Request 98/08

1998 Mid-year financial return

Executive summary

Purpose

1. This document asks institutions to update their 1997-98 financial forecasts, originally submitted to the Council in July 1997. It also asks for details of the annualised servicing costs of long-term and short-term borrowings, guarantees to third parties and overseas tuition fee income.

2. We need this information to monitor the financial health of institutions, and compliance with the requirements of the Financial Memorandum.

Key points

3. The format of the mid-year financial return is largely the same as last year. The update to the financial forecasts is required for 1997-98 only. Additional information is requested this year about the impact on overseas tuition fees of the financial crisis in South East Asia.

4. In addition to providing details of long-term borrowings drawn down, institutions are asked to provide details of loans approved but not yet drawn down.

5. The short-term borrowing return is amended to reflect the revisions in the Financial Memorandum (Circular 15/97 paragraph 58).

6. Copies of this circular, and disks for completion and return to the Council, have been sent separately to Directors of Finance.

Action required

7. Returns should be sent to Joanne Iles at the HEFCE by 27 March 1998.

Outturn for 1997-98

8. In July 1997 institutions submitted five-year financial forecasts and student number projections in response to Circular 9/97 'Strategic Plans and Financial Forecasts'.

9. Institutions are now asked to provide the latest estimate of actual outturn for the academic year 1997-98. Reasons for significant variances in income and expenditure compared with the July 1997 forecasts should be explained in a separate commentary. There is no prescribed format for this commentary, although the note numbers in Annex A should be used for reference.

10. The estimated outturn should take account of any notified or forecast revisions to the 1997-98 grant allocation, as well as the impact of other known or forecast changes in income and expenditure. Examples of revisions include changes in: HEFCE grants, FEFC grants, TTA grants, holdback, MASN penalty, non-formula funding, special initiatives, TSS adjustments and the impact of the South East Asia crisis.

11. Institutions should provide their returns in the format set out at Annex A. This is consistent with the format of Table 1a of Circular 9/97.

Discretionary reserves

12. Institutions should state the estimated level of discretionary reserves at 31 July 1998, taking account of the revised surpluses or deficits for the year (Annex A).

Long-term borrowing

13. We need information on the annualised servicing cost (ASC) of long-term borrowings, as defined in paragraph 57 of the Financial Memorandum between the Council and institutions. Institutions should provide this information in the format set out in Annex B, which has been revised to include details of loans agreed but not yet drawn down. Guidance on calculating the annualised servicing cost of long-term borrowing is included at Annex F. This has been revised to clarify the position where inherited liabilities have been rolled into core funding.

14. The table at Annex B should be completed by all institutions, including those whose ASC is below the 4 per cent threshold. The calculation of the ASC should include all long-term borrowings in place on 28 February 1998. Where there are no long-term borrowings, institutions should enter 'nil' in this table. The income figure to be used in determining the ASC percentage is the total income as reported in the latest audited financial statements, or the estimated amount for the current academic year if that is lower. This figure should be adjusted to exclude the interest element of inherited debt where this is reimbursed by the Council.

15. Information is needed from all institutions to give us a complete picture for the sector.

Short-term borrowing

16. Institutions should give details of net cash (as defined in 'Financial Reporting Standard 1(Revised 1996): Cash Flow Statements') at the beginning and end of the academic year 1997-98. They should also give the highest level of negative net cash sustained for seven consecutive days during the period 1 March 1997 to 28 February 1998. This information should be in the format set out in Annex C, Table 1.

Guarantees to third parties

17. Annex D requests information on all guarantees given to third parties. (This refers to all parties which are not consolidated within the group's financial statements.) Returns should include guarantees given on behalf of subsidiary undertakings, and those where the possibility of loss is remote and thus disclosure is not required under SSAP 18 'Accounting for Contingencies'.

Overseas tuition fees for 1997-98 and 1998-99

18. Institutions should give details of overseas tuition fees for each year, at Annex E. We require the following information:

• total overseas tuition fee income for 1997-98 and 1998-99 as forecast in July 1997
• the amount of those fees that were forecast to come from students from countries affected by the South East Asia financial crisis (Malaysia, Thailand, South Korea, Hong Kong, Singapore and Indonesia)
• latest forecast of tuition fee income from students from countries affected by the South East Asia financial crisis for 1997-98 and 1998-99
• the amount of income now expected to be lost (line 2 minus line 3 in the table)
• the actions taken or to be taken to address that impact.

Date of return

19. The return should be approved and signed by the Designated Officer of the institution.

20. Two hard copies of the tables and the completed disk, with files stored in Lotus 123.WK1 format or Excel Version 4, should be returned to:

Joanne Iles
Analytical Services Group
HEFCE
Northavon House
Coldharbour Lane
Bristol BS16 1QD

by Friday 27 March 1998.

21. Copies of this document and disks containing the tables have been sent separately to Directors of Finance. Annex A on the disk contains each institution's forecast data for 1997-98, extracted from the 1997 financial forecasts.

22. Any queries arising from this request should be addressed to your Finance Adviser:

Annexes

The annexes in the printed document and on the disks sent to Directors of Finance are not available in this electronic version of the document.

Annex A - Income and expenditure account 1997-98

Annex B - Long-term borrowing

Annex C - Short-term borrowing

Annex D - Guarantees to third parties

Annex E - Overseas tuition fees 1997-98 and 1998-99

Annex F - Clarification of annualised servicing costs (ASC) calculations