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A response is required by Wednesday 20 June 2012

1. This letter clarifies our requirement for the submission of annual accountability information by Wednesday 20 June 2012. A response is required by all higher education institutions.

2. For the 2011 annual accountability returns we agreed to defer the submission of part of institutions’ financial forecasts and associated commentary until June 2012. ('Annual accountability returns 2011’, HEFCE 2011/28). This was due to the degree of uncertainty last autumn about, among other things, student number limits, future HEFCE funding, and student recruitment in the new fee regime. BUFDG had been consulted regarding this approach.

3. In the financial forecasts and commentary due in June, institutions are required to submit full financial forecasts for 2012-13 to 2014-15, and to update the 2011-12 forecasts submitted in December. These should take into consideration our recent grant announcements and any other information that the institution considers pertinent. We appreciate that some uncertainty remains about funding and student number controls from 2013-14, but feel it is important that we understand the current assumptions and plans being developed by the sector.

4. In the commentary that accompanies the financial forecasts institutions must answer the following questions (as stated in paragraphs 45-48 of HEFCE 2011/28):

  1. Explain how the institution is ensuring its sustainability, including the institution’s strategy, quality of teaching and research, management of its key risks and investment in its estates and infrastructure.
  2. Explain the assumptions about student recruitment over the period of the forecasts, including how the institution is mitigating any risk and what scenario planning or sensitivity analysis has been undertaken.
  3. Explain significant movements (±10 per cent in any one year) on the income and expenditure account and material changes on the balance sheet (including the detail on any material exceptional items).
  4. Explain the key assumptions made in developing the financial forecasts.

In addition, we expect the commentary to explain any significant changes in the 2011-12 forecast from that submitted in December 2011.

5. In previous years, not all institutions provided explicit responses to all of the questions asked. This year’s questions have been amended and reduced in number following discussion with higher education finance directors. We expect the changes will enable institutions to provide all of the necessary information in their commentaries.

6. We expect any submission of financial information in June 2012 to have been approved by the governing body. Where this is not possible – due, for example, to the timings of meetings – we expect that the information will be presented and approved at the next available opportunity.

7. The higher education sector’s 2010-11 underlying financial performance was better than in previous years. A report on the financial health of the sector published in March (HEFCE 2012/05) provides a full overview; it is available on the HEFCE web-site under Publications.

8. We will send detailed guidance directly to heads of finance on how to make the submission of annual accountability information by the end of April.

9. We expect to issue risk assessment letters to individual institutions at the end of September following our review of the information submitted in both December and June.

10. We also expect to issue guidance about the annual accountability returns process for 2012 at the end of September.

Yours sincerely

Sir Alan Langlands
Chief Executive

Date: 12 April 2012

Ref: Circular letter 10/2012

To: Heads of HEFCE-funded higher education institutions

Of interest to those
responsible for:

Finance

Enquiries should be directed to:

Jacqui Brasted, tel 0117 931 7389, e-mail j.brasted@hefce.ac.uk