Report 99/69

Analysis of the 1999 financial forecasts and annual operating statements

Executive summary

1. Purpose

2. The analysis in this report provides a summary of financial projections for the higher education sector covering 1998-99 to 2002-03 and of the sector’s annual operating statements for 1998-99 and 1999-2000. It is based on the information provided by higher education institutions in July 1999.
3. Universities and colleges are encouraged to develop corporate plans to help deliver their strategic aims. Such plans will incorporate financial strategies and be underpinned by projections of the financial impacts of those strategic aims. Within these plans, targets and milestones will be set against which progress can be measured. Annual operating statements demonstrate how those targets have been met in the past year and set out outputs for the coming year. These, along with financial forecasts, form integral parts of the strategic planning and performance monitoring processes.

   Key points

   Financial forecasts

4. The 1999 forecasts take account of some, but not all, of the additional funding announced following the Government’s 1998 comprehensive spending review. The areas where additional funding, and related expenditure, are not included involve the allocations of earmarked capital funding yet to be announced. These will affect the balance sheet and cash flow forecasts, but will have a minimal impact on the forecast operating positions.
5. The annual financial forecasts continue to be reliable indicators of future operating positions, recognising the climate in which they have been prepared. Variations across the years tend to reflect different economic climates, rather than unreliability in the forecasting process.
6. The forecast operating surplus for 1998-99 is £148 million, or only 1.5 per cent of income. This compares with the 1997-98 actual operating surplus of £265 million, or 2.8 per cent of income. From 1999-2000 onwards the forecast levels of annual operating surplus are below 1 per cent of income.
7. The erosion in operating margins from 1997-98 reflects the pressures being felt across the sector to control expenditure and to generate the income levels necessary to support higher costs and provide for reinvestment.
8. These levels of operating surplus are below those considered necessary to provide for reinvestment. Against the benchmark of an operating surplus of 3 per cent of income, the shortfall is close to £150 million in 1998-99, rising to around £250 million a year from 2000-01 onwards. We are refining this benchmark for use at institutional level; data are currently being tested and evaluated. The outcome is expected to provide a narrow range around the 3 per cent level, to cover continuing investment needs, with additional levels to meet backlog or other, short-term, requirements.
9. Twenty-eight institutions had operating deficits in 1997-98, compared with 35 forecast. The number forecasting operating deficits from 1998-99 onwards is around 40 institutions each year, but with an increase to 50 institutions in 1999-2000. While this is an improvement on the 1998 forecasts, it still represents 30 per cent of the sector operating in continuing deficit.
10. In contrast, 52 institutions (close to 40 per cent of the sector) reported operating surpluses for 1997-98 above 3 per cent of income. The number of institutions forecasting operating surpluses above 3 per cent declines to 28 in 1998-99, and to around 16 in all subsequent years.
11. The income and expenditure assumptions made by institutions are generally realistic, although some individual income assumptions appear optimistic. However, there are key assumptions for which marginal changes would have an immediate adverse impact across many institutions. These key assumptions are the level of annual pay awards, the annual rates of non-pay inflation, and the annual real terms reduction in unit funding.
12. The sector’s dependency on public funding continues to decline. In 1997-98 64.3 per cent of total income came from public sources. This is forecast to continue to decline as universities and colleges expand existing non-publicly funded activities and generate new ones.
13. This trend towards increased income from non-public sources will be further enhanced through the Higher Education Reach-out to Business and the Community Fund and the increased links between higher education and business and industry.
14. Net liquidity, which includes short-term investments, is forecast to decline from 62 days at 31 July 1999 to 50 days from 31 July 2001.
15. The trend in reducing dependence on external borrowing to fund capital expenditure continues.
16. Operating cash flows continue to improve, compared with previous forecasts, particularly from 2001. The number of institutions forecasting to have negative operating cash flows reduces from around 30 in 1998-99 to 12 by 2002-03.
17. Capital expenditure shows a significant increase compared with previous forecasts. Over the four years 1998-99 to 2001-02, the aggregate capital expenditure in the 1999 forecasts is £3,350 million, compared with £2,500 million in the 1998 forecasts, an increase of £850 million or one-third.
18. This additional expenditure is being funded from a range of sources but primarily from additional capital grants, totalling £400 million, over these same four years. These are part of the additional capital funding being provided over 1999-2000 to 2001-02, which is beginning to address the backlog of past under-investment. This will need to be sustained if the improvements in global competitiveness flowing from these funds are not to be lost.
19. As is the case with previous forecasts, the sector aggregates disguise a wide range of financial performances and strengths. Much of the financial wealth within the sector is concentrated in a small number of institutions.

    Annual operating statements

20. The core purpose of any annual operating statement is to specify how the institution intends to progress its corporate plan in the forthcoming year. Over 90 per cent of the statements received included key operating targets for 1998-99.
21. Annual operating statements indicated that, by their own assessment against their individual targets, institutions considered that they had achieved a significant proportion of their targets. The broad pattern was:
    1. Around two-thirds of institutions considered that they had met their 1998-99 targets in relation to physical resources, and recruitment and access.
    2. Over half considered that they had met their targets on academic developments, learning and teaching and learning resources, collaboration, staffing, IT strategy, research, and quality enhancement.
22. Nearly all institutions (98 per cent) identified priorities for 1999-2000 within their operating statements.
23. The broad pattern of themes suggests some increase in the priority given to collaboration, and widening student access and participation.

    Action required

24. No action is required.

Financial forecasts

24. Reliability of financial forecasts

25. The financial information provided by higher education institutions to the Council continues to be based on the Statement of Recommended Practice: Accounting in Higher Education Institutions. This provides a consistent and comparable basis for analysis and interpretation.
26. We now have an increasing time series of financial data from institutions. Annex A summarises the operating surpluses (defined as the surplus/(deficit) after depreciation of assets at valuation and tax) for the sector as a whole, through five years of forecasts and actual results. While these show some variations from year to year, this is more the impact of external factors, such as announced government funding, than an adverse reflection on the sector’s ability to forecast. For example, the 1997 forecasts reflected the funding reductions announced by the previous Government in November 1996; whereas the 1998 forecasts included the additional funding announced in the autumn of 1997, but not that announced in July 1998. The 1999 forecasts take account of the additional recurrent funding, and some of the earmarked capital funding, announced following the Government’s 1998 comprehensive spending review. Our conclusion is that the financial forecasts continue to be reasonably robust at the time they were made.

    Income and expenditure account

27. The income and expenditure projections for the sector as a whole are at Annex B and summarised in Table 1.

    Table 1 Income and expenditure projections for the HE sector

    	Actual results		Forecast
    	1996-97	1997-98	1998-99	1999-00	2000-01	2001-02	2002-03
    	£M	£M	£M	£M	£M	£M	£M
    Total income	9,025	9,500	9,765	10,212	10,520	10,861	11,196
    Total expenditure	8,885	9,233	9,643	10,129	10,450	10,779	11,110
    Surplus/(deficit) after depreciation of assets at valuation and tax	137	265	148	91	64	85	84
    Surplus as a percentage of total income	1.5 %	2.79 %	1.52 %	0.89 %	0.61 %	0.78 %	0.75 %

28. These forecasts show an improved position for 1997-98 and 1998-99, but a broadly similar position for later years, compared with the 1998 forecasts. This is shown in Table 2.

    Table 2 Surplus/(deficit) after depreciation of assets at valuation and tax

    	1997-98	1998-99	1999-00	2000-01	2001-02	2002-03
    	£M	£M	£M	£M	£M	£M
    1998 forecasts	161	90	84	60	49
    1999 forecasts	265 (actual)	148	91	64	85	84

29. The improvements take account of the additional recurrent funding for 1998-99 announced in September 1997, and the additional recurrent funding for 1999-2000 following the announcement of the outcome of the Government’s comprehensive spending review in July 1998. The additional earmarked capital funding for 1999-2000 to 2001-02 is covered in paragraphs 48 to 50 below.
30. Across the sector the expenditure assumptions made by institutions in preparing their forecasts have tended to be realistic, although there are some outliers, which are being followed up with the individual institutions. Some income assumptions appear to be optimistic, and these again are being discussed with the individual institutions. Real terms reductions in unit funding are generally assumed to be between 0.75 per cent and 1 per cent a year. Non-pay inflation is assumed to be in line with changes in the GDP deflator, at 2.5 per cent a year. Pay increases have generally been assumed to be around 3 per cent to 3.5 per cent a year, with incremental drift representing a further 1 per cent annual cost increase. This represents an annual increase in staff costs of 4 per cent to 4.5 per cent a year.
31. Generating the additional income to meet this scale of increase is a major challenge for institutions. Some of the additional funding will come from limiting the real terms reductions in unit funding and from the expansion in funded student numbers, but other income sources will need to expand to bridge the remaining gap. Academic fees and research grants and contracts are being forecast to increase by an average 5 per cent and 6 per cent a year respectively over the forecast period. While these rates of increase may be achievable for some institutions, others may find it more difficult, given that there are limits to the size of the available markets. In addition, there are some optimistic assumptions of increases in fee income for postgraduate, part-time and overseas students; these are being reviewed with the institutions concerned.
32. The erosion in operating margins from 1997-98 reflects the pressures being felt across the sector to control expenditure and to generate the income levels necessary to support higher costs and provide for reinvestment. The forecast operating margins fall short of the target level of 3 per cent considered necessary to provide for that reinvestment, as shown in Table 3.

    Table 3 Forecast operating surplus against 3 per cent target

    	3% target operating surplus	Forecast operating surplus	Shortfall
    	£M	£M	£M
    1998-99	293	148	145
    1999-00	306	91	215
    2000-01	316	64	252
    2001-02	326	85	241
    2002-03	336	84	252

33. The review of the operating surplus target has taken longer than expected. Data are currently being validated with a number of pilot institutions. These are tending to confirm our expectations of an on-going range of 1 per cent to 5 per cent, depending on the circumstances of individual institutions, but this may increase to address backlog or other, short-term, issues.
34. The sector analysis masks a wide range of forecast operating positions. For example, 28 institutions had operating deficits in 1997-98 (35 were forecast), but this increases to 50 by 1999-2000 before declining to around 40 thereafter.
35. In contrast, 52 institutions (close to 40 per cent of the sector) reported operating surpluses for 1997-98 above 3 per cent of income. The number of institutions forecasting operating surpluses above 3 per cent then declines to 28 in 1998-99 and to around 16 in all subsequent years.
36. The low operating margins across the sector also mean that small changes in key assumptions continue to have a major impact where these vary from forecast levels. Those which potentially have the greatest effect are: increases in pay rates; reductions in unit funding; and increases in non-pay inflation.

    Table 4 Effect of changes in key assumptions

    	1999-2000	2000-01	2001-02	2002-03
    	£M	£M	£M	£M
    Cumulative effect of annual increase in pay rates of 1 per cent above assumptions	-59	-119	-183	-248
    Cumulative effect of annual increase in non-pay inflation of 1 per cent above assumptions	-36	-74	-112	-152
    Cumulative effect of annual reduction in unit funding of 1 per cent above assumptions	-36	-73	-111	-150

37. The figures in Table 4 show the gross impact of such small changes in key assumptions. These would be offset to the extent that sufficient compensatory action is both possible and would be taken by institutions.
38. The dependence on public funding is slowly declining, with higher levels of forecast growth in income coming from existing non-publicly funded activity. A comparison of the distribution of public income as percentages of total income between 1994-95 and 1997-98, banded in groups of 10 per cent, is at Annex C. This shows the extent of the overall shift to reducing levels of public income, but most markedly:
    1. The number of HEIs whose income is less than 50 per cent from public sources increases from four in 1994-95 to 11 in 1997-98.
    2. The number of HEIs whose income is more than 80 per cent from public sources declines from 27 in 1994-95 to 17 in 1997-98.
39. Alongside this, HEIs are developing and expanding their range of income-generating activities. The higher levels of actual and forecast growth in income are coming primarily from non-publicly funded activity.
    1. Overseas student fees increased very significantly up to 1997-98, but have declined recently owing to the economic problems in the Far East.
    2. The provision of research, consultancy and other services to industrial and commercial customers has also shown strong growth up to 1997-98.
    3. The lower growth rates in income areas in the forecast years, compared with the actual performance, reflect the natural prudence among most HEIs in forecasting future levels of income.
40. This trend towards increased income from non-public sources will be further enhanced through the Higher Education Reach-out to Business and the Community Fund and the increased links between higher education and business and industry.

    Balance sheet

41. The forecast balance sheet for the sector as a whole is at Annex D. This shows a broadly stable position over the forecast period. Total assets continue to increase, funded mainly through capital grants, increased borrowing and cash from operating activities. In some cases fundraising will also provide a contribution. Net current assets decline, but not significantly, as some short-term investments are liquidated.
42. Provisions show a significant reduction at 31 July 1999 as institutions comply with the new accounting standard (FRS 12 Provisions, contingent liabilities and contingent assets). Under this, provisions can only be made where there is a legal or constructive obligation to meet a liability in the future. Provisions for long-term maintenance normally do not fall within this definition, so are transferred to the income and expenditure account balance. This is a balance sheet adjustment only and has no effect on the annual operating position. However, the impact on institutions will be that expenditure on long-term maintenance will now be written off to the income and expenditure account as incurred. This may lead to wider fluctuations from year to year in some institutions’ operating positions.
43. Net cash balances (cash balances less overdrafts), expressed in the number of days of expenditure, continue to remain low, as shown in previous forecasts. In aggregate these are 13 days at 31 July 1999 and only rise to 15 days by 31 July 2003. However, broader measures of liquidity (cash balances plus short-term investments less overdrafts) show balances representing 62 days at 31 July 1999, but declining to marginally above 50 days from 31 July 2001.
44. Aggregate external borrowing levels are again marginally lower than predicted in previous forecasts. Taking account of forecast levels of operating surplus, along with increases in capital grants (see paragraphs 48 and 49 below), this indicates a reduced dependency on borrowing to fund capital expenditure.
45. As has been shown by previous forecasts, the financial strength of the sector is not distributed evenly, and much of it is concentrated in a few institutions. While some of this reflects the diversity within the sector, this is not always the case. For example:
    1. Around 10 per cent of the sector has 50 per cent of the net liquid resources (cash balances plus short-term investments less overdrafts), while around 25 per cent has 75 per cent of these net liquid resources.
    2. Around 15 per cent of the sector has no external borrowing, while an equal number of institution account for 50 per cent of all external borrowing.
    3. Five institutions have 25 per cent, and fewer than 20 institutions have 50 per cent of the total discretionary reserves of the sector.

    Cash flow

46. The aggregate cash flow for the sector is at Annex E. The improvements in the cash flow being generated from operating activities (highlighted in the 1998 forecasts) continue, with further increases now being forecast from 2001. However, there are variations between institutions. Over 30 institutions are forecasting negative operating cash flows, but this declines steadily to 12 by the end of the forecast period. This compares favourably with around 20 institutions forecasting to have negative operating cash flows by the end of the 1998 forecast period.
47. The 1999 forecasts also show significantly higher levels of capital expenditure than were being projected last year (Table 5). However, they also still show a significant decline of over 50 per cent by the last year of the forecast period. Should higher than forecast capital expenditure occur in these years, to take account of further announcements of capital grants, these will impact on the forecast cash flow and balance sheet positions.

    Table 5 Capital expenditure forecasts

    	Capital expenditure 1999 forecasts	Capital expenditure 1998 forecasts
    	£M	£M
    1998-99	986	952
    1999-00	976	700
    2000-01	772	456
    2001-02	614	387
    2002-03	445

48. Over the four years 1998-99 to 2001-02, the aggregate capital expenditure in the 1999 forecasts is £3,350 million, compared with £2,500 million in the 1998 forecasts, an increase of £850 million or one-third.
49. These additional levels of expenditure are being financed from a range of sources, but quite significantly from increased capital grants. The other sources include: improved operating cash flows, lower interest costs, increased receipts from asset sales, and fundraising. The comparison of deferred capital grants received between the 1998 and the 1999 forecasts is shown in Table 6.

    Table 6 Deferred capital grants received

    	Deferred capital grants received 1999 forecasts	Deferred capital Grants received 1998 forecasts
    	£M	£M
    1998-99	246	230
    1999-00	371	220
    2000-01	251	108
    2001-02	184	87
    2002-03	133

50. Over the four years 1998-99 to 2001-02, the forecast deferred capital grants received are £407 million higher than being forecast in 1998. These reflect elements of the additional earmarked capital funding announced following the Government’s comprehensive spending review, where funding decisions have been taken and allocations announced. As further announcements are made, further capital grants will be made and these will increase the levels of capital expenditure.
51. These forecast levels of capital expenditure, supported by some additional capital funding, are to be welcomed and have made a start to address past under-investment. However, capital funding has only been announced for the three years 1999-2000 to 2001-02.
52. The present levels of recurrent funding and net contributions from other activities, on their own, are currently insufficient to finance all capital expenditure. The ability to take on additional borrowing is limited by the capacity to repay from operating cash flows; again the limitations in recurrent funding and net contributions from other activities act as a constraint to take on further borrowings. Capital grants provide a much needed boost, but these need to be provided on a continuing basis to allow institutions to plan how to use such funds to best effect within their overall strategies.

Annual operating statements

52. Introduction

53. This section gives feedback on the overall picture revealed by institutions’ annual operating statements and student number forecasts provided in July 1999.

    Background

54. The HEFCE introduced new arrangements in 1999 for collecting corporate plans on a three year cycle from all HE institutions, supplemented by shorter annual operating statements. The aim is to reduce the burden on universities and colleges, to secure greater coherence in planning, and to give a better basis for us to understand and support institutions’ strategic intentions. Details were given in circular letter 3/99 and HEFCE publication 99/30 `Annual operating statement, planning return and financial forecasts’.
55. The annual operating statements provide the context within which we assess institutions’ five year financial forecasts. They also summarise the strategic direction of HEIs, their priorities for action, and their own assessment of progress against objectives. We use this information to gain a broad understanding of institutions’ plans, and to provide informed advice to the Secretary of State.
56. We expect institutions to produce annual operating statements as a matter of course for their own purposes, not the HEFCE’s. We therefore left the content and structure of the operating statements largely to institutions. But some consistency of coverage was necessary for us to derive consistent judgements about trends and developments across the sector. We therefore asked institutions to provide the following information:
    1. The institution’s mission.
    2. The key operating targets for the academic year 1998-99.
    3. An assessment of progress against those targets.
    4. The key planned operating targets for the academic year 1999-2000, indicating major new developments, either in terms of environmental factors which the institution expects will affect it, or in terms of actions which the institution intends to take.
57. The following analysis concentrates on the key operating targets for the academic years 1998-99 and 1999-2000, as well as institutions’ assumptions about future trends.
58. Proportions and percentages given in this analysis should be taken as indicative. Some interpretation is inevitable, because of variations in institutions’ reporting practices and in the amount of evidence provided.

    Summary of 1998-99 key operating targets

59. The core purpose of any annual operating statement is to specify how the institution intends to progress its corporate plan in the forthcoming year. Over 90 per cent of the statements received included key operating targets for 1998-99.
60. Table 7 shows the recurrence of main themes in statements for which institutions had set themselves targets for 1998-99.

    Table 7 Main themes in annual operating statements 1998-99

    Theme	% of HEIs with targets for 1998-99
    Academic developments	93 %
    Recruitment and access	85 %
    Physical resources	82 %
    Research	78 %
    Finance	77 %
    Learning and teaching and learning resources	74 %
    IT strategy	73 %
    Quality enhancement	73 %
    Staffing	72 %
    Collaboration	64 %
    Widening participation	57 %
    Governance and management	54 %
    International activities	52 %
    Regional activities	49 %

61. Statements also contained information about institutions’ success in meeting their targets. Institutions differed in how they specified their targets, how ambitious the targets were, and the indicators used to assess whether they achieved the targets. A statistical comparison of achievement against targets would therefore not be valid. However, statements indicated that, by their own assessment against their individual targets, institutions considered that they had achieved a significant proportion of their targets. The broad pattern was:
    1. Around two-thirds of institutions considered that they had met their 1998-99 targets in relation to physical resources, and recruitment and access.
    2. Over half considered that they had met their targets on academic developments, learning and teaching/learning resources, collaboration, staffing, IT strategy, research, and quality enhancement.
    3. Between a third and a half of institutions reported that they had achieved their targets in the areas of governance and management, widening participation, international activities, and regional profile. The targets set, and the factors affecting progress in achieving them, varied from case to case.

    1999-2000 key operating targets

62. Nearly all institutions (98 per cent) identified priorities for 1999-2000 within their operating statements. Table 8 shows the main themes.

    Table 8 Main themes in annual operating statements

    Theme	% of HEIs with targets for 1999-2000
    Estate management	86 %
    Collaborative links	82 %
    Learning and teaching strategy	80 %
    Information strategy	77 %
    Widening student access and participation	75 %
    Growth and restructuring student numbers	75 %
    Financial strategy	72 %
    Human resource strategy	72 %
    2001 Research Assessment Exercise	66 %
    Strategic planning	52 %

63. Here too it would not be statistically valid to compare this listing with the previous year, because the way priorities are grouped into themes is not consistent between years. Nonetheless, the broad pattern suggests some increase in the priority given to collaboration, and widening student access and participation.
64. Annex F provides a range of examples of targets set by institutions. These illustrate the areas in which institutions are setting targets, and the way in which those targets are expressed. We have selected some of the more focused targets, those which we thought other institutions might find interesting, and those which give a flavour of the range of operating statements. The examples should not necessarily be taken as good practice for others to follow.

    Future trends

65. Institutions were asked to include in their statements key assumptions about future trends. Only a third of institutions did so. The following were included.

    Regional issues/collaboration

    • The need to sustain and develop links with industry and the community.
    • Within the context of the consolidation of student numbers – continuation and development of partnerships with colleges of further education in the region.
    • Increased emphasis on the local and regional dimension including developing regional partnerships and co-operation with other providers.

    Student numbers

    • Increased demand for postgraduate provision.
    • Decline in overseas demand at degree level but an increase at postgraduate level.
    • Increase in full-time provision in the longer term due to the Government’s emphasis on increasing sub-degree places, (predict will progress onto full-time degrees).
    • Shrinkage in pool of mature students applying to HE.
    • Changing expectations of students, their supporters and employers.
    • Growing competition for students.

    Widening participation

    • Changing application patterns and the need to widen access and participation, including through work with schools and FECs to encourage progression.
    • Government focus on lifelong learning, addressing issues of changing patterns and modes of learning as well as inclusion of economically and socially disadvantaged groups.

    Teaching and research

    • Need for distinctiveness and excellence in taught and research programmes.
      Importance of multi-disciplinary and inter-disciplinary research.
    • Significant changes in the FE sector’s role in providing HE, particularly at the sub-degree level.

    Forecast student numbers

66. Annex G to J summarise institutions’ forecasts of student numbers in England. These student numbers are those reflected in institutions’ financial forecasts. They show that institutions project that:
    1. Full-time home and EC student numbers will increase by over 2 per cent per annum.
    2. Part-time home and EC student numbers will increase by 5 per cent in 1999-2000 and then by approximately 2 per cent per annum thereafter.
    3. By 1999-2000, full-time postgraduate taught numbers will increase by 10 per cent, and postgraduate research numbers by 2 per cent. Part-time postgraduate taught and research students will increase by 5 per cent and 2 per cent respectively.
    4. Overseas student numbers will increase by 14 per cent by 2002-03. This is not out of line with actual increases up to 1997-98. In addition, institutions began preparing their forecasts before the Prime Minister’s June announcement on overseas students to increase the United Kingdom’s proportion of non-EU international students to 25 per cent market share. The figures, therefore, may not fully reflect the implications of that announcement.
    5. The number of students franchised out of HEIs will increase by 22 per cent by 2002-03 (this includes a 4 per cent growth of FE students and a 16 per cent growth of NHS students).

Annexes

With the exception of Annex F, these are all Excel files:

Annex F

1999 Annual operating statements

Examples of key operating targets set by institutions

These illustrate the areas in which institutions are setting targets, and the way in which those targets are expressed. We have selected some of the more focused targets, those which we thought other institutions might find interesting, and those which give a flavour of the range of operating statements. The examples should not necessarily be taken as good practice for others to follow.

Academic developments

• Identify areas for diversification for School of Education to replace reductions in ITT numbers and collaboration with other discipline areas. Extend INSET collaborative areas for Teacher Training Agency bid.
• To give universal opportunity for students to learn a modern foreign language.

Recruitment and access

• To improve our market share of applications.
• Develop the university’s participation policy with particular reference to ways of attracting able students to the university whatever their background.

Physical resources

• To complete the building of the new campus on schedule and within budget for the start of the 1999-2000 academic year.
• Undertake rationalisation studies of space occupied by the science schools (taking account of Joint Infrastructure Fund bids) and professional schools.
• Review possible alternative uses for the existing sports centre.

Research

• Enhance research performance, specifying targets and actions to be taken at school, group and university level; implement a clear and well-supported programme of preparation for RAE 2001.

Finance

• Achieve an unallocated surplus on recurrent income of £500,00 in 1999-2000 by maximising income and taking steps to contain costs and achieve best value for money on expenditure.
• During the year an audit will be undertaken of relative costs when compared to a set of similar HEIs. The findings of this study will be used to inform the ‘value for money’ strategy of the college.

IT strategy

• To establish a regional computer networking infrastructure (Regional Area Network).

Quality enhancement

• Develop and enhance the quality and standards of externally validated, delivered or franchised programmes with regional, national and international partner colleges.
• To define and establish a new framework for academic quality and quality management in the university related to national developments and internal requirements.

Learning and teaching

• Improve the quality of learning and teaching and assessment through the provision of effective workshops and seminars and award-bearing training programmes for the university’s teachers.
• Development and implementation of a new teaching and learning strategy encouraging innovation, incorporating increased contributions from C&IT, enhancing activity related to employability of graduates, and developing high quality teaching.

Staffing

• Develop an overarching human resources strategy from the key objectives agreed in the corporate plan (also taking into account the conclusions of the Bett Report) and begin to implement that strategy in conjunction with ‘line management’, paying particular attention to the need for skills retention, development and (re) training and to the motivation, reward and retention of staff.
• Assist deans of schools and heads of support departments to identify and meet training and development needs derived from current and emerging requirements.

Collaborative links

• A small number of formal collaborations will be established with overseas partner institutions. These collaborations will be the subject of annual academic and financial audit.

Widening participation

• To further develop the university’s targeted access scheme, working with selected city schools which have no tradition of pupils proceeding to HE, to raise expectations and performance.
• Extend and facilitate access from all potential students, but particularly those from all parts of the region, by raising awareness of the university across the region, particularly working with partner colleges in joint activities.

Governance and management

• Review the statements of corporate governance for the annual report and accounts; review the size and constitution of the governing body; membership and modus operandi of the remuneration and audit committees; the role of secretary to the governing body; establishment of a register of members’ interests; introduction of a students’ complaints procedure; adoption of procedures for public interest disclosure (whistleblowing).

International activities

• To identify and establish strategic institutional links around the world, particularly in [three specified countries]. Such links will generate sustained in-flows of student recruitment, particularly postgraduate students, and will facilitate research co-operation and collaboration.
• Develop the recruitment of EU nationals across all schools by exploiting existing partnerships and links.

Growth and restructuring student numbers

• International scholarships will be extended to support student recruitment and diversify areas of recruitment.
• Support growth and restructuring in institution’s numbers – respond to the Government’s planned targets for further and higher education by increasing student numbers to 3,500 full time equivalent by 2002-03 academic year.