The proposed access regulator could cause a conflict of interest in the Higher Education Funding Council for England, the council's chief executive claimed this week.
Speaking to the Association of University Administrators at Derby University, Sir Howard Newby said Hefce had a number of concerns about the forthcoming Office for Fair Access, principally its relationship to the Hefce board and to him as chief accounting officer for the sector.
"If Hefce is directed by the regulator to withhold a proportion of an institution's grant and I believe doing so would imperil its financial robustness, it's not clear to me how this will be resolved," he said.
Sir Howard said he was also worried about the levels of bursary support universities might be obliged to provide. "If they are set at too high a level, I would be concerned there would not be enough left to invest in the sector," he said.
Jeremy Taylor, a Treasury policy adviser, was called a liar during his address to the AUA. Sue Holmes, a senior administrator at Sheffield Hallam University and an executive member of the AUA, challenged Mr Taylor, who was explaining 6 per cent a year average real growth in university funding, which he said was a significant increase.
"You're lying to us," said Ms Holmes, who was chairing the session. "You are asking us to do more and more with the money."
Brian Roper, vice-chancellor of London Metropolitan University, agreed:
"There is something very strange going on and we need to know where all this extra money is going because we haven't seen any and neither have many other successful institutions. Something seems to be going wrong between the Treasury handing over the money and Hefce dividing it up."
Sir Howard said the "generous settlement" had had to be distributed in a challenging way for reasons outside its control. "Once the research resources had been ringfenced by the chancellor, the teaching settlement did not allow for the expansion of the sector, so while some institutions did very well, others did not."
Mr Taylor said he hoped universities would soon be offered a three-year planning cycle, although Professor Roper said the "jam tomorrow" mantra was wearing very thin.
Challenged over the practice of fining universities for failing to meet recruitment targets, Mr Taylor said the government intended to bear down on dropouts. Some factors may be outside universities' control but not all, and dropouts represented an enormous waste of both money and time, he said.
On the 50 per cent target, Mr Taylor acknowledged that students could not be forced to study subjects just because universities wanted them to.
"There is a tension, particularly in some shortage areas, but expansion must be driven by informed consumer demand," he said. "Many of the problems need to be resolved at the school level."
* The "them and us" culture that has for so long soured relations between academics and administrators needs to be laid to rest, university managers heard this week.
Ian McNay, emeritus professor of higher education and management at Greenwich University, told the AUA, that the inequality of the relationship had stifled creativity.
"The culture of blame is so strong that people are afraid to try new ideas and to make mistakes," he told the conference.