The University of Wales, Lampeter, is under investigation by the Higher Education Funding Council for Wales (HEFCW).
The council has commissioned external consultants to review the university's managerial capability. The consultants, HWCA, will assess the university's strategic direction and business model and whether they have the "viability and ability to deliver a sustainable institution".
Times Higher Education understands that closure of the university, which has origins dating back to 1822, has been ruled out. But merger, relocation and collaboration with other institutions are all options under consideration.
The funding council said: "In carrying out the study, the consultants are to take into account the economic and social significance of the university to the town and the region."
The review, which is expected to be completed in early autumn, follows criticism of Lampeter's management by the Quality Assurance Agency. The QAA said in an audit report last year that it had "limited confidence" in the university's ability to safeguard academic standards and described the institution's reporting systems as "fundamentally flawed". It said that concerns raised by external examiners had not been dealt with effectively.
Robert Pearce, the vice-chancellor, said: "Throughout Lampeter's existence there have been questions about the nature of the institution and the appropriateness of its direction." He said the HEFCW review was "more about the institution than its management team", but added that if it concluded that the university's strategic direction should change "there would be issues about whether the current management is appropriate".
One question raised by the consultants is the "breadth and depth" of the liberal arts institution's research. "With increasing selectivity in research funding, all universities are looking at whether to concentrate funding on a small number of areas or to encourage all staff to be engaged in research," Professor Pearce said. "I'm pretty sure (the consultants) have understood our position, which is to encourage all staff to do research but to ensure it is accountable activity. If we went down the route of leaving some departments research inactive, they could easily end up in an unviable position."
The university's traditional strengths lie in theology and religious studies, but Professor Pearce said that "turning a broad-based institution into a monotechnic one would be dangerous and unsustainable".
At the University and College Union annual congress in May, regional representatives said that Lampeter managers had raised the possibility of not implementing the October pay rise or national pay and grading structures. The university has set a target of six voluntary redundancies from across the institution with a view to saving £300,000 in the next financial year.
Mark Oley, UCU regional support officer, told Times Higher Education: "It will be a relief to all concerned that the uncertainty over the university's future may soon be resolved. UCU is pressing HEFCW that the university should remain in the town in some form."
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