Universities are to campaign for greater freedom to spend public money as they see fit, the new president of Universities UK said this week.
Roderick Floud, provost of London Guildhall University, who took over as president from Sir Howard Newby on Wednesday, also warned that the government would have to come up with more money for the sector or jeopardise its own expansion targets.
Professor Floud said universities were hampered by the present system where a lot of public money comes to universities in numerous separate pots, each with their own rules and regulations ensuring institutions are accountable for the cash.
Since 1997 the trend has been increasingly to disburse money for specific aspects of provision - such as widening participation or staffing issues. The process is motivated by the Treasury's wish for measurable returns on public spending.
Each parcel of money now comes with strings attached, which have acted, in many cases, to limit universities' use of the money to pre-determined purposes and to force them to demonstrate how they are meeting the criteria. This leads to situations where, for example, a university that is excellent at widening participation, using innovative local initiatives, is forced to bid for widening participation money, which is allocated for specific projects.
It also forces universities to spend money setting up accounting systems to prove they are using this money for purposes the government has determined through the funding council.
Professor Floud said: "Although the government is right to say that in totality funding is increasing for universities, the flexibility for these resources is diminishing because the money is coming in these little pots. We want to reduce the number of pots.
"At the moment money is being used to explain how money is being used. We are expected to account for the money in ways that are set by the funding agencies. I believe we should be taking a risk-based approach."
Such an approach to financial accountability would mean universities taking greater responsibility for their own auditing, maximising internal systems and making more use of commercial auditing companies, he said.
The aim would be to assure the funding councils that universities' accountability systems were robust. Professor Floud added that the funding bodies could then relax the auditing and accountability procedures relating to specific parcels of money.
He said: "There are areas where greater control should operate. But in other areas, where there is no evidence of problems, then the controls can be much less. It should be an assessment based on risk. Universities should be able to make more use of normal commercial systems in ensuring that money is properly spent."
The aim is to build on the PA Consulting report on accountability, which was produced for the Higher Education Funding Council for England last year.
Among the four main recommendations was a call for cost-effective ways of assessing the costs and impacts of accountability and a demand for more efficient and effective ways of ensuring probity in the way universities manage public funding.
Vice-chancellors will be asked to agree a set of principles and systems to take the report forward when they meet for UUK's residential meeting in September.
Professor Floud takes over as UUK prepares to make its submission to the third comprehensive review of government spending, which is due to be announced next year. Its bid for cash will build on the Taylor report, which it commissioned last year, and which identified a £900 million funding gap by 2004.
Professor Floud said: "I think the widening participation targets are achievable but they will require substantial investment. If this does not come then we will not be able to do so much and so government policy is in jeopardy."