Dear Vice-Chancellor or Principal
1. This letter clarifies our requirement for the submission of annual accountability information. by Friday 15 April 2011. A response is required by all institutions.
2. In November 2010 we agreed to allow higher education institutions (HEIs) to defer the submission of part of their financial forecasts and associated commentary until April 2011 ('Update to our requirement for the 2010 accountability returns in relation to financial forecasts', HEFCE Circular letter 27/2010). This decision was taken given the uncertainty about HEFCE funding beyond 2010-11 and the implications of the October 2010 Spending Review announcement. We appreciate that some uncertainty remains about funding from 2012-13 but we feel it is important to understand the current assumptions and plans being developed by the sector.
3. In respect of the financial forecasts, institutions will be required to submit the following:
- Full financial forecasts for the period to 2013-14 to include an update of the 2010-11 forecasts submitted in December. These should take into consideration our recent announcement 'Funding for universities and colleges for 2010-11 and 2011-12' (HEFCE Circular letter 05/2011), the implications of the 2010 Spending Review, and any other information that the institution considers pertinent.
- If you submitted full financial forecasts in the 1 December 2010 return and you are confident that your assumptions underpinning these forecasts take into account the impacts described above, then you should confirm to your HEFCE assurance consultant that the original forecasts remain your best estimates and that you will therefore not be resubmitting.
4. Institutions must submit a commentary accompanying the financial forecasts that answers the following questions (as stated in paragraphs 37-39 of 'Annual accountability returns 2010', HEFCE 2010/25):
- How is the HEI ensuring its sustainability, including investment in its estates and infrastructure?
- What are the principal risks to the HEI’s financial health and sustainability over the forecast period, and how is the HEI responding to these?
- What scenario planning has been undertaken in relation to the financial position over the forecast period? What actions has the HEI taken/does it plan to take to address the impacts of any reductions in income streams?
- What value-for-money (VFM) initiatives has the HEI implemented in the past 12 months? (If the HEI produces a VFM report that contains this information, we would be pleased to receive this in response to this question.)
- How is the HEI seeking funding/refinancing of significant loan repayments during the forecast period? Do you envisage any significant liquidity issues over the forecast period?
- What assumptions have you made in developing the financial forecasts, including any significant movements in the forecast of student numbers?
- What significant movements (±10 per cent in any one year) on the income and expenditure account and material changes on the balance sheet (including detail on any material exceptional items) do you expect and how do you explain these?
5. In addition to the above requirements, we expect the commentary to explain any significant movements in the 2010-11 forecast from that submitted in the December 2010 financial forecasts. There is no need to provide comments if the sole reason for the difference is due to the changes announced in HEFCE funding for 2010-11.
6. In previous years, not all institutions provided explicit responses to all of the questions. The questions incorporated in the financial commentary for the 2009-10 return have been amended in discussion with higher education finance directors, and institutions should provide all of the necessary information in their commentaries.
7. If you submitted a full financial commentary in the 1 December 2010 return and you are confident that your commentary addresses all of the questions in paragraphs 4 and 5 of this letter, then you do not need to submit a revised commentary. However, you will be required to notify your assurance consultant that you will not be resubmitting.
8. In our original request for financial tables and commentary we requested that these documents were approved by the governing body before submission to us. We expect any submission of financial information in April 2011 to have been approved by the governing body. Where this is not possible – due, for example to the timings of meetings – we request that the information is presented and approved at the next available opportunity.
9. The higher education sector's 2009-10 underlying financial performance was better than previous years. We ask institutions to note however that the HEFCE income for 2010-11 appears to be overstated at a sector level; therefore we request that they consider their own forecast 2010-11 income and ensure that this reflects the announced efficiency savings to date. A new report on the financial health of the sector (HEFCE 2011/06) has been published which goes into more detail.
10. We understand that some HEIs may be concerned about submitting information to us on future fee levels before these have been finalised and published. Specifically, some have expressed concern about possible requests to HEFCE under the Freedom of Information (FOI) Act. But we anticipate, in the event of an FOI request for individualised HEI information on possible future fees prior to their planned publication, that the commercial interest exemption would apply along with a number of other exemptions. Depending on the timing of any such request, disclosure of this information in advance of its planned publication in July may also prejudice the effective conduct of public affairs and/or the economic interests of the UK.
11. We will send more detailed guidance directly to heads of finance on how to make the submission of annual accountability information. Your assistance in this matter is, as always, greatly appreciated.
Sir Alan Langlands