University plans to hand budgets over to schools to counter deficit

March 14, 2003

Cambridge University is planning to decentralise its finances to give its five schools control of their own budgets, writes Caroline Davis.

The university had a £3.8 million deficit last year, and it has a projected deficit of £11.8 million this year and one of £24 million for 2005-06. Last year, a working party was established last year to tackle the issue.

Its key recommendation was to introduce a resource allocation model to distribute the university's £450 million annual turnover. Under the existing system, funds are distributed on a historical basis. Each department receives the same amount as last year, and departments then bid for any extra funding.

Chair of the finance working party, pro vice-chancellor Malcolm Grant, said that this had led to departments bidding for money to stockpile in "rainy day" accounts. "The proposals try to reverse the incentive to always call on central monies first," he said.

He added that schools must be willing to curtail activities if they were no longer useful.

The resource allocation model would be implemented for the 2004-05 funding round. Professor Grant said the working party did not yet know how the extra £10 million from the Higher Education Funding Council for England announced last week would affect finances but insisted that the proposed reforms would still be necessary.

The working party also recommended that the recruitment freeze be lifted as it had delivered "only a modest saving in return for considerable disruption".

Other measures included raising fees for overseas students by 2 per cent above inflation for the next two years, asking schools to review their use of estates and investigating trust accounts.

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