Bad managers put six 'at risk'

October 27, 2006

A string of self-inflicted problems, including management incompetence, revealed in letters sent out by the funding council. Phil Baty reports

Six higher education institutions officially deemed to be a "at risk" of financial collapse have all been blighted by poor management, The Times Higher has learnt.

Documents obtained under the Freedom of Information Act detail for the first time the reasons why six universities and colleges are under special supervision by the Higher Education Funding Council for England.

Copies of letters that institution heads received from Hefce this year reveal a catalogue of self-inflicted problems beyond less-controllable market conditions, such as student recruitment and retention. All institutional names and other identifying features have been removed.

The letters reveal concerns about weak financial forecasting leading to "poor decision-making", "inaccurate" student recruitment forecasting and inadequate risk management and other administrative problems.

One institution was told it had five separate areas where it was at risk, including poor "budget management" and an "unsatisfactory ability to control staffing costs", when it had relied on increases in staff productivity that could not be delivered.

A seventh university, not officially on the "at risk" list, was also heavily criticised for failing to inform the funding council of major reforms. Hefce said this was against the spirit of openness that it required.

The mismanagement revelations angered the University and College Union, which will next week publish details of a survey in which university staff bemoan the quality of their managers.

Sally Hunt, UCU joint general secretary, said: "Poor management can have a massive impact on the way people are able to perform in their jobs, on morale and, in some extreme cases, on whether or not people's livelihoods are put at risk.

"It is unacceptable that UCU members' jobs are put at risk because of poor management and it is up to institutions to ensure this does not happen. The initial findings (of our report) indicate that many members are frustrated by the way their institutions are now run."

Roger Kline, head of employment at UCU, said: "These letters make sorry reading. They should alarm everyone who cares about higher education.

"The clarity with which Hefce describes the ways in which staff and students directly suffer as a result of the incompetence or worse of some of our institutional leaders should set alarm bells ringing."

Four out of the six at risk institutions, some of which are not universities, were identified during the financial year 2005-06. A further two were added to the list after the end of the last accounting year, in March 2006.

Hefce has a four-point scale of risk, and all six were in the second-highest risk category, 2*, which means that institutions face challenges that threaten their future operations in the short to medium term.

The letters were sent to the institutions between May and September this year.

They reveal that as well as concerns about mismanagement some of the struggling institutions suffered as a result of more general changes in the recruitment market - likely to intensify with the introduction this year of top-up tuition fees.

One institution suffered from the "sector-wide decline in the planned international student income", Hefce revealed. Another institution suffered a "weakness" in student recruitment at a time of "increasing competition" and "market volatility".

A Hefce spokesman said: "We are working with these institutions under our support strategy to help them address their risks.

"There is no risk of closure; if there was, we would take action to protect the interests of students, staff and the taxpayer, as we have always done."  



Institution A

Risk 1: "Significant and sustained downward trend in student numbers...

"Ucas 2006 applications were down and 2005-06 overseas enrolment were down against budget."

Risk 2: "Weak financial position, deteriorating further... significant issues in some areas of internal control... improvements required in governance."

Institution B

Risk 1: "Not on asustainable financial trajectory...

"Low levels of free reserves, combined with negative net liquidity and poor income and expenditure account performance.

"Must urgently improve its finances through increased income generation and cost management."

Risk 2: "Forecasts are proving unreliable and may give rise to poor decision-making... and a lack of confidence by Hefce."

Institution C

Risk 1: Redacted under the Freedom of Information Act. Risk 2: Described only as "management stretch" in the documentation, with all other information redacted.

Hefce said that "there are challenges that might undermine the continuation of current operations in the short to medium term, unlessfurther action is taken".

Institution D

Risk 1: "Continues to display poor financial performance... uncertainty over the effectiveness of planned reduction in staff expenses."

Risk 2: "Unsatisfac-tory ability to control staffing costs... no indication of an action plan to improve the culture of cost management."

Risk 3: "Has consistently returned optimistic income and expenditure account forecasts."

Risk 4: "The governing board and external auditors... lack confidencein the procedures for appraisal, decision-making and risk-management in projects."

Risk 5: A "financial risk implication" relating to the trading deficit operated by a subsidiary company.

Institution E

Risk 1: "Long-term financial sustainability."

Risk 2: "Inaccurate student recruitment forecasting."

Institution F Risk 1: "Breakdown in relationship with an unnamed external business partner, requiring 'urgent' agreement on working arrangements."

Risk 2: "Needs additional accommodation and to improve the quality of existing provision."

Risk 3: "There is a high risk that target student expansion.. and retention will not be achieved."

Risk 4: "The (institution) will not commit itself to (and possibly finds it difficult to afford) further investment in the poor estate, which adversely affects student recruitment."

Risk 5: "Net liquidity 'depleted', mainly to finance the estates developments."

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