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Financial memorandum 2010
Latest terms and conditions for payment of HEFCE grants to institutions.
Institutions' finances
Higher education institutions in England receive funding from many different public and private sources. HEFCE is the largest single source of income for the higher education sector.
HEFCE funding for teaching and research is provided to institutions as a block grant. Institutions are free to distribute the money internally at their discretion, as long as it is used to support teaching, learning and related activities. Institutions are accountable to HEFCE, and ultimately to Parliament, for the way they use HEFCE funds.
Financial memorandum
The financial memorandum (HEFCE 2010/19) between HEFCE and the institutions we fund sets out the terms and conditions for payment of HEFCE grants. Each year we draw up a funding agreement, also known as Part 2 of the memorandum, which gives conditions specific to the institution, the funds available to the institution, and the educational provision the institution has agreed in return for those funds.
Each institution must have proper systems for managing and controlling its finances, and must submit annual audited financial statements. Institutions' finances are monitored through regular financial returns and contact with our staff. This helps us to identify and minimise any risks at an early stage.
We issue an annual Accounts Direction detailing the information institutions must disclose in their annual financial statements. The most recent one, for 2010-11, was published as HEFCE Circular letter 19/2010.
As far as possible the accountability process between HEFCE and institutions will be concentrated into an exchange of documents and dialogue during a specific period (currently December) each year – this is known as the annual accountability return. Our aim is to minimise our demands on institutions and as far as possible to rely on data and information that they have produced to meet their own needs. The most recent requirements are set out in Circular letter 15/2008.
Audit Code of Practice
Our Audit Code of Practice sets out our requirements for institutions' internal and external audit arrangements and gives the broad framework in which they should operate. The code is now published as an annex to the financial memorandum. HEFCE's assurance and institutional risk service provides guidance and support to institutions in this area, including up to date guidance on value for money and data assurance.
Financial memorandum 2010
The 2010 financial memorandum will take effect from 1 August 2010. It follows a consultation that took place between December 2009 and March 2010. The principal issues that were subject to consultation included a proposed new borrowing framework, a new link between the financial memorandum and quality assurance arrangements, and a clearer statement about HEFCE's expectations of institutions' governing bodies.
Consultation on the financial memorandum
Sector impact assessment
In developing the revised financial memorandum, we undertook a formal assessment of the impact it will have on the HE sector in terms of regulatory burden, equality and diversity, and sustainable development.
[ Adobe PDF 72K | MS Word 107K ]
Memoranda of understanding
HEFCE agreed with three key regulators a protocol for the exchange of institutional risk information. This is an efficient way of promoting institutional accountability and easing the regulatory burden on HEIs.
Memorandum of understanding between the Research Councils UK and HEFCE
[ Adobe PDF 40K | MS Word 64K ]
Memorandum of understanding between the Training and Development Agency for Schools and HEFCE
[ Adobe PDF 137K ]
Memorandum of understanding between the Student Loans Company and HEFCE
[ Adobe PDF 40K ]
Related publications
The general principles that underpin HEFCE's allocations of grants to universities and colleges are described in Guide to funding: How HEFCE allocates its funds (HEFCE 2010/24).
The 'Statement of Recommended Practice (SORP) on Accounting for Further & Higher Education' sets out how HEIs should prepare their annual financial statements. This is published by Universities UK.
The Higher Education Statistics Agency (HESA) collects financial information from universities and colleges. This is published in 'Resources of Higher Education Institutions'. The publication contains data on finance and staff in higher education including analysis of the income.
Last updated 10 September 2010