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 was been downloaded over 5,000 times. The guide has now been updated (September 21) to reflect, among other things, updates to the terminology used in the 2020 financial statements, changes to the sector following Brexit, and the latest reporting requirements.


Download the Understanding University Finance v2 guide

A guide to Accounting for Pensions in H E

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.

Download the BUFDG Guide to Accounting for Pensions in HE

A BUFDG Guide to UK Universities and Tax

The document provides a high-level overview of the many areas where tax impacts on UK universities, looking at taxes relating to people, income, and expenditure. There is a myth that universities, as charities and/or public bodies, simply do not pay tax, and so tax is not an issue. Unfortunately, this is not the case, as the guide demonstrates! So, whether you: work in academia, estates, finance, governance, HR, international development, planning, procurement, or research; have worked in the university sector for some time or are new to it; need a refresher, or; are simply curious about tax and universities, we hope that you will find the new guide useful.

Download the BUFDG Guide to UK Universities and Tax

Communicating Value

Teaching students is just one of the things that universities do. They expand human knowledge by undertaking research in a mind-boggling range of areas. They are at the forefront of countless discoveries. They are key parts of 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.

Despite this, universities often struggle to communicate their value. They work hard to find ways to get these important messages across but they can't assume that, amidst a busy news cycle, the public and governments will automatically hear about all the good things that they do. The UniversitiesUK award-winning campaign MadeAtUni showcases how they contribute to society.’

BUFDG is contributing to this effort by supporting finance directors to improve financial communication, assisting the development of value reporting (in particular the use of Integrated Reporting <IR>). To find out more about Integrated Reporting, and how it could help your institution demonstrate its value, carry on reading below.


Integrated Reporting in H E

BUFDG has undertaken a number of different projects to introduce and develop the Integrated Reporting (IR) framework in Higher Education. At a time when Higher Education Institutions need to communicate with a wide range of stakeholders, BUFDG and many of its members feel that IR offers a structure that can help. Using the International IR Framework and looking at the six capitals – financial, manufactured, intellectual, human, social and relationship, and natural – can help university managers, academics and governors approach “the value question” in a more holistic way.

For phase one, BUFDG used an abridged framework to assessed annual reports of six universities, and published the findings alongside the developed framework. In phase two, BUFDG and four universities agreed to join the IR Network, and a Specialist Panel, convened by the International Integrated Reporting Council (IIRC), reviewed universities 15/16 annual reports and financial statements. You can download and read these reports in the links below.

In 2017 the baton was passed to Advance HE (formerly the Leadership Foundation), who undertook a project to bring together entire leadership teams (not just finance) at 10 HEIs. The project was supported by funding from the funding councils, and aimed to embed integrated thinking and IR across the whole institution. The project concluded in the Summer of 2018, and more information can be found on the Advance HE website.

Integrated Reporting in H E: helping universities tell their stories better

Download the report

Integrated Reporting in four British Universities

Download the report

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