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The financial memorandum between HEFCE and the institutions it funds sets out the accountability requirements on universities and colleges in order to receive HEFCE grant funding. The changes proposed in the consultation take account of the Government’s recent reforms to the funding and regulation of higher education as well as changes in how banks lend money to universities and colleges [Note 1].
The most significant issue for consultation concerns what changes are necessary to manage the risks around financial commitments taken on by higher education institutions. The current way that HEFCE consents to borrowing by HEIs, which is based upon annualised servicing costs, is no longer suitable because banks are now generally lending on shorter timescales. We have not proposed new arrangements, because we want to hear how universities, colleges and lenders wish us to address this issue.
The higher education sector has a long and successful history of self-regulation, and HEFCE aims to keep its own regulation limited where possible. Where we have confidence in an institution’s accountability arrangements and processes, we will rely on the assurances that institutions already provide for themselves. From time to time we will validate these assurances. This respects institutional autonomy and limits the cost of regulation.
Other proposed changes include updates and reduction in the level of detail, including having fewer annexes [Note 2].
Sir Alan Langlands, Chief Executive of HEFCE, said:
‘HEFCE has a clear regulatory duty to ensure that universities and colleges in receipt of public funds provide value for money and are responsible in their use of these funds. We also ensure that the funding we distribute accurately reflects what is delivered. We aim to reduce the accountability burden on institutions by enabling other public bodies, wherever possible, to rely on our systems of oversight and assurance. We in turn seek to take assurance from institutions’ own systems of self-regulation and control.
‘The principle of institutional autonomy and the system of regulation on which it depends therefore relies on clear lines of accountability for the proper stewardship of public funds and on being able to demonstrate to Parliament and the public that, in the exceptional circumstance when something goes wrong, there is a clear mechanism to put it right. The financial memorandum provides this clarity and assurance by defining the formal relationship between HEFCE, governing bodies and heads of institutions.
'In addition HEFCE has responsibilities to protect the collective student interest – a role given more prominence in the recent government reforms – and to secure the wider public interest, particularly in relation to the funding of higher education.’
Responses to the consultation are invited by 6 December 2013.