The number of universities at fiscal risk is far smaller than recent reports suggest, Phil Baty reveals
Six higher education institutions are currently "at risk" of financial failure, The Times Higher can exclusively reveal.
Funding chiefs confirmed the current position on the financial health of the sector without naming the institutions amid a furore this week over the release of the names of institutions deemed to have been at risk in the past.
Historical financial monitoring records, covering 1998 to 2003, made public under the Freedom of Information Act, revealed that at least 17 higher education institutions had been in the "category 1" risk band - indicating an "immediate risk" to the institutions' future.
A series of board papers, released on the advice of the Government's Information Commissioner, show in detail how 46 named universities and higher education colleges were deemed to have been at risk, at varying levels of severity, at one time or another in the five years.
Among 17 in the highest "category 1" risk band were the universities of Lancaster, East London, Westminster, Greenwich, Derby and South Bank. Luton University, now Bedfordshire University, was in the highest-risk category in four of the five years.
After some newspapers reported that the information suggested continuing financial risks to named institutions, Hefce has stressed that the material released under the Fo... is at least three years old - some of it almost a decade old - and that all named universities are now on a sound financial footing.
The names of three institutions have been removed from the historical documents on the basis that their disclosure might increase the risks they still face.
The Higher Education Funding Council for England confirmed to The Times Higher this week that its latest data on the financial health of institutions, as of March 2007, lists six institutions as being at "higher risk". This is a new categorisation of risk and encompasses the old "category 1" risk as well as the old slightly lower-risk category 2. It covers "institutions whose health is considered to be immediately at risk, or likely to be at risk in the near future, unless action is taken".
Hefce said: "Higher education is a high-performing sector. Institutions are generally well managed and at low risk, but there are usually a small number at higher risk at any one time. We work with these institutions to ensure that they develop a robust recovery plan. This normally results in their restoration to financial health."
No more than about half a dozen institutions have been on the "at risk" list between 2004 and 2007, Hefce said, although institutions have changed category.
Diana Warwick, chief executive of Universities UK, said: "The headlines about this issue have been inaccurate, misleading and irresponsible. There is no doubt that higher education is a UK success story, bringing substantial benefits to the UK economy and with a well-deserved world-class reputation. Institutions are multimillion-pound businesses - and risk is part of any business of that size and complexity."
She added that in the period covered by the disclosed documents, the sector was working with tight operating margins. "This should come as no surprise, as at that time UUK was lobbying hard for increased resources in its spending review submissions and other public discussions. These led to a Higher Education Bill, enabling new income streams and opportunities for additional funding, which institutions are now beginning to benefit from."
Sally Hunt, general secretary of the University and College Union, said: "It is a matter of concern if any higher education institution is in financial difficulties. It is only three months since Hefce declared the sector to be in a financially sustainable position to the end of the decade."
Hefce has confirmed that it will in future publish its Institutional Risk Board papers three years after they have been considered at the board meetings. Papers for 2004 will be released after a review in early 2008.
Hefce chief executive David Eastwood said: "There is public interest in knowing that particular institutions have faced difficulties and are in the process of working their way through these. Generally, with support, institutions are able to recover sufficiently within three years."
However, Hefce will continue to withhold any information where there is deemed to be a continuing, current risk of financial failure.
How do funding chiefs define which institutions are at risk?
In Higher Education Funding Council for England documents for 1998 to 2003 released this week, four risk categories are referenced:
1. Institutions whose health is considered immediately at risk.
2*. Institutions whose health is likely to be at risk in the near future unless action is taken by the institution as a matter of urgency.
2. Institutions whose health is likely to be at risk in the near future unless action is taken by the institution.
3. All others.
These categories were developed at a time when Hefce did not formally communicate risk assessments to the institutions.
In 2005 it simplified risk bands into two categories: "at higher risk", covering previous categories 1 and 2*, and "not at higher risk", covering categories 2 and 3.
From 2005, Hefce directly informed each institution in the "at higher risk" category, and in 2006 wrote to all institutions including those "not at higher risk" informing them of the categories they were in.
When an institution is at higher risk, Hefce said, "it is generally because its combined financial and market positions require steps to be taken to ensure its long-term sustainability. It can also be because the rate, scale and cost of strategic change are stretching the resources and management capacity."
Where an institution is deemed to be at risk, Hefce implements its "support strategy".
A support officer is designated for the institution, more audit information is collated, and the institution applies for further funding support.
The universities in 'HEFCE'S 'immediate risk' category 1998-2003
Period in category 1
The university says
At least four months (January-April 1998)
Hefce diagnosed ‘financial management problems’ and noted breaches of the Financial Memorandum.
Hefce projected a return to financial health for February 1999, if the university managed its ‘overdraft position’.
“This relates to information from ten years ago, and since then the university has been turned around so that it is now one of the healthiest in the sector.’
(January 1998-April 1998)
The withdrawal of Mackworth ­College from a merger deal and a failed Ofsted inspection meant ‘the underlying financial position remains weak’.
A merger with
‘In the late1990s, we acknowledge that the university felt the strain of its ambitious growth plans, but more recently the university’s performance demonstrates what successful achievement can deliver to its community.’
At least one month (January 1998)
The university had ‘poor financial management’ and ‘weak financial controls’
prior to 1998.
By March, the university had ‘addressed the majority of the control weaknesses’ identified by Hefce.
‘The university did experience financial difficulties in the mid-1990s.
However, under the leadership of vice-chancellor Geoffrey Copland [appointed in 1996], the institution put in place a series of vigorous cost-cutting measures.’
Less than one year (September 1999-June 2000)
There were ‘significant discrepancies in student numbers revealed through data audit ? non-­completion significantly higher than ­stated.’ In 1999, the non-­completion at UEL was the worst in ­higher education at 36per cent.
Hefce withheld funds from 1998-99 while two campuses were developed, and the university introduced a new student data system.
‘The UEL is in good financial health and has been so for several years, following a successful programme of restructuring and expansion. Our student numbers have nearly doubled over the past five years.’
Less than one year (June 2001-­September 2002)
The university suspended members of staff who were criticised by consultants Ernst and Young for poor management. Hefce saw ‘no reason to bail out such a substantial management failure’.
Third-party companies were involved in revising business plans and improving ‘staff utilisation’ following significant redundancies.
‘The university has not been in category 1 since February 2002 and has posted financial surpluses in every year since 2004. The balance sheet including reserves is stronger than for a very long time.’
Less than one year (February 2002-December 2002)
Under-recruitment in 2000-01 led to the withdrawal of ?6.2 million from Hefce. The university’s action plan included ‘six financial scenarios, only one of which presents the possibility of avoiding institutional collapse’.
South Bank made 120 members of staff redundant, while student numbers increased, providing greater funds.
‘At the moment we are in an extremely healthy position because we have diversified and our business plan has developed for circumstances that will inevitably change. We have grown in size and in income. The circumstances at the time in no way represented a crisis.
Other institutions in “category 1” between 1998 and 2003 were: College of Guidance Studies; Luton (now Bedfordshire) University; North Riding College; Westhill College; London Guildhall University (now London Metropolitan); Rose Bruford College; Bretton Hall College; Trinity College of Music; Liverpool Institute for the Performing Arts; and University of Northumbria in Newcastle (for just two months).