HEFCE’s funding and regulatory

role

HEFCE’s current role

• Primarily to fund teaching, research and related activities at higher education institutions in England (£4bn)

• Policies in learning and teaching, widening participation, research, knowledge exchange and leadership, governance & management

• Requirement to assess quality in funded institutions

• Statutorily independent (set up via 1992 Further & Higher Education Act)

• Accountability – financial sustainability, governance & risk

• Principal regulator of exempt charity HEIs

• Universities and colleges are

independent bodies, and are free to

raise money from a range of other

sources.

• HEFCE works in partnership with

them.

• Universities and colleges have to

account for the public funding they

receive.

Relationship with HE institutions (HEIs)

Financial health

Actual

2011-12 2012-13 2013-14

Total income £23,277M £24,330M £25,554M

Operating surplus £972M £943M £991M

Operating surplus as % of total income 4.2% 3.9% 3.9%

Historical cost surplus £1,138M £1,208M £1,272M

Historical cost surplus as % of total income 4.9% 5.0% 5.0%

Earnings before interest, taxation, depreciation and amortisation

£2,087M £2,188M £2,332M

TRAC sustainability gap** (£726M) (£870M) (£883M)

TRAC sustainability gap as a % of total income 3.1% 3.6% 3.5%

Cash flow from operating activities as % of total income

8.1% 8.3% 8.4%

Net liquidity as number of days’ expenditure 118 123 122

External borrowings as % of total income 23.5% 25.6% 26.3%

Discretionary reserves excluding FRS17* as % of total income

56.0% 61.8% 64.4%

• audit – risk-based approach

• annual accountability returns process

• data audits/assurance

• institutional risk monitoring

risk classifications letters to HEIs support strategy.

Monitoring and accountability

MAA changes

• Financial commitments

• Register of HE providers

• Jisc subscriptions

• Audit Code of Practice

• Exchequer interest- include SLC monies

• Data assurance-includes SLC data

• Annexes

• A financial commitments threshold based on earnings not

income above which HEFCE approval is required

• Better reflects institutions ability to service debt

• Simpler than ASC, but not perfect

• Takes into actual and forecast information

• Short-term or long-term commitments, it makes no

difference

Financial commitments threshold

– The future arrangements in terms of financial

commitments will be as follows.

• There will be one threshold

• The threshold will be a multiple of EBITDA

• Financial commitments will be those on the balance

sheet

• HEFCE will assess affordability

• Additional information in financial forecasts

• Communication

Financial commitments threshold

• Confirmed as mandatory from August 2014

for three years only

• JANET valued but comments about value

of other Jisc services

• Scope for Jisc to engage more with

customers

Jisc subscriptions

• Streamlined

• Principles-based and links to good practice,

rather than prescriptive detail

• Helpful comments to clarify requirements

Audit Code of Practice

Exchequer interest

• Triggers for repayment:

– First trigger around solvency is unchanged

– Second trigger is now linked to reduction to

total of HEFCE grant and SLC payments

• Annual Audit Committee opinion on the

adequacy and effectiveness of the HEI’s

arrangements for:

‘management and quality assurance of data

submitted to the Higher Education Statistics

Agency, the Student Loans Company,

HEFCE and other bodies’.

Data assurance

• Reduced in number, as proposed

• Now five:

– Audit Code of Practice

– Institutional engagement, support and

safeguarding actions

– Financial commitments

– Exchequer interest

– Exempt charities

• Previous information available on web-site

Annexes

• Accountability gap following shift from grant to

tuition fees

• Sector-led proposal to address this gap, in

preference to BIS proposal

• Applies to HEIs and FECs in receipt of HEFCE

funding

• Consultation by UUK, Guild HE and AoC

Agreement on institutional

designation

Projected levels of teaching income

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

£m

illio

ns

Other fee income

Dept of Health fee income (Home & EU)

Overseas fee income (non EU)

FT UG fee income (Home & EU)

Other funding body grants

HEFCE Teaching grant

2010-11 to 2012-13: actual income

2013-14 to 2016-17: forecast income

Agreement on institutional

designation

• Short-term solution

• August 2014 to July 2017

• New regulatory framework – legislation –

needed for longer-term

HEFCE’s role

• monitor HEIs’ and FECs’ compliance with the terms of the

agreement; and

• engage with HEIs and FECs where there are indications

of possible non-compliance, and reach a resolution so that

the terms of this agreement continue to be met, as set out

below. This will include working with the SFA where

relevant.

The agreement also sets out possible consequences where

an HEI or FEC no longer complies with this agreement.

Agreement on institutional

designation

HEFCE’s role in specific course designation

• Oversight of the application system since June 2013

• Legally confined to processing and providing analysis of applications against BIS designation criteria

• Dealing with changes to existing courses

• Undertaking annual monitoring of alternative providers

• Working with BIS, SLC, QAA & HESA

• Quality – Must have a successful and

recent review with the Quality Assurance

Agency

• Course Eligibility – as set out in the

Student Support Regulations (2011),

course template and validation/approval

documentation

BIS designation criteria

• Financial Sustainability, Governance

and Management – solvency and fitness to

receive public funds

• Franchise arrangements – must satisfy

the BIS definition, expectation that HEI

applies for designation

• BIS has introduced annual designation from 2015-16

BIS designation criteria

• Launched in August 2014, lists HE

providers which are regulated in England.

• It sets out the powers they have, and the

regulatory controls which apply to them.

• Continuing development work

• http://www.hefce.ac.uk/reg/register/about/

Register of HE Providers

Thank you for listening –

any questions?