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HEFCE closed at the end of March 2018. The information on this website is historical and is no longer maintained.

Many of HEFCE's functions will be continued by the Office for Students, the new regulator of higher education in England, and Research England, the new council within UK Research and Innovation.

The HEFCE domain - - will continue to function until September 2018. At this point we will close the site entirely and all its information will only be available from the National Web Archive.


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Dear Vice-Chancellor or Principal

Value for Money reporting

1. This letter sets out our requirements for the submission of a Value for Money (VFM) report as part of the Annual Accountability Return due in December 2016, and our plans for next year’s submission. In summary, the changes are as follows:

  • all institutions are required to submit a VFM report in 2016, with no prescribed format
  • the VFM report in 2016 must be presented to an institution’s governing body, or to a delegated subcommittee responsible for assurance on VFM
  • we are asking for feedback from the sector on VFM reporting guidance
  • for the December 2017 submission, guidance on VFM reporting will be issued.

Background to the redevelopment of VFM reporting

2. HEFCE’s grant letter received in March 2016 from the Department for Business, Innovation and Skills asks us to collect annual reports from institutions on how they are becoming more efficient and productive over time. The intention is that these reports become a useful tool for institutions to monitor their efficiency performance. We have since been in discussion with Universities UK (UUK), GuildHE, the British Universities Finance Directors Group, and other professional bodies in the sector about how this requirement should be met.

3. There is an increasing expectation for the sector to provide more evidence to demonstrate how value for money in higher education is being achieved. Reporting from institutions is fundamental to supporting any case for investment in English higher education. HEFCE requires information to produce a forthcoming annual report on the aggregate efficiency of the sector (a further requirement of our recent grant letter and in keeping with the recommendations of the 2015 UUK review of efficiency, effectiveness and value for money led by Professor Sir Ian Diamond, available at

4. Furthermore, the consideration of value for money is a necessary and central part of institutional governance. Governors and trustees across the sector (including student representatives) should be presented with information that will allow them to understand VFM at their institution, to set a VFM strategy that is appropriate for that institution and its stakeholders, and to drive change that will lead to improved VFM.

5. In previous years HEFCE has asked higher education institutions to submit reports on VFM as part of their Annual Accountability Returns. Submission of these reports was optional and there was no prescribed format or standard content. Last year over 90 institutions submitted reports, though our review of these identified an understandable lack of consistency and comprehensive information.

6. Through discussions with sector representatives we have established the need for firmer guidance on the information that should be included in VFM reports. This will need to recognise the changing landscape for higher education regulation and policy.

7. We are redeveloping the VFM reporting process to address the requirements above. Our approach aligns with the Diamond review, which called for a common framework of key information on efficiency that institutions can use to inform their own VFM reports. We are implementing these changes over the next two years, giving institutions time to adjust to the revised requirements.

Changes to VFM reporting

8. The submission of a VFM report in December 2016, as part of the Annual Accountability Return covering the academic year 2015-16, is required of all HEFCE-funded higher education institutions. In recognition of the important role of governance in this area, it will be a requirement that the 2016 VFM report is received by an institution’s governing body or a delegated subcommittee responsible for seeking assurance on VFM and for driving VFM activity.

9. For this year, the format and content of VFM reports is not prescribed and we are not issuing formal guidance. However, in Annex A we set out a commonly accepted definition of VFM and identify some sources of evidence that might be used, the majority of which are existing data collections that are already available to institutions.

10. We are interested in views from the sector on this suggested approach to VFM reporting and would welcome any feedback on what guidance would be useful. This can be directed to Matt Davey (tel 0117 931 7013, email We will use this feedback, along with the submitted VFM reports, to develop more specific guidance that will be issued for the Annual Accountability Return due in December 2017.

11. Regardless of any HEFCE requirements, we would encourage each institution to continue with or further develop its own approach to value for money reporting, aligned with its strategic plan and meeting the requirements of its students and other stakeholders.

Other initiatives

12. We recognise that, beyond reporting, up-to-date guidance on value for money strategy and practice for higher education institutions is currently limited. We are looking to the sector to develop guidance that reflects the changing environment in which it operates and the changing stakeholder interests, and have asked UUK and the Committee of University Chairs to take forward this work with HEFCE support.

13. We also appreciate that governing bodies can require help to fulfil their role in monitoring VFM. The Leadership Foundation for Higher Education will be including publications and events that address these needs in its Governor Development Programme.

Yours sincerely

Professor Madeleine Atkins

Chief Executive

Date: 17 August 2016

Ref: Circular letter 23/2016

To: Heads of HEFCE-funded higher education institutions

Of interest to those
responsible for:

Finance; Governance

Enquiries should be directed to:

Will Dent, tel 0117 931 7437, email
Matthew Davey, tel 0117 931 7013, email