| 19 October 2005 |  |
| To | Heads of HEFCE-funded higher education institutions Heads of universities in Northern Ireland |
| Direct Line | 0117 931 7300 |
| Direct Fax | 0117 931 7203 |
Circular letter number 28/2005
For further information contact Paul Greaves, tel 0117 931 7378, e-mail p.greaves@hefce.ac.uk
Dear Vice-Chancellor or Principal
Monitoring institutional sustainability
1. Financial monitoring by HEFCE has always included an assessment of financial viability. We have been working recently with the Treasury, the Office of Science and Technology and the DfES, in the Research Base Funders' Forum, to develop a broader assessment of institutional sustainability. I am now writing to ask each institution to provide an initial framework setting out how its long-term sustainability is being managed. Frameworks should be submitted by 3 January 2006.
Background
2. In HEFCE 2005/31 'Accountability for higher education institutions' (paragraphs 43-46) we explained that the Research Base Funders' Forum had agreed arrangements with the Treasury to demonstrate that higher education institutions are, over time, managing themselves in a sustainable way. The Treasury needs such assurance as it continues to support the delivery of research (including through the Science Research Investment Fund).
3. There are two elements to the arrangements: a set of trigger metrics that include ones specifically relating to funding for research, and an institutional framework. We are already computing the metrics from data from the Higher Education Statistics Agency and other sources. We will shortly write to you again about the metrics for your institution, with the keys and instructions for accessing the data from the HEFCE extranet.
4. We now ask you to submit an initial sustainability framework for your institution. Further guidance on the framework is given below. We will shortly consult the sector on a longer-term approach to capital investment. This would then be supported by a revised approach to capital funding that could be introduced from April 2008, subject to the availability of funding.
Framework towards achieving long-term sustainability
5. Please provide a framework which sets out how the long-term sustainability of the institution is being managed. As indicated in HEFCE 2005/31, this is essentially a statement which sets out how far and on what basis the leadership of the institution consider that the institution is on a sustainable trajectory. This assessment should be supported by relevant evidence, including any performance measures. You are not restricted to the trigger metrics, which are intended to be a core set of standard indicators rather than a comprehensive set of measures.
6. In preparing their frameworks, institutions should note that sustainability does not necessarily mean preserving all or any current activities. Instead, it means sustaining adaptive capacity, that is, managing key resources so as to at least maintain the current capacity of the institution to respond effectively to changing demands over, say, the next 10 years. Within the Transparent Approach to Costing (TRAC, volume III) this is expressed as follows:
'An institution is being managed on a sustainable basis if, taking one year with another, it is recovering its full economic costs across its activities as a whole, and is investing in its infrastructure (physical, human and intellectual) at a rate adequate to maintain its future productive capacity appropriate to the needs of its strategic plan and students', sponsors' and other customers' requirements.'
7. Ideally, the framework would be prepared in the context of institutions' current strategic planning processes. However, the timing of this request for the 'initial' framework might not coincide with the current planning timetable, in which case it will be a supplement to the existing strategic plan.
8. We recognise that it is not necessarily meaningful to prepare a detailed strategy for a 10 year period. Instead, the framework should identify at least one credible scenario under which, on current knowledge of internal and external matters, the institution could reasonably be predicted to at least maintain its adaptive capacity.
9. We do not wish to be prescriptive about the form and content of the framework. We have therefore produced (at Annex A) broad guidance in the form of suggested headings, with key questions that institutions may choose to consider in preparing their framework. However, institutions are encouraged to structure their framework in a way that best reflects their own particular circumstances.
10. The framework should be signed by the Designated Officer and sent to your HEFCE Assurance Consultant by 3 January 2006. Given this timing, it may not be possible for the framework to be fully considered by the institution's governing body, in which case please provide a draft framework indicating when it is to be discussed by the governing body. If you have any difficulties with this timescale, please contact your Assurance Consultant. Contact details are on the web at www.hefce.ac.uk under About us/Contact us.
11. We would like to point out that frameworks produced in this first year will be considered as indicative, recognising that institutions will need some time to embed this new requirement into their existing planning process. We may wish to refine our approaches to the framework as the accountability arrangements in HE continue to evolve.
Trigger metrics
12. The trigger metrics for your institution are for your information at this stage. They are derived from existing data we hold, and we do not now envisage asking you to provide any additional information. We do not expect to form a view on the long-term sustainability of an institution based upon these data alone. We shall be looking at the data over the coming years as a time series, nationally and for individual HEIs, and in the context of each institution's framework.
Return date
13. As indicated above, we would like you to return your initial framework to your HEFCE Assurance Consultant by 3 January 2006. We then need to collate and provide evidence to the Treasury in April.
14. It is not our intention to provide feedback to every institution in the short term, but we will do so by exception where we have questions or concerns about the metrics or the framework.
Yours sincerely
Howard Newby
Chief Executive
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Annex A
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