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Executive summary

Purpose

1.   This report gives an overview of the outcomes of the review of 'single conversation' annual accountability returns for 2007-08. The outcomes are based on information provided by higher education institutions (HEIs) in December 2008 (and January 2009 for the Transparent Approach to Costing return). In addition, the report also provides an overview of the financial health of the higher education sector in England.

Key points

2.   The outcomes of our reviews of all the single conversation returns fed into the risk assessments and risk letters to institutions as well as informing the continuing dialogue with each institution. This publication provides some general feedback points for consideration by all institutions.

3.   In 2008 we made it a condition of funding that all institutions' audit committees provided an opinion on management and quality assurance of data submitted to the Higher Education Statistics Agency and to HEFCE and other funding bodies. This was requested in the Financial Memorandum with HEIs that took effect from 1 August 2008 and it is understandable that some HEIs were not able to give an opinion because the requirement was not foreseeable at the beginning of that year. We expect all institutions to comply with this mandatory requirement in 2008-09.We remain concerned that some data received from HEIs are not accurate or do not comply with funding rules. It is strongly recommend that all institutions undertake a formal review of existing arrangements.

4.   There are some areas in which institutions could improve their reporting including demonstrating economy, efficiency and effectiveness (value for money). In our dialogue with institutions it is clear that the pursuit of value for money is a high priority, but the reporting of the activity and achievement could become more explicit. By being more explicit in reporting areas of efficiency it becomes easier for us to identify and quantify efficiency savings across the sector. We remind institutions that there is a requirement under the Financial Memorandum with HEFCE to ensure that public funds are spent on the purposes for which they are intended, and that good value for money is obtained.

5.   The overall financial results for the sector in 2007-08 show a positive and financially sound position, with some improvement on the performance in 2006-07. At the end of 2007-08 the sector had strong cash balances and healthy reserve levels, which will provide some cushion for the likely risks the sector now faces. However, Transparent Approach to Costing data indicate that, when adjusting institutions’ audited financial statements to provide an estimate of the full economic costs of activities, there is an overall deficit of £1,066 million for HEFCE-funded HEIs.

6.   A significant proportion of the sector's financial forecasts were prepared last summer, before the economic downturn began, and our analysis of them indicates that not all institutions have fully reflected the likely pressures on income streams and expenditure in future years. Annex A discusses the potential impact some of these pressures might have on the sector’s sustainability, and provides more detailed feedback on the current financial health of the sector.

Action required

7.   No action is required: this report is for information. 

Date: 1 July 2009

Ref: 2009/26

To: Heads of HEFCE-funded higher education institutions, Heads of universities in Northern Ireland

Of interest to those
responsible for:

Audit, Estates, Finance, Governance, Management, Planning, Student data

Enquiries should be directed to:

HEFCE assurance consultants or assurance advisers or HEFCE higher education policy advisers, Contact details for HEFCE staff