OfS believes the sectors ‘ambitions for growth in student numbers are not realistic’ particularly based on UCAS data for 2023-24 which suggest ‘a slight but continuing downward trend in numbers of UK and EU undergraduate applications’ and Home Office data that shows ‘overall numbers of visa applications for higher education are also reducing’. The report gets dramatic coverage in the Guardian with the headline ‘Universities in England risk closure with 40% facing budget deficits’.

Some of our Tuesday ‘fringe meetings’ at the BUFDG Annual Meeting dived into the issues around financial sustainability, enabling similar institutions to discuss the issues relevant to them in detail, whilst providing invaluable support and solidarity to those dealing with the sharp end of this issue. And we’ll be ending the event today (Wednesday) with a plenary session looking at how universities can position themselves to weather the storm, the importance of leadership and culture, and of trust and honesty, and the crucial role of the CFO.

The OfS is holding an event in London on 3 July, ‘Prepare for the road ahead: addressing financial challenges within higher education’, an event for higher education providers, banks, auditors, and other stakeholders to discuss the financial position of English higher education, which will ‘provide a forum to discuss the financial challenges that are facing the higher education landscape in England, and ways in which providers and the sector as a whole can address these’. Find out more and book here.

HEPs’ student recruitment forecasts and the recent dip in numbers, tie in with the release of the report from the Migration Advisory Committee’s rapid review of the Graduate route on 14 May – the Committee’s conclusion was very clear that the ‘Graduate route has broadly achieved, and continues to achieve, the objectives set by this government. We therefore recommend that the route remains in place in its current form’.

The Committee found ‘no evidence of any significant abuse of the Graduate route’ but did express some concern over some of the marketing used by international agents as agents ‘simply do not have the same incentives as universities’. It recommended that, despite the voluntary framework introduced around this, the government should ‘consider whether mandatory requirements would ensure good practice and that universities be required to publish information on their use of agents to improve disclosure’. There’s sector commentary on the report from Wonkhe, UUK, and the Russell Group, but no government response as yet. In advance of the publication of the Committee report, the decline in international student numbers after recent visa changes was reported on in the Guardian and the FT (£).

Despite the Committee clearly coming out in favour of retaining the Graduate route, there are concerns reported in the Times Higher that the government will announce a policy to remove it nevertheless. However, the Times Higher also reports on Education Secretary Gillian Keegan praising the benefits of international students at the Education World Forum.

FUNDING AND SECTOR

If all of the financial sustainability news is getting too much for you, you might like to know that ‘Apparently, people like universities’, according this Wonkhe article reporting on some polling commissioned by the Russell Group. Given government rhetoric of the past couple of years seemingly designed to appeal to voters, this may have you scratching your head, but it’s still nice to hear for a change. And while the poll sample was small (1,064), we can only hope that government takes some notice of this, along with the MAC report above.

SOAS is running a fascinating sounding webinar TODAY at 6pm (Wednesday 22 May) title ‘University Financing: has the model broken and can it be fixed?’ There will be a recording available. Speakers will be Professor Shitij Kapur, VC and President of King's College London, and Professor Nicholas Barr, Professor of Public Economics at LSE. You can find out more and book a place here. ‘Many universities – around one third today – face the reality of restructuring. The closure of departments, the inadequate support for students and the nature of international fees is the result of a lack of financial stability… this next SOAS Vice-Chancellor’s Lecture Series event… [will] discuss solutions to what many see as a broken operational model in higher education… The talk will also look at the reliance on international fees asking should this be the mechanism by which to cross-subsidise domestic fees and research? What about the morality of draining resources from the Global South to finance the domestic obligations of the Global North?’

Sempre Analytics is running a webinar with the University of London on 27 June looking at how to achieve a more strategic and proactive approach to financial planning. The webinar will cover the work the University of London finance team has undertaken to improve treasury reporting and streamline the budgeting and planning process. Finance Director, Sam Horne, will run through the challenges of setting up the project, and the benefits it has brought to the team. Find out more and book your place here.  

FINANCIAL REPORTING

We held our annual Financial Statements Workshop webinars last week, with thanks to members of the Financial Reporting Group for preparing and presenting the webinars. You can access a recording and the slides from the webinars here.

SUSTAINABILITY

There has been a Salix announcement regarding eligibility criteria for the Public Sector Decarbonisation Scheme (PSDS). Phase 4 of the PSDS defines the ‘public sector’ using the definition of a ‘public sector body’ or ‘public authority’ in the Procurement Act 2023, for the purposes of defining eligibility for the scheme. The announcement is made as the implementation of the Procurement Act approaches, and references the definitions contained within the Act, which defines a ‘public sector body’ more broadly across government. It is important that potential applicants are aware of the new criteria. Potential applicants uncertain about their eligibility are encouraged to check whether they are classified as a ‘public authority’ by the Procurement Act 2023, or discuss eligibility with their procurement teams. The announcement states that "it is believed that only a small number of applicants from previous phases could be affected by the change" and that "these will be predominantly universities whose revenue comes mostly from private funding and international student fees". 

The awards for Phase 3C of the PSDS were also announced recently and include a number of HEPs: Northumbria, Leeds Beckett, Bradford, York, Liverpool, Liverpool Hope, Liverpool John Moores, De Montfort, Loughborough, Leicester, Coventry, Warwick, Wolverhampton, Cranfield, Cambridge, Oxford Brookes, Oxford, Gloucestershire, Plymouth, Greenwich, Arts London, and West London.

And here’s a quick reminder of our list of available funding sources for sustainability projects (updated on 16 May).

TAX AND PAYROLL

Last week’s Tax Brief (the new BUFDG publication highlighting the key tax updates), highlighted that there is less than month until exports move from the current CHIEF system to the new Customs Declaration System (CDS), as well as Julia’s favourite TV moment of the month with Martin Lewis grilling Robert Jenrick on immigration and universities on Good Morning Britain, proving this is an issue that gets into the mainstream.

If you (or anyone in your team) would like extra support on Employment Status issues, then you (they) may be interested in our new Employment Status Teams Channel – contact Julia if you’d like to join.

PENSIONS

After five years of ‘extensive engagement with employers and stakeholders, including USS and UCU’, the transfer of USS employer representative responsibilities from UUK to UCEA will take place on 1 August.

PROCUREMENT

The Procurement Act 2023 will come into force on 28 October 2024 and will create a simpler and more flexible, commercial system. It will embed transparency throughout the commercial lifecycle, and open up public procurement to new entrants such as small business and social enterprises. The Government Commercial Function has developed a comprehensive learning and development programme to support and prepare those operating within the new Act - this includes Communities of Practice (CoP) for all procurement practitioners. Find out more here.

The Cabinet Office has also invited all stakeholders, including suppliers, to a series of update webinars in May and there is still one more available on 24 May (this Friday) – find out more here.

SCOTLAND

EAUC Scotland has published its 2022/23 emissions analysis report based on submissions to the Scottish Government from Scotland's colleges and universities. The data from the report is relevant to institutions across the UK and Ireland, particularly if you are looking for evidence on institutional emissions, relative size of emission sources, or reporting and emissions trends over time.

WALES

HEFCW has issued the latest Accounts Direction for Higher Education Institutions. This is also linked from our Financial Reporting Knowledge Hub webpage.

HEFCW has also issued a request for forecasts including financial estimates for 2023/24 and forecasts for 2024-25 to 2027-28, along with some other details.

JOB OF THE FORTNIGHT

The job of the fortnight is the role of Senior Category Manager for the Open University, expected to be a hybrid role working from both home and the office in Milton Keynes. The Senior Category Manager will provide expert strategic procurement and commercial advice to key stakeholders involved in the IT & Digital spend categories, as well support for the STEM category. The successful candidate will also play a key role in ensuring that procurement is delivered using best practice.

You can find this and other job vacancies on our Jobs page.