HEFCE Circular 7/96
Strategic Plans and Financial Forecasts
To Heads of HEFCE-funded Institutions
Heads of DENI-funded Universities
Of particular interest to those responsible for Planning, Finance, Estates, Research, Student data, Staff data, Information Strategy
Reference 7/96
Publication Date May 1996
Response by 28 June 1996
Enquiries on: Strategic Plans: Regional Officers
Financial Forecasts: Regional Financial Officers
Estate Returns: Regional Estates Officers
Executive Summary
1. This Circular invites institutions to provide copies of their updated strategic plans and financial forecasts. It specifies the areas of strategic plans in which the Council has a particular interest, and provides detailed guidance on the format and content of financial forecasts, student and staff number forecasts and estate returns. It also asks institutions to provide details, either in their strategic plan or in a short supplementary statement, about their plans and policies in relation to a number of specific issues.
2. A complete list of the returns required by the HEFCE is given at paragraph 7. Institutions are asked to send three copies of these, and the disk-based return, to their HEFCE Regional Officer, to arrive no later than 28 June 1996.
3. Institutions that offer Initial Teacher Training are also required to make returns to the Teacher Training Agency by 28 June 1996 (see paragraphs 8 and 9).
Background
4. Each year the Council asks institutions to submit strategic plans and financial forecasts in order to inform discussions between the Council and the institution and between the Council and Government. A summary analysis of the 1995 submissions was also published in Circular 28/95. The Council now invites institutions to submit updated plans and forecasts for the period up to 1999-2000. This Circular also asks institutions (in paragraph 14) to provide details of their plans and policies in relation to a number of particular issues of interest to the Council, where such details are not in the strategic plan itself.
5. The Council expects institutions to produce strategic plans as a matter of course for their own purposes. It is not part of the Council's responsibility to approve these plans.
Value to the Council
6. Strategic plans and financial forecasts give the Council's officers a context for discussions with institutions and help to establish an informed relationship. Also, in reviewing its funding method for teaching, the Council is considering greater use of institutional strategies in informing its resource allocations. Strategic plans are of value to the Council because they:
a. Provide information about the coherence and integration of institutions' objectives and strategies, and their consistency with the Government's and the Council's broad policy objectives.
b. Inform the Council about the prospective financial health of institutions.
c. Identify trends within the sector.
d. Help the Council to prepare advice to the Secretary of State for Education and Employment on the funding needs of higher education institutions. This requires data to be submitted on a consistent basis, and the plans to be realistic.
e. Provide a context against which specific institutional proposals for additional funding can be considered.
Returns to the HEFCE
7. Institutions should send three copies of the following to their Regional Officers by 28 June 1996:
a. Their mission statement (see paragraph 10).
b. Their strategic plan for the period from 1995-96 to 1999-2000 covering areas identified in paragraph 13.
c. A supplementary statement detailing the institution's plans and policies in response to the issues listed in paragraph 14, if they are not dealt with in the strategic plan.
d. Data, including the financial forecast data and commentary, for the period to 1999-2000 (see paragraph 15). The data should also be returned on the disk provided.
e. Their annual operating statement (see paragraph 16).
f. Contact names in the institution for the strategic plan, financial forecast and estate returns.
Returns to the Teacher Training Agency (TTA)
8. The five colleges for which the Chief Officer of the TTA has the Lead Accounting Officer role should send a copy of all the information requested in paragraph 7 to:
Sheena Evans
Teacher Training Agency
Portland House
Stag Place
LONDON SW1E 5TT.
These colleges should also send three copies of the returns, plus the completed disk, to their Regional Officer at the HEFCE.
9. All other institutions which offer initial teacher training should send a copy of their strategic plan only to Sheena Evans at the TTA. Where the strategic plan itself does not provide the specific details about ITT recruitment requested in paragraph 14, these should be given in a supplementary statement.
The Mission Statement
10. The mission statement should give a clear idea of the institution's purposes and distinctive characteristics.
The Strategic Plan
11. The strategic plan should be set in the context of the institution's Mission Statement.
12. Institutions will adopt their own approach to developing a strategic plan. However, because the Council has an interest in particular areas, it would be helpful to have these clearly identified in the plan. This might be achieved within the structure of the plan, or through clear referencing in an index or covering statement.
13. The Council would expect every institution to address the following issues somewhere in their plan. They are not intended to be a comprehensive guide to the content of any individual plan, and institutions will wish to ensure that, overall, the plan fully reflects the range of their intentions.
a. Academic aims and objectives: the current portfolio and planned major shifts in subject provision and delivery for teaching, research and consultancy; developments in the student experience; access and participation; recruitment strategies and entry standards.
b. Student numbers: the effect on the institution of the Government's current policy of consolidation, and the institution's assumptions about future recruitment.
c. Staffing strategy: the staffing policies proposed to deliver the institution's objectives.
d. Estate strategy: the current portfolio and future intentions. Institutions have prepared estate strategies in response to HEFCE Circular 1/93 Strategic Estate Management. Details in this plan may take the form of an updated synopsis of this strategy and its integration with other aspects of the plan. Requirements for specific data on the estate are set out in Annex F. Separate estate strategies will not be required.
e. Information and library systems strategy: the exploitation of information systems for teaching and learning, research and administration, showing the extent to which an institution has developed an integrated information strategy and its relation to other aspects of the plan. Institutions will be aware of the Joint Information Systems Committee's (JISC's) Guidelines for Developing an Information Strategy and its work on management information systems.
f. Financial strategy: the financial forecasts, with a commentary on how they integrate with other aspects of the plan, and any intended use of the Private Finance Initiative.
g. Quality: the institution's evaluation and management of quality within all its areas of strategic activity.
14. Institutions are also asked to provide details, either in their strategic plan or in a short supplementary statement, about their plans and policies in response to the following issues:
a. Local and regional developments. This might include institutions' plans in relation to local and regional needs, and links with other education institutions such as FE colleges.
b. The reform of Initial Teacher Training. Institutions should provide specific details about their recent and planned recruitment to ITT courses, broken down by phase (primary or secondary), level (undergraduate or postgraduate) and between courses of differing lengths. They should also indicate where changes in delivery affecting total ITT student numbers are already under way and when they started. This information, which last year was requested separately in the joint HEFCE/TTA Circular Letter 29/95, will inform any HEFCE allocations for structural diversification.
c. Approaches to access and widening participation. This might include information on how the institution intends to maintain or extend opportunities for non-traditional students, or planned activity in continuing professional development/continuing vocational education.
d. Innovations in teaching and learning. This could describe developments and plans to change the way in which teaching and learning is undertaken.
e. The Technology Foresight Programme (TFP). This should describe the institution's response to reports by the Technology Foresight Steering Group or its 15 sector panels; the link with future resource allocation, including capital and equipment spend; the link with curriculum development, particularly for postgraduate courses; interactions with users of research; and plans for inter-disciplinary research.
Data
15. To assist analysis, aggregation and feedback to the sector, planning data should be provided in a consistent format, following the guidance in Annexes A to F, whose contents are described below:
a. Annex A gives detailed guidance notes on completing the financial forecast tables. This reproduces and updates the guidance to institutions' Directors/Heads of Finance in Ian Lewis' letter of 13 March. In particular, it amends the guidance on student and staff number forecasts. The student number returns are designed to be consistent with the HESES95 tables, which institutions completed in autumn 1995, and with the TTA's survey of recruitment to ITT.
b. Annex B is a template for the commentary to the financial forecasts. This was also included in Ian Lewis' earlier letter.
c. Annex C gives further guidance notes on the completion of the financial forecast tables, including assumptions about future HEFCE and TTA funding which institutions may wish to take into account in preparing their forecasts.
d. Annex D shows printouts of the financial forecast and student and staff number tables. These are for reference only: institutions are asked to complete these tables on the disk provided to the Director/Head of Finance.
e. Annex E gives guidance notes on completing the estate returns.
f. Annex F shows printouts of the estate returns. Again, these are for reference only: returns should be completed on the disk provided. The returns will update the information provided in the estate strategies submitted to the Council last year.
Annual Operating Statement
16. Many institutions, as part of good practice, have annual operating statements which identify those developments in the strategic plan to be put into effect in the coming year, and the resources required to deliver them. They also review performance against the targets for the previous year. Institutions may select management statistics to measure their activity, and use them in assessing achievement of their aims and objectives. Where these statements are available, institutions are requested to send three copies to their Regional Officer.
Late Returns
17. Some institutions may have meetings of their governing body to approve the budgets and the financial forecasts shortly after the return date of 28 June 1996. In such cases, the Council is prepared to consider requests from institutions for a limited extension to the deadline. Institutions should contact their Regional Finance Officer as soon as possible and provide in writing a request for a late submission, with the date of the meeting of the governing body, and the date on which the forecasts will be received by the Council.
Confidentiality
18. The HEFCE and the TTA will treat institution-specific information as confidential. They may, however, wish to issue summary analyses of the information on an aggregate basis, as was done in Circular 28/95.
Annex A
Financial Forecasts 1996: Guidance Notes
Introduction
1. Financial forecasts represent the strategic plan in financial terms and are integral to it. They should be institutions' own forecasts, based on their assessment of the most realistic assumptions over the period covered by the strategic plan.
Objectives
2. The Council's objectives in requesting financial forecasts are:
Primary Objectives
a. To inform the Council about the integration of institutions' strategic, estates and financial planning.
b. To inform the Council's process of monitoring of the financial health of institutions; and to identify those institutions which have, or may have, serious financial difficulties.
Secondary Objective
c. To inform the Council's advice to the Secretary of State for Education on the financial needs of higher education.
Accounting Conventions
3. The main tables of financial forecasts follow the format of the Statement of Recommended Practice: Accounting in Higher Education Institutions (SORP), introduced from 1 August 1994. Where information is being required at a more disaggregated level, the form of the Finance Statistical Return 1995-96 (FSR), published by the HESA, has been adopted. These guidance notes are consistent with the SORP and with the guidance notes for completing the FSR. In particular the Definition of Terms in Part 2 of the SORP, paragraphs 8 to 21, should be applied in completing the return. The SORP and the FSR guidance notes provide additional guidance for completing the financial forecasts.
Consolidation
4. The financial forecasts should cover the institution and all its subsidiary undertakings. Where an institution has subsidiary undertakings, the financial forecasts should be prepared on a consolidated basis in accordance with Financial Reporting Standard No 2: Accounting for Subsidiary Undertakings (FRS 2). Student Unions should be consolidated where this is the agreed treatment for that institution.
Uniformity of Returns
5. It is important that all institutions follow these guidance notes carefully. This will then allow the data to be compiled in a consistent manner and more meaningful interpretations made.
6. All moneys should be shown in units of £1,000 and where necessary be independently rounded to the nearest £1,000. For example, £147,700 should be entered as 148.
Tables to be Completed
7. The forecasts cover a six year period starting with the last completed and audited year; followed by the current year; and then the following four years. They comprise the following tables:
Table 1a Income and Expenditure Account
Table 1b Analysis of Surpluses/(Deficits)
Table 2a Analysis of Income
Table 2b Staff Costs
Table 2c Depreciation
Table 2d Other Operating Expenses
Table 2e Interest Payable
Table 3 Balance Sheet
Table 4 Cash Flow Statement
Table 5 Sensitivity Analysis
Tables 6a-6h Student Numbers
Table 6i Staff Numbers
Tables 7a-7l Commentary Data
Commentary
8. Institutions should also provide a commentary on the financial forecasts. This serves two purposes:
a. To explain how the financial forecasts represent the institution's strategic plan.
b. To provide additional, supporting information on the financial forecasts.
9. To assist institutions, a pro forma is provided at Annex B and on the disk. This should be completed by all institutions; guidance on what should be included under each heading is given at the end of these guidance notes.
Queries
10. All questions about completing the financial forecasts should be addressed to the institution's Regional Financial Officer.
Regional Team 1
(North East, North West, North Midlands, Yorkshire, Open University, Northern Ireland)
Heather Williams (0117 931 7113)
Emma Lewis (0117 931 7377)
Regional Team 2
(Midlands, Home Countries, South Coast, South West)
Richard Allen (0117 931 7389)
Philip Summers (0117 931 7376)
Regional Team 3
(Greater London)
Brian Fenelon (0117 931 7217)
Linda Josh (0117 931 7225)
Karen Pritchard (0117 931 7328)
Guidance on Tables
Table 1a: Income and Expenditure Account
Table 1 is the Income and Expenditure Account in the SORP format. The data for Heads 1 to 12 are calculated automatically and require no input.
Exceptional items should be included under the relevant head of income and expenditure and not disclosed separately; details should be provided in the commentary.
Head 13: Taxation
This will represent the estimated liability for taxation of the institution and its subsidiary undertakings.
Head 14: Minority Interest
This will represent that proportion of the surplus or deficit attributable to the minority interests in subsidiary undertakings.
Heads 15 and 16: Surplus/(Deficit) after Depreciation of Assets at Valuation and Tax
These values will be the same and are calculated automatically.
Head 17: Difference Between a Historical Cost Depreciation Charge and the Actual Depreciation Charge for the Year Calculated on the Revalued Amount
This will apply when depreciation is calculated on assets included on the balance sheet at valuation or revaluation, rather than historical costs. The amount shown will be the difference between the depreciation charge included under Head 8 of the Income and Expenditure Account, and the equivalent depreciation charge calculated on historical costs. If depreciation is included under Head 8 of the Income and Expenditure Account on the historical costs, the entry under this Head should be nil.
Head 18: Realisation of Property Revaluation Gains of Previous Years
This will occur when a revalued asset is sold or is expected to be sold over the forecast period.
Head 19: Historical Costs Surplus/(Deficit) after Tax
These values are calculated automatically.
Table 1b: Analysis of Surplus/(Deficit)
This analysis indicates where the overall surplus or deficit after depreciation of assets at valuation and before tax has been earned, between certain self-financing activities and between those activities funded out of General Income. The Income items relate to the Heads in Table 2a and the Expenditure items relate to the Heads in Tables 2b to 2e combined. The total of the Surplus/(Deficit) after depreciation of assets at valuation and before tax should correspond to the amount shown at Head 12 of Table 1a for each year. No input is required as the Table is linked to, and data extracted automatically from, Tables 2a to 2e inclusive.
Table 2a: Analysis of Income
Table 2a provides a further analysis of the five main income headings in Table 1a. The totals for each of five income headings are automatically transferred to Table 1a.
Head 1: Funding Council Grants
Sub-head 1a: HEFCE Teaching
Should contain the total block grant for teaching, as shown in the annual grant letter or additional grant letters from the Funding Council. The non-consolidated addition to core funds and reimbursement of inherited liabilities should not be included here, but under Sub-head 1c.
Sub-head 1b: HEFCE Research
Should contain the total block grant for research as shown in the annual grant letter or additional grant letters from the Funding Council. No distinction between the different components of research funding is required.
Sub-head 1c: HEFCE Non-formula Funding
Should include all elements of non-formula funding as stated in the annual grant letter, in additional letters from the Funding Council or claimed separately. Special initiatives should be included under this Sub-head. The non-consolidated addition to core funds and reimbursement of inherited liabilities should also be included under this Sub-head, and not under Sub-head 1a.
Sub-head 1d: HEFCE Capital Grants - Equipment
Amounts under this Sub-head should be in respect of equipment grant provided up to 1994-95, and include:
a. Release from Capital Grants Deferred Credit where Equipment Grant has been applied to the purchase of an asset that has been capitalised. The release will be over the lives of the assets capitalised and will offset the depreciation charge on those assets.
b. Equipment Grant applied to expenditure which has not been capitalised. In such cases the grant should be treated as income.
Sub-head 1e: HEFCE Capital Grants - Estates
Amounts under this Sub-head should be in respect of estates formula funding up to 1994-95, and include:
a. Release from Capital Grants Deferred Credit in respect of Estate Project Funding and where Estate Formula Funding has been applied to the purchase of an asset that has been capitalised; and the release from Capital Grants Deferred Credit in respect of Hunter or KDK funds, where they have been applied to the refurbishment of an asset that has been capitalised. The release will be over the lives of the assets capitalised and will offset the depreciation charge on those assets.
b. Estate Formula Funds applied to expenditure which has not been capitalised. In such cases the grant should be treated as income.
c. In addition, Hunter or KDK funds which are being treated as income and not as deferred capital grants should be shown under this Sub-head with a corresponding transfer to the long-term maintenance provision under
Sub-head 4c of Table 2d.
Details of the Hunter and KDK funds included should be disclosed in the commentary.
Sub-head 1f: HEFCE Formula Capital Funding
Amounts under this Sub-head should be in respect of formula capital funding from 1995-96 to 1999-2000, and include:
a. Release from Capital Grants Deferred Credit in respect of Estate Project Funding and where Formula Capital Funding has been applied to the purchase of an asset that has been capitalised. The release will be over the lives of the assets capitalised and will offset the depreciation charge on those assets.
b. Formula Capital Funding applied to expenditure which has not been capitalised. In such cases the grant should be treated as income.
Sub-head 1g: FEFC Recurrent Grants
Should include all recurrent grants provided by the FEFC.
Sub-head 1h: TTA Formula Funding
Should contain the total block grant for ITT and for INSET, as shown in the annual funding allocations letter or additional grant letters from the TTA. No distinction between the different components of funding is required.
Sub-head 1i: TTA Non-formula Funding
Should include all elements of non-formula funding as stated in the annual funding allocations letter or additional grant letters from the TTA, stated in additional letters or claimed separately.
Sub-head 1j: TTA Formula Capital Funding
Amounts under this Sub-head should be for 1995-96 to 1999-2000 only, and include:
a. Release from Capital Grants Deferred Credit where Formula Capital Funding has been applied to the purchase of an asset that has been capitalised. The release will be over the lives of the assets capitalised and will offset the depreciation charge on those assets.
b. Formula Capital Funding applied to expenditure which has not been capitalised. In such cases the grant should be treated as income.
Head 2: Academic Fees and Support Grants
This should cover all fee income, including short courses, self-financing full-cost courses funded by private or non-private sources and support grants in respect of all and only those students on courses for which fees are charged. It should include income from courses provided for other bodies where the institution charges either a block fee to cover a specified number of students or a fee per individual student. Income relating to, inter alia, the teaching of NHS personnel, such as nursing or midwifery courses, should be included under this Head.
Where fees are waived in whole or in part, the income properly due though not received should be included, that is the income should be returned as a grossed up figure and not the net figure. If payment from an outside fund (including the Overseas Research Students Awards Scheme (ORSAS)) is received to meet the cost of fees, it should be shown as if it were fees income. If the costs of any waivers fall on institutions' funds, the equivalent amount should be shown under Head 3 of Table 2d.
Credit-bearing Continuing Education (CE) courses should be treated as part-time or full-time credit-bearing courses, as appropriate.
Sub-head 2a (Full-time Home and EU Students)
Should only cover full-time and sandwich students for full-time degree, diploma or similar award-bearing courses. It should include fees for UK domiciled students charged at the mandatory home fee rate; fees for non-UK domiciled students, including EU students, charged at the mandatory home fee rate. It should also include Channel Island and Isle of Man students.
Sub-head 2b (Overseas Students and Other Fees)
Should include fees for students who are charged overseas and other fees. This should include students doing a second first degree and who are sponsoring themselves. Also included under this Sub-head are registration, retaining, examination and re-examination fees, where separately charged, and the top-up element of any top-up fees, where charged.
Sub-head 2c (Other Fees and Support Grants)
Should include:
a. Fees for degree, diploma or other HE credit bearing courses for part-time students; all fee income received in respect of non-credit bearing Liberal Adult Education, Continuing Education or extra-mural courses.
b. The fee income received for the provision of FE/non-advanced courses; income in respect of Department of Health/Regional Health Authorities teaching contract courses, including Project '2000'.
c. Income received from other institutions as payment for the teaching of students who are principally registered at those institutions (this may arise, for example, under some "franchising" arrangements, or where another institution "sub-contracts" the teaching of part of a course).
d. All grants made by Research Councils and other bodies in support of the training of research students. It should include bench fees, Collaborative Awards in Science and Engineering (CASE), and other awards. External income received in respect of research studentships should not be returned under this Head but under Head 3 below, according to the appropriate source.
Head 3: Research Grants and Contracts
This should include all income in respect of externally sponsored research carried out by the institution or its subsidiary undertakings.
Sub-head 3a: Research Councils
Should include income from research grants and contracts from the Research Councils covered by the Office of Science and Technology.
Sub-head 3b: UK-based Charities
Should include income from research grants and contracts from charitable foundations, charitable trusts, and so on, based in the UK and registered with the Charities Commission, and exempt charities.
Sub-head 3c: Other Research Grants and Contracts
Should include income from research grants and contracts from sources other than Research Councils, UK-based charities and exempt charities.
Head 4: Other Operating Income
Sub-head 4a: Other Services Rendered
This should show all income in respect of services rendered to outside bodies, including the supply of goods and consultancies. The Integrated Graduate Development Scheme, European Social Fund Grants and Teaching Company Schemes should be included under this Head. It should include all validation fees for courses such as those run by other institutions.
Sub-head 4b: Residences and Catering Operations
This should include the gross income from residences and catering operations including conference lettings.
Sub-head 4c: Other Operating Income
Should include operating income not specifically included elsewhere, including:
a. Grants from local authorities, which should be treated as capital or revenue according to the purpose to which the grant will be applied. Releases from such deferred capital grants should be recorded under this Sub-head. Revenue grants should be treated as income and included under this Sub-head.
b. Income received from UK health or hospital authorities for the funding of any employees of the institution, including academic teaching posts, except those relating to the provision of a service which should be recorded as Other Services Rendered under Sub-head 4a.
c. A capital grant from a source other than a Funding Council to finance, or partly finance, the construction or acquisition of a fixed asset. Where the asset is capitalised, the grant should be included in a deferred credit account and released to the Income and Expenditure Account over the useful economic life of the asset. The annual release from that deferred credit account should be included under this Sub-head. Where the asset is not capitalised, the grant should be included under this Sub-head in full, with the expenditure included within total expenditure under the appropriate Head. The treatment under this Sub-head is consistent with that in Sub-heads 1d and 1e above in respect of Funding Council capital grants. All other grants from sources other than a Funding Council should be treated as revenue and included under this Head, except in the case of research activities or for services rendered which should be included under Sub-heads 3b or
4a as appropriate.
d. All income received from intellectual property rights such as licences and patents.
e. All other operating income not covered above, including the Trans-European Mobility Programme for University Students (TEMPUS) and ERASMUS grants.
Head 5: Endowment Income and Interest Receivable
Sub-head 5a: Released from Specific Endowments
Should include the appropriate amount of the income from the investment of specific endowments necessary to match the expenditure incurred on the purpose for which the specific endowment was provided. Where capital is to be applied to match the expenditure incurred, the appropriate amount should be included under this Sub-head.
Sub-head 5b: Income from General Endowments
Should include the full amount of the income from the investment of
general endowments. This includes the income earned from the capital of the endowment whether arising from the interest or dividends on investments, bank interest or rents from real property.
Sub-head 5c: Other Investment Income and Interest Receivable
This should include:
a. Interest receivable on, and the net surplus or deficit from the realisation or revaluation of, short-term investments.
b. The surplus or deficit on the realisation of investments held as long-term funds.
c. All other interest received or receivable, not included elsewhere.
Head 6: Total Income
This is the total of Heads 1 to 5, is calculated automatically and linked to Table 1a.
Tables 2b to 2e
These tables provide a further analysis of the four main expenditure headings in Table 1a. All staff costs should be included on Table 2b; all depreciation on Table 2c; all interest costs on Table 2e; and all other non-pay operating expenses on Table 2d.
Table 2b: Staff Costs
Staff costs should cover all and only those full-time and part-time staff holding contracts of employment with the institution. Payments to non-contracted staff or individuals should be included in Other Operating Expenses. The pay of departmental administrators and other non-teaching staff employed in academic departments should be included under Head 1.
Table 2c: Depreciation
Both equipment depreciation and depreciation of premises should be analysed between that charged against Research Grants and Contracts (analysed between the costs in respect of grants and contracts from Research Councils, from UK-based charities, and from other sources); that charged to Other Services Rendered; that charged to Residences and Catering Operations; and all other depreciation of equipment or premises.
Table 2d: Other Operating Expenses
Other operating expenses should be allocated to academic department cost centres under Head 1 or to the non-departmental Heads according to where they are incurred. The costs included should be all other non-pay costs incurred except for depreciation and interest payable which are shown separately; and should include payments to non-contracted staff or individuals. Equipment which has not been depreciated should be included on this Table under the appropriate Head, according to where the expenditure was incurred.
Table 2e: Interest Payable
Interest payable should be recorded under four Heads only:
Head 4 Premises
Head 5 Residences and Catering Operations
Head 7a Other Services Rendered
Head 7b Other Expenditure
Heads 1 to 8
These Heads provide an analysis of the staff costs on Table 2b, the depreciation on Table 2c, the other non-pay operating expenses on Table 2d, and the interest costs on Table 2e, according to where the expenditure is to be incurred.
Head 1: Academic Departments
This should cover all expenditure directly incurred by or on behalf of academic departments, including departments of Continuing Education, and expenditure incurred in connection with special and short courses, which is not reimbursable by Research Councils or other bodies in respect of work carried out on their behalf. It should cover, inter alia:
a. Salaries and wages of departmental academic staff, including departmental administrators and other non-teaching staff mainly providing services to academic departments.
b. Expenditure from Research Council grants in respect of Research Training Support Grants (RTSGs) for the training of postgraduate research students, including bench fees and CASE awards.
c. The cost of departmental museums and observatories which are housed in a teaching department.
d. Expenditure on departmental computers and that incurred by departments for the use of computers outside the institution.
e. Expenditure on animal houses and similar units associated with particular departments, if necessary with apportionment between department groups concerned.
f. Payment to other institutions in respect of the teaching of students who are principally registered at the reporting institution (for example, if some of the teaching of a course is "sub-contracted" to another institution, or if a "franchising" arrangement involves such payments).
Head 2: Academic Services
This should show all expenditure incurred on centralised academic services such as the Library, Learning Resource Centres, Central Computers, etc. It should include such expenditure:
a. On all libraries and learning resource centres (central, departmental seminar etc.), whether they are under the control of the institution's librarian or not. Expenditure in binderies, on audio-visual aids, television, slide and tape production, photography, language centres etc. should be included under this Sub-head.
b. In respect of central non-administrative, non-library institutional computers. It should exclude direct costs of Central Computer services for outside bodies, but include maintenance, operating and materials costs. It should include the pay of staff involved in managing and running the installation(s), but exclude the pay of staff involved in the teaching and research of academic subjects such as computer science.
c. On museums, galleries and observatories, except those run by academic departments and included in Head 1; and expenditure on any other general academic services not covered above, such as radiation protection, international liaison office and industrial liaison. If teaching is carried out by an academic services unit, the teaching activities should not be included under this Sub-head but under the appropriate academic department under Head 1.
Expenditure on departmental computers or by departments on computers in other institutions should not be covered by this Sub-head but instead should be included under Head 1. The running costs of administrative computers and charges for the administrative use of a central computer should be shown, wherever possible, under Administration and Central Services and not here.
Head 3: Administration and Central Services
This should include all expenditure incurred on central administration, general educational expenditure, and staff and student facilities and amenities. It should not include the cost of departmental administration which should be covered by Head 1, nor the expenditure on premises, including estates maintenance and administrative staff, which should be shown under Head 4. It should include such expenditure on:
a. Central administrative staff, and such payments to Heads of Institutions, Professors, Deans, Tutors, Faculty Officers and so on, that are made in respect of central (as distinct from departmental) administrative work.
b. The running costs of an administrative computer and charges for the administrative use of a central computer.
c. Examinations, remission of fees, fellowships, scholarships, bursaries, prizes and other expenditure of a general educational nature. In particular it should include the direct costs of examinations, for example of external examiners, salaries, printing, and so on. Provisions for bad debts in respect of unpaid fees should also be included. If, however, the teaching service has not been provided, then the fees written off should instead be shown as a reduction in income against the appropriate Head in Table 2a.
d. The provision of facilities and amenities for the use of students and/or staff. In particular it should include costs in respect of the facilities provided by the Careers Advisory Service, the Accommodation Office and the institution's health service (where staff involved have more than one function, an appropriate apportionment of pay should be made); all grants made to student societies, including additional subventions to student unions for specific purposes; that proportion of the emoluments made to wardens of halls of residence in respect of all duties performed in that role; all costs in respect of athletic and sporting facilities except maintenance; and all expenditure on staff and student amenities and facilities not covered above. It should not cover any expenditure on physical education as an academic subject which should be shown under Head 1. Income received for the use of athletic facilities should be shown under Sub-head 4a of Table
2a. Maintenance of sports premises should not be included under this Sub-head but should be included under Head 4.
Head 4: Premises
This should show all expenditure incurred (whether centrally or departmentally) on the maintenance of premises, including academic buildings, central academic services, art centres, institution's health service premises, pavilions, sports buildings, etc., and on roads and grounds, except residences and catering (which should be covered by Head 5). Staff concerned with building maintenance, including estates administrative staff, should be included under this Head. Gross expenditure on the maintenance of premises which appears in operational accounts, such as those concerned with running halls of residence, catering operations and other student accommodation, should be excluded from Head 4. Payments to medical authorities should be included. Expenditure should be separated as follows:
Sub-head 4a: Running Costs
This should include:
a. Uniform business rate charged by local authorities.
b. All payments made for the rental of premises.
c. Recurrent costs, including fuel, gas, electricity, water and sewerage.
d. Premises Expenditure not included above: for example, the cost of insuring all premises and their contents. In addition, the cost of cleaning (salaries, wages and materials, and payments in respect of contract cleaning) and the cost of portering and security services should be included.
Sub-head 4b: Routine Maintenance
This should include the maintenance of premises, including the pay of staff involved. It covers expenditure to keep existing premises in good repair, and to replace or maintain existing systems.
Sub-head 4c: Long-term Maintenance Provision Charge
Long-term maintenance should be provided for on the basis of a long-term maintenance plan. The Income and Expenditure Account should bear an annual charge to spread the total costs of long-term maintenance as equally as possible between years.
In addition this will include the transfer to the long-term maintenance provision to cover Hunter or KDK funding provided and included as income under Sub-head 1e of Table 2a.
Head 5: Residences and Catering Operations
This should show the gross expenditure incurred in providing the residence, catering and conference operations, including the cost of maintenance of residential and catering premises, salaries and any other identifiable costs relating to these operations. The depreciation costs and interest costs of these operations should be included on Tables 2c and 2e respectively. The long-term maintenance provision charge for residences and catering operations should be included under this Head.
Head 6: Research Grants and Contracts
This should provide a total of the direct costs attributed to research grants and contracts.
Sub-head 6a: Research Councils
Should include direct expenditure on research grants and contracts from the Research Councils covered by the Office of Science and Technology.
Sub-head 6b: UK-based Charities
Should include direct expenditure on research grants and contracts from charitable foundations, charitable trusts, and so on, which are based in the UK and registered with the Charities Commission, and exempt charities.
Sub-head 6c: Other Research Grants and Contracts
Should include direct expenditure on research grants and contracts from sources other than Research Councils, UK-based charities and exempt charities.
Head 7: Other Expenditure
Sub-head 7a: Other Services Rendered
Should provide a total of the direct costs attributed to other services rendered.
Sub-head 7b: Other
Should include all expenditure not covered by other expenditure Heads.
Head 8: Total Expenditure
This is calculated automatically and the figures link directly to Table 1a.
Table 3: Balance Sheet
Head 1: Fixed Assets
Should include land, buildings and equipment which are expected to have an economic useful life of more than 12 months from the date of acquisition, and which meet institutions' capitalisation thresholds.
The assets should be stated at cost or valuation. Donated assets should be included at open market value at the time of acquisition.
Sub-head 1a: Tangible Assets
Should include land, buildings and equipment in use in the institution or subsidiary undertakings.
Sub-head 1b: Investments
Should include investments made by the institution or its subsidiary undertakings out of funds other than endowment funds, and which are not intended to be realised within the next 12 months. Amounts as at 31 July 1995 should be stated at market value. Investments in subsidiary undertakings will be eliminated on consolidation.
Head 2: Endowment Asset Investments
Include investments made out of restricted or general endowment funds and which are not intended to be realised within the next 12 months. Investments as at 31 July 1995 should be stated at market value.
Head 3: Current Assets
Sub-head 3a: Stocks and Stores in Hand
Should be included where practical to do so and where the amounts involved are material. They should be included at the lower of cost or net realisable value.
Sub-head 3b: Debtors
Should include all amounts due to the institution as a whole, less any provisions for bad and doubtful debts. The current portion of any long-term loans should be included under this Head. Prepaid costs should be included to the extent that the cost relates to expenditure in the following academic year.
Sub-head 3c: Investments
Should include investments and short-term deposits which are intended to be realised within 12 months. Investments held as current assets should be shown at the lower of cost and net realisable value.
Sub-head 3d: Cash in Hand and at Bank
Should include all accounts held in the form of cash, including bank accounts. Bank overdrafts should not be netted off against positive balances but should be shown separately under Current Liabilities.
Head 4: Creditors: Amounts Falling Due Within One Year
Include all liabilities which are payable within
12 months. Provisions should not be included under this Head, but disclosed separately under Head 8.
Sub-head 4a: Creditors
Should include all amounts due within the next 12 months, or income received in advance and not included elsewhere.
Sub-head 4b: Current Portion of Long-term Liabilities
Should include that portion of long-term liabilities, whether reimbursable by the Funding Council or not, that is due to be repaid within the next 12 months.
Sub-head 4c: Bank Overdrafts
Should include all bank overdrafts, which should not be netted off against Cash in Hand and at Bank.
Head 5: Net Current Assets/(Liabilities)
This will be the total of Head 3 less Head 4 and is calculated automatically.
Head 6: Total Assets Less Current Liabilities
This is Heads 1 and 2 plus Head 5 and is calculated automatically.
Head 7: Creditors: Amounts Falling Due After More Than One Year
Include all amounts outstanding at each year end on external borrowings and which are due for repayment more than 12 months from the balance sheet date. The portion due within 12 months should be included under Sub-head 4b above.
Sub-head 7a: Reimbursable by the Funding Council
Should include outstanding debts and finance leases with local education authorities which are expected to be reimbursed by the Funding Council through its funding for inherited liabilities.
Sub-head 7b: External Borrowings
Should include all other debts and finance leases.
Head 8: Provisions for Liabilities and Charges
Should include all amounts set aside on a regular and/or planned basis, to ensure that sufficient amounts are available to meet estimated future liabilities or costs, although the exact amount and timing of the future liabilities may not be known. Details of all provisions should be disclosed in the commentary.
This should include:
a. The balance on the long-term maintenance provision, after taking account of the annual amount charged to the Income and Expenditure Account and annual expenditure in accordance with the institutions' long-term maintenance plan.
b. The balance of amounts set aside to meet the future costs of enhanced pensions for staff no longer employed by the institution or its subsidiary undertakings.
c. All other amounts set aside on a regular and/or planned basis, to ensure that sufficient amounts are available to meet estimated future liabilities or costs, although the exact amount and timing of the future liabilities may not be known.
Head 9: Total Assets Less Liabilities
This is Head 6 less Heads 7 and 8 and is calculated automatically.
Head 10: Deferred Capital Grants
Capital grants received from the Funding Council and other bodies in respect of assets which have been included within fixed assets should be included under this Head and released to the Income and Expenditure Account over the estimated useful lives of the assets. The balance will represent the unreleased portions of the capital grants received.
Head 11: Total Net Assets
This is Head 9 less Head 10 and is calculated automatically.
Head 12: Endowments
Should include amounts provided to the institution by way of endowments.
Sub-head 12a: Specific Endowments
Should include those endowments where the donor has specified the uses to which the capital or income should be applied. Income on the investment of such endowments should be included under this Head, and released to the Income and Expenditure Account as necessary to match the specific expenditure for which the endowment was provided.
Sub-head 12b: General Endowments
Should include those endowments where the institution has the discretion as to the uses to which the capital or income should be applied. Income on the investment of such endowments should be included in the Income and Expenditure Account in full.
Head 13: Reserves
Sub-head 13a: Revaluation Reserve
Where fixed assets are included at valuation, or revaluation, the difference between the valued or revalued amounts and the historical cost of the assets should be included under this Sub-head. Changes to valuations of such assets, whether increases or decreases, should also be included. The capital element of the reimbursement of inherited liabilities should be taken directly to this Sub-head. Where assets stated at valuation or revaluation are sold, the revaluation reserve will be reduced by the difference between the valued or revalued amount and the historical cost of the asset. The movements on the Revaluation Reserve should be detailed in the commentary.
Sub-head 13b: Minority Interest
Should represent the value of any minority interests in subsidiary undertakings.
Sub-head 13c: Income and Expenditure Account
Should represent the total of all other reserves of the institution and its subsidiary undertakings. The annual surplus or deficit on the Income and Expenditure Account before transfers should be added. Details of reserves and reserve movements should be included in the commentary.
Table 4: Cash Flow
Should represent increases or decreases in cash and cash equivalents. It should be completed in accordance with Financial Reporting Statement 1: Cash Flow Statements. The format adopted is that for the indirect method as shown in the SORP.
A reconciliation is required of the movement in cash and cash equivalents shown in the cash flow statement to the balances in the balance sheet.
Table 5: Sensitivity Analysis
The purpose of the sensitivity analysis is to indicate the financial effects of a number of scenarios on the forecast financial results of institutions. Each scenario requires the following assessments:
a. Estimation of the potential consequences.
b. Quantification of the financial consequences if no action taken.
The cumulative effects of all the changes from the original forecast figures over the forecast period should be shown.
Scenarios 1 to 9 are required to be completed by all institutions. Scenarios 1 to 4 cover the cumulative impact of annual changes which would compound over the forecast period if no action were taken; scenarios 5 to 9 cover the cumulative impact of step changes in 1996-97 if no action were taken in that or subsequent years.
Scenarios 10 and 11 are available for institutions to provide additional scenarios if there are areas of sensitivity specific to the institution and not included elsewhere.
The commentary should include a description on the actions which would be taken and the impact on the financial forecasts should these scenarios come about, either individually, in combination, or collectively. It would be helpful to separate the actions into those which relate to the compounded annual changes and those which relate to the step changes from 1996-97.
Tables 6a to 6h: Student Numbers
The tables are designed to be consistent with the HESES95 survey, which institutions completed in autumn 1995, and to keep the data requested to a minimum. For definitions of academic subject categories (ASCs), mode of study, level of study and new entrants, please refer to that survey (Circular 19/95). None of the student number data will be used for funding purposes. The following modifications have been made to the tables which were completed for the HESES95 survey:
a. For each year, it is necessary to complete only two columns: 'UK and EC' (both fundable and non-fundable) and 'Island and Overseas'. This changes the treatment of Island students from that in previous strategic plan returns, in order to be consistent with HESES.
b. In tables 6a to 6c institutions are asked to provide details of the number of UK and EC undergraduate and postgraduate students expected to receive awards from English or Welsh LEAs, SAAS or DENI at the mandatory undergraduate fee levels, disaggregated according to the three fee bands. Institutions should provide this breakdown according to the fee band they expect a particular course to attract. In addition, the number of franchised out students included in the table and, where appropriate, the number of FE students at the institution should also be given.
c. In tables 6d to 6f, institutions are asked to provide forecasts of ITT student numbers, broken down according to phase (primary or secondary) and 12 secondary subject groups. The TTA has already signalled that there will be a restructuring of the subject breakdown of secondary ITT. For now, however, institutions should use the same breakdown as was required in last year's strategic plan submissions, and in the Teacher Training Agency's 1995-96 ITT Survey. Primary registrations should not be split into subject areas. Within the 12 secondary subject groups:
i Mathematics includes statistics.
ii English includes drama.
iii Science includes physics, chemistry, biology, integrated science and other sciences.
iv Technology includes design and technology, engineering, computer studies, business studies and commerce.
v Physical education includes movement studies, outdoor studies and dance.
vi Other includes classics, economics, other social sciences and other subjects.
d. In tables 6g and 6h institutions are asked to provide forecasts of full-time new entrant student numbers. This will assist the Council in examining how the Government's policy of consolidation is taking effect. For definitions of new entrants please refer to paragraph 11 of Annex B of the HESES95 Survey. Students recorded here should be new entrants between 1 August and 31 July, equivalent to the sum of columns 5 and 6 of Tables 1a, 2a, and 3a in the HESES95 Survey.
Students to be Counted
Institutions should, in the first instance, refer to Annex A of Circular 19/95 for details of those students who are to be included in this return. The returns should include HE students at associate colleges and HE students who are franchised out.
All student numbers should be on a head count basis, not full-time equivalents (FTEs). Institutions should provide forecasts of the number of registered HE students in each academic year. Non-completions up to 1 December in each academic year should not be included: non-completions after 1 December should be included as registrations. This is equivalent to the sum of columns 1 and 2 of the HESES95 return.
Students recorded under Initial Teacher Training (ITT) should be all and only those on courses which lead to Qualified Teacher Status upon successful completion. Institutions should enter details of ITT student numbers on tables 6d to 6f only. ITT student numbers on tables 6a to 6c do not require input, as these will be calculated automatically from the data recorded on the separate ITT tables.
Table 6i: Staff Numbers
Staff numbers are collected to support information on pay expenditure in Table 2b of the financial forecasts. For the 1996 forecasts the staff data table has been changed to reflect this purpose. Institutions are asked to provide details of academic staff and of all other staff on the institution's payroll on a FTE basis, forecast as at 31 July each year from 1996 to 2000. The FTE of academic staff will include the sum of Field 11 of each member of staff on HESA's individualised staff record, plus the FTE values for other academic staff who are only on the staff record aggregate return. The FTE values for non-academic staff should be derived using the same FTE definitions as for Field 11 of the individualised staff record.
Commentary
Institutions should provide a detailed commentary on their forecasts, which should be in the form of the template at Annex B.
The following areas should be covered:
1. Introduction
This should cover the context in which the forecasts have been prepared. It should include how the elements of the institution's strategic plan and estate strategy have been included in the forecasts, and how these developments are to be financed.
2. Major Assumptions
Table 7a provides for details of the assumptions made for each academic year: the impact on pay expenditure of pay settlements which occur throughout the year; the impact of non-pay inflation; short-term and long-term interest rates; contribution rates on research grants and contracts and on other services rendered; and the efficiency gains on teaching and research funding incurred in 1995-96 to 1996-97 and assumed for 1997-98 to 1999-2000. Where interest rates payable are a mixture of fixed and variable, institutions should indicate a composite rate.
3. Comparison with the 1995 Financial Forecasts
The major changes between the 1995 and the 1996 financial forecasts should be explained on Table 7b. Such changes will arise through changes in levels of activity or other underlying assumptions, such as pay and non-pay inflation or levels of funding. The reasons for these changes should be explained using the references provided.
4. Specific Actions Taken to Ensure Continued Financial Viability
This provides an opportunity for institutions to set out the actions that they have taken or expect to take to ensure that expenditure does not exceed income, taking one year with another, as required in the Financial Memorandum between the HEFCE and Institutions. These should cover not only the impact on the figures, but the consequences for staff, students and the impact on the provision of teaching and research and the institution's estate.
5. Changes in Pay and Non-pay Expenditure
The reasons for the year-on-year changes in pay and non-pay expenditure should be explained. This would include indicating for each year of the forecasts the impact on pay expenditure of pay awards, incremental drift and changes to the numbers of staff employed; and the impact on non-pay expenditure of price changes and changes in the level of activity.
6. Details of Significant Increases or Decreases over the Forecast Period
These should link back to the assumptions made in preparing the forecasts, and cover significant changes in income, expenditure, assets and liabilities. These could for example relate to changes in activities; major developments or initiatives. The details should be listed as indicated in the template.
7. Details of Long-term Maintenance
Table 7c should include details of long-term maintenance in accordance with the institution's long-term maintenance plan. Table 7d should detail how the long-term maintenance is to be funded. Movements on the long-term maintenance provision should be detailed on Table 7e, and agree with the balances in the forecasts of provisions on Table 7h, included under item 9 of this commentary.
8. Analysis of Reserves and Reserve Movements
Table 7f should include details of the movements in the Revaluation Reserve (Table 3 Head 13a) over the forecast period. Details should also be provided on Table 7g of all the reserves which are included within the total shown as the Income and Expenditure Account balance (Table 3 Head 13c) on the balance sheet. The value of these reserves which are uncommitted and cash backed should also be stated.
9. Analysis of Provisions
Table 7h should provide details of the provision for backlog and long-term maintenance, SSAP 24 and other provisions. The totals should correspond to the balances forecast on the balance sheet (Table 3 Head 8).
10. Details of Capital Expenditure and Expected Method of Funding
Forecast capital expenditure and the expected method of finance should be provided on Table 7i. Details of major capital projects over the forecast period should be provided on Table 7j, with details, on Table 7k, of any capital projects which are expected to be funded through the Private Finance Initiative.
11. Sensitivity Analysis
This should detail the actions which the institution expects to take should any, or a combination, of scenarios 1 to 9 on Table 5 come about.
Scenarios 10 and 11 are for institutions to set, and institutions should indicate the change that is being tested and provide the same information as is required for scenarios 1 to 9 above.
12. Cash Flow Statements
A reconciliation between the annual surpluses or deficits after depreciation of assets at valuation and before tax, as shown on the Income and Expenditure Account (Table 1a Head 12), and the net cash inflows or outflows, as shown on the Cash Flow Statement (Table 4 Head 1), should be provided on Table 7l.
If there are differences between the changes in the Cash and Cash Equivalents on Table 4 and the changes in the Cash in Hand and at Bank values shown at Sub-head 3d on Table 3, these should be disclosed, and detailed as indicated on the template.
Details of Other Items, at Heads 2, 4 and 6 of Table 4, should be provided as set out in the template.
Commentary Approval
The commentary should be signed by the institution's Director of Finance, or equivalent.
Annex B
Financial Forecasts 1996: Commentary (Template)
1. Introduction
2. Major Assumptions
The major assumptions which underpin the forecasts should be provided in Table 7a.
Note: the recovery rates included on the table should be the value of the contribution from the activity expressed as a percentage of the total direct costs of that activity. The contribution will be the difference between the income receivable and the direct costs (additional direct staff and non-staff costs) relating to the activity.
3. Comparison with the 1995 Financial Forecasts
The major changes between the 1995 and the 1996 financial forecasts should be provided by completing Table 7b. The reasons for these changes, against each of the headings, are:
1.
2.
3.
4.
5.
6.
4. Specific Actions Proposed to Ensure Continued Financial Viability
5. Changes in Pay and Non-pay Expenditure
Table 2b includes year-on-year percentage changes in pay expenditure, covering the impact of pay awards, incremental drift and changes in staff numbers. The bases for these changes are:
a. Pay Expenditure: 1994-95 to 1995-96
b. Pay Expenditure: 1995-96 to 1996-97
c. Pay Expenditure: 1996-97 to 1997-98
d. Pay Expenditure: 1997-98 to 1998-99
e. Pay Expenditure: 1998-99 to 1999-2000
Table 2d includes year-on-year percentage changes in non-pay expenditure, covering the impact of price changes, changes in the level of activity and changes in the level of expenditure. The bases for these changes are:
a. Non-Pay Expenditure: 1994-95 to 1995-96
b. Non-Pay Expenditure: 1995-96 to 1996-97
c. Non-Pay Expenditure: 1996-97 to 1997-98
d. Non-Pay Expenditure: 1997-98 to 1998-99
e. Non-Pay Expenditure: 1998-99 to 1999-2000
6. Details of Significant Increases or Decreases over the Forecast Period
The significant increases or decreases in income, expenditure, assets and liabilities, and the reasons for these changes are:
a.
b.
c.
d.
e.
f.
7. Details of Long-term Maintenance Plan
The estimated amounts of long-term maintenance to be undertaken each year, in accordance with the institution's long-term maintenance plan, should be detailed on Table 7c.
The backlog of long-term maintenance, amounting to £[ ], including that identified in the Hunter/KDK surveys, is included within the above long-term maintenance plan and will be eliminated by [ date ].
The sources for funding the long-term maintenance expenditure shown on Table 7c should be detailed on Table 7d.
The forecast movements on the long-term maintenance provision should be detailed on Table 7e.
8. Analysis of Reserves and Reserve Movements
The forecast movements on the Revaluation Reserve should be detailed on Table 7f.
The forecast balances on other reserves, within the total balance on the Income and Expenditure Account as shown on the Balance Sheets should be detailed on Table 7g.
9. Analysis of Provisions
The forecast balances on provisions should be detailed on Table 7h.
10. Details of Capital Expenditure and Expected Method of Funding
The forecast levels of capital expenditure and methods of financing should be disclosed on Table 7i.
The major capital projects within the above totals should be detailed on Table 7j.
The capital projects which have been or are expected to be funded through the Private Finance Initiative, and which are therefore not included in the details on Table 7j, should be detailed on Table 7k.
11. Sensitivity Analysis
The actions which would be taken in the event of any or a combination of a number of the scenarios in Table 5 occurring are:
a.
b.
c.
d.
Other scenarios which have been considered are [ ]. In such circumstances the actions taken would be:
a.
b.
c.
12. Cash Flow Statements
The reconciliation of the surplus/(deficit) for the year to the net inflow/(outflow) from operating activities should be detailed on Table 7l.
The reasons for the differences between the increase or decrease in Cash and Cash Equivalents shown at Head 7 on Table 4, and the net changes in the Cash in Hand and at Bank and Bank Overdraft values shown at Heads 3d and 4c respectively on Table 3, are:
a.
b.
c.
d.
The items included as Other Items on Table 4 Heads 2, 4 and 6 are:
Head 2
a.
b.
c.
d.
Head 4
a.
b.
c.
d.
Head 6
a.
b.
c.
d.
[Name]
Director of Finance
27 June 1996
Annex C
Further Guidance Notes for Completing Data Tables
Financial Data Tables
1. The financial data tables covering the years up to 1999-2000 were enclosed in the letter from the HEFCE's Head of Finance of 13 March 1996, with guidance notes on their completion. There are some minor changes to these and to the format and content of the student and staff number tables and guidance notes. The guidance notes have therefore been re-issued as Annexes A and B of this Circular. The tables to be completed are enclosed on the disk provided to institutions' Directors/Heads of Finance. They are also reproduced for reference as Annex D of this Circular.
2. This annex provides details of the assumptions on funding which institutions may wish to take into account in preparing their financial forecasts, together with the latest forecast of changes in the GDP Deflator. The assumptions on funding are not statements of HEFCE or TTA policy, but are provided solely to assist institutions in preparing their forecasts.
GDP Deflator
3. The latest forecast GDP Deflators, together with figures adjusted for the academic year to 31 July, are shown below as a guide to future inflation levels.
| FY | AY | |
|---|---|---|
| 1995-96 | 2.75 | 2.75 |
| 1996-97 | 2.75 | 2.67 |
| 1997-98 | 2.50 | 2.42 |
| 1998-99 | 2.25 | |
| 1999-2000 |
Assumptions about HEFCE Funding
Transitional Arrangements
4. The Council has made clear that it wishes to avoid unmanageable rates of change in institutions' funding. For the purposes of the forecasts, it should be assumed that:
a. The roll-on into 1996-97 of the 1995-96 transitional funding allocations, as shown in Table E of the individual recurrent grant letter of 27 February 1996, will have been phased out by the start of 1997-98.
b. Any transitional funding supplement first received in 1996-97, as shown in Circular 4/96, will be rolled forward at 50 per cent of its value in 1997-98 and will have been phased out by the start of 1998-99.
Baseline Reductions
5. The 1995 Budget announcement stated that the total resources (that is, grant plus tuition fees) made available for higher education would be subject to an annual efficiency gain of 3 per cent in real terms in financial years 1996-97 and 1997-98, and 2 per cent in 1998-99. Institutions should expect that baseline reductions will continue to be required, and that they may be applied differentially.
Access Funds
6. Access funds received and paid should not be included in the Income and Expenditure Account, but should be on the Balance Sheet.
Funding for Teaching
7. For the purposes of the forecasts only, institutions should assume that:
a. The HEFCE review of its funding method for teaching will have a neutral impact on the core funds received by individual institutions. These should be subject to assumptions about inflation and baseline reductions (see paragraph 5).
b. There will be no formula-based marginal funding in 1997-98 for either full-time or part-time students.
8. Assumptions from 1998-99 onwards should reflect the anticipated share of any additional marginal funding provided to meet the planned increase in student numbers.
Funding for Research
9. The HEFCE policy of reallocating QR research resources between three families of subjects (medical, science and technology related, and non-science and technology related) was completed in the allocations for 1996-97. The 1996 Research Assessment Exercise will affect the funding of QR from 1997-98. However, for the purposes of the forecasts, institutions should assume that the 1996 Research Assessment Exercise and any changes to the HEFCE's funding method for research will have a neutral impact on the QR, DevR and GR funding received by individual institutions. Research funding should be subject to assumptions about inflation and baseline reductions.
Non-formula Funding and Special Initiatives
10. Allocations which have been announced should be included.
11. Please give details in the Financial Forecast commentary of any assumptions made for Non-formula Funding and Special Initiatives.
12. Joint Information Systems Committee (JISC) allocations should only be included if institutions have been advised that they will receive them.
Inherited Liabilities
13. Those institutions which have inherited residential rents or leases have had the opportunity to opt in 1994-95 for a lump sum from the Council equivalent to reimbursement for the next three years. For the purposes of the forecasts:
a. Institutions which have not chosen to accept a lump sum should assume reimbursement will continue up to and including 1997-98.
b. All institutions should assume that there will be no further reimbursement from the Council after 1997-98.
14. For the purposes of the forecasts, institutions should also assume that:
a. Non-residential rents and leases will continue to be reimbursed by the Council unless they are to be capitalised by institutions during the forecast period, in which case the financial impact of capitalisation should be reflected in the forecasts. Institutions should provide details in the commentary to the forecasts of any assumptions made on the capitalisation of non-residential rents and leases. Any such capitalisation will require HEFCE agreement.
b. Inherited debts will continue to be reimbursed by the Council. If any buy-outs are planned, they should not be reflected, as the financial impact will be neutral.
c. Inherited staff liabilities will continue to be reimbursed by the Council.
Capital
Formula Capital
15. For the purposes of the forecasts, institutions should assume that formula-based allocations remain at the cash level of the 1996-97 allocations during the forecast period.
Projects
16. Funding for Estate Projects should only be included where funding has already been agreed, albeit conditionally, by the Council.
Backlog Maintenance
17. Circular Letter Number 1/96 Backlog Maintenance stated that all Council funding for building and maintenance projects should be subject to a final cut-off date of 31 March 1998. In summary, institutions should assume for the purposes of the forecasts that:
a. HEFCE funding for eligible priority I and II work identified in the Hunter Building Condition Survey ceased after March 1996.
b. HEFCE funding for eligible work identified in the Hunter Electrical Survey and the KDK Survey will continue until 31 March 1998.
Assumptions about TTA Funding
Funding for Teaching
18. The 1995 Budget settlement for the TTA announced that efficiency gains of 2 per cent were assumed for ITT for each year to 1998-99. Efficiency gains for INSET were assumed at the same level as for HEFCE-funded provision (see paragraph 5). Institutions should expect that baseline reductions will continue to be required, although they may be applied differentially.
19. Intake targets for primary ITT are planned to increase from 11,500 in 1996-97 to 14,500 in 1999-2000. Intake targets for secondary ITT are planned to increase from 18,900 in 1996-97 to 24,200 in 1999-2000. Institutions should give details in the Financial Forecast commentary of any assumptions made for increases in intakes to primary or secondary ITT.
20. Having taken account of the baseline adjustments described in paragraph 18 and any uplifts for inflation, institutions should assume that, at a national level, recurrent funding for ITT during the period of the forecast will change pro-rata to the expected change in all-year ITT student numbers. It should be assumed that any changes in the TTA's funding method, while having a neutral impact nationally, may have a bearing on the funding received by individual institutions from 1997-98. Institutions should provide details of any assumptions made in the commentary to the forecasts.
21. The transfer of resources to partner schools associated with the shift to schools-based training of teachers should be included, and disclosed separately in the commentary to the forecasts.
Transitional Arrangements
22. For the purposes of the forecasts it should be assumed that any financial buffer allocated in 1996-97 will be phased out by the start of 1997-98.
Capital Funding
23. For the purposes of the forecasts, institutions should assume that formula capital funding for ITT and INSET allocated in 1996-97 will roll forward into 1997-98 and subsequent years.
Research Council Income
24. This should include both the additional direct and indirect costs which are now recoverable on grants from the Research Councils.
Commentary
25. Institutions are asked to provide a detailed commentary on their financial forecasts. This should include a summary of how the elements of the strategic plan have been reflected in the forecasts. Where the submission date for strategic plans does not fit well with an institution's planning cycles, the financial forecast commentary should explain how the plan has subsequently developed. It should also explain how the elements of the institution's estate strategy have been reflected in the forecasts, and how these are to be financed. More detailed guidance on areas to be covered in the commentary are included in Annexes A and B.
Timetable for Returns
26. Institutions should return their forecasts on the disk provided together with three hard copies to their Regional Officer at the HEFCE, Northavon House to be received by 28 June 1996 or such other date as has been agreed in writing with their Regional Finance Officer (see paragraph 17 of this Circular). The five colleges for which the TTA has the Lead Accounting Officer role should also return one hard copy to Sheena Evans at the TTA by the same date. Please provide the names of the people to be contacted in the event of queries.
Annex D
The tables are not available in the electronic version of this circular. They are contained on the disks sent to institutions and are shown on the printed circular.
Table 1a Income and Expenditure Account
Table 1b Analysis of Surplus/(Deficit)
Table 2a Analysis of Income
Table 2b Staff Costs
Table 2c Depreciation
Table 2d Other Operating Expenses
Table 2e Interest Payable
Table 3 Balance Sheet
Table 4 Cash Flow Statement
Table 5 Sensitivity Analysis: Effect of Each Scenario before Compensating Action
Table 6a Strategic Plans: Full-time Student Number Forecasts
Table 6b Strategic Plans: Full-time Sandwich Year out Student Number Forecasts
Table 6c Strategic Plans: Part-time Student Number Forecasts
Table 6d Strategic Plans: ITT Full-time Student Number Forecasts
Table 6e Strategic Plans: ITT Full-time Sandwich Year Out Student Number Forecasts
Table 6f Strategic Plans: ITT Part-time Student Number Forecasts
Table 6g Strategic Plans: Full-time and Sandwich New Entrants Student Number Forecasts
Table 6h Strategic Plans: Part-time and Sandwich New Entrants Student Number Forecasts
Table 61 Staff Number Forecasts
Table 7a Major Assumptions
Table 7c Details of Long-term Maintenance
Table 7g Analysis of Reserves
Table 7j Major Capital Projects
Table 8a Floor Areas (m2)
Table 8b Valuation (£000)
Table 8c Maintenance Expenditure
Table 8d Running Costs (£000)
Table 8e Estate Records
Table 8f Space Management
Table 8g Problems
Table 8h Opportunities
Table 8i Major Projects
Table 8j Financing
Annex E
Estates Return: Guidance Notes The Estates Return should be completed by the Director/Head of Estates.
Table 8a: Floor Areas
Current Year - Define the latest year for which strategic assumptions are made.
Measuring Practice
All floor areas exclude residences, unless specifically requested.
Gross Internal Area
The gross internal area of a building is the area within the inside faces of external walls and includes areas occupied by internal walls and partitions.
Net Space
The net space is the gross internal area less the balance areas (see below); it is the floor area planned or provided for the primary function of the building, such as teaching, research, library or administration. It includes, for example, academic stores, service rooms, workshops, kitchens, chair and bar stores, changing rooms and showers, porters' offices or kiosks, first aid and staff rest rooms. Allowance should be made for these in assessing space need. It excludes accommodation on NHS sites.
Room Areas
For space management and other purposes, institutions often measure the areas of individual rooms to the faces of internal walls and partitions. Whereas any removal of such walls or partitions would thus affect the total area of rooms, it would make no difference to the gross internal area or net space unless balance areas are thereby brought into net space. If records contain only room areas, allowances should be added to arrive at an accurate assessment of net space.
Balance Areas
The floor area planned or provided as part of the gross internal area to enable the building to function, such as corridors, stairways, entrance lobbies, foyers, lifts, lavatories, cloakrooms, cleaners' stores, plant rooms, ducts, boiler houses, calorifier chambers, and fuel stores. Where buildings provide 'open plan' spaces, such as libraries, the whole space, including circulation space, is included in net space except only those areas which, without structural alteration, are solely and irrevocably providing for the functions that are properly balance areas.
Designated Space
The percentage designated should be that space in the institution whose primary purpose is the provision of various categories of activities. Examples of typical activities are listed below.
Exclusively Taught Courses
General and specialist teaching rooms
Lecture theatres
Teaching laboratories, stores and workshops
Learning Resource Centres
Teaching staff offices
Curriculum gymnasia and sports buildings
Exclusively Research & Associated Activities
Research is defined as for the 1996 Research Assessment Exercise (Circular RAE96 2/95). Associated activities are those outside the definition but for which research space is used and include activities such as consultancy, and routine testing and analysis of materials, components and processes.
Research laboratories, stores and workshops
Offices of research staff
Offices of research support staff
Both Teaching and Research
Faculty and department offices
Academic services
Academic staff offices
Libraries
Computer terminal rooms
Departmental stores and workshops
Animal houses
Support Activities
Offices of Vice-Chancellor, Director, Principal, etc.
Offices of Deputies, Pro-Vice-Chancellors, etc.
Council chamber, boardroom
Administrative departments and offices of support staff
Students Union, coffee area, games room
Sports hall, pool not used primarily for the curriculum
Assembly hall
Refectory, kitchen, bars
Chaplain's room
Medical rooms, welfare offices, crèche
Committee rooms
Accommodation office
Careers office
Maintenance depot, central stores and workshops
Caretaker's office
Shop
Bank
Launderette
Bookshop
Other
Chapel
Theatre
Concert hall
Museum
Gallery
Conference centre
Field station
Investment property
Premises used substantially other than for the institution's own teaching or research
Space Full-Time Equivalents (SFTEs) should be calculated using a factor which reflects expected attendance at the institution's premises (not including NHS sites) as follows:
a. Full-time 1.0
b. Sandwich (registered for four years with one year out) 0.75
c. Accelerated, part-time, block release, franchised courses and others. Use a factor which reflects the expected use of the institution's space relative to the requirement of a full-time student.
For example, if the full-time expectation is 25 hours per week over 30 weeks, then:
A. Three terms of half a day each week =
(4 hours x 30 weeks) / (25 hours x 30 weeks) = 0.16
B. One term full-time =
(25 hours x 10 weeks) / (25 hours x 30 weeks) = 0.33
Definitions of Students and Staff
Students on Taught Courses
Include all undergraduates; and postgraduate students attending courses that are mainly taught even though including a dissertation or who are on Postgraduate Certificate in Education (PGCE) courses. Such postgraduate students will have a qualification aim (Field 41) on the HESA Student Record of 3, 5, 7-13 or 62.
Research Students
Postgraduate students attending courses that are mainly research although these may contain some formal teaching. These students will have a qualification aim (Field 41) on the HESA Student Record of 1, 2, 4, 6 or 96.
Academic Staff
Teaching and/or Research staff. This covers all staff on the HESA Individual Staff Record.
Other Staff
This will include all other, non-academic staff.
Table 8b: Valuation
Insurance Value
This is the value for which the whole estate is insured.
Depreciated Replacement Cost (DRC)
This is the value in accordance with the RICS Appraisal and Valuation Manual (the Red Book) Practice Statement 4.8. That is:
'The aggregate amount of the value of the land for the existing use or a notional replacement site in the same locality, and the gross replacement cost of the buildings and other site works, from which appropriate deductions may then be made to allow for the age, condition, economic or functional obsolescence and environmental factors etc; all of these might result in the existing property being worth less to the undertaking in occupation than would a new replacement.'
Adjusted Replacement Cost (ARC)
The ARC is based on the contractor's method of valuation and is an estimate of the capital replacement cost which is then adjusted to allow for obsolescence, age and location. It is often provided for rating returns, and institutions may wish to use this instead of DRC.
Book Value
This is the value entered into the institution's accounts.
Table 8c: Maintenance Expenditure
Long-Term Maintenance
This is premeditated, planned maintenance and includes:
a. Replacement of systems or elements, such as roofs, windows or boilers, over a period of five to ten years or more.
b. Irregular maintenance, attending to slowly developing problems, such as repointing.
c. Regular, scheduled maintenance, such as external or internal repainting.
Routine Maintenance
This includes expenditure to keep the premises in good repair and includes work resulting from breakdowns, breakages, vandalism and fault correction, particularly those associated with user requests, such as radiator leaks. It also includes the annual servicing of mechanical and electrical services, such as lifts, air conditioning units and heating systems.