1. BUSINESS‐LIKE BUT NOT A
BUSINESS
The legal framework of higher education

2. Degree Awarding Powers
• Universities are autonomous, self‐governing institutions
which operate within a regulated environment for higher
education.
• The power to award degrees is regulated by law.
• To be able to award a recognised higher education degree in
the UK an organisation must be authorised, either by Royal
Charter or Act of Parliament – as recommended by the QAA.

3. Types of Degree Awarding Power
Foundation Degrees (England and Wales only)
• Further education institutions offering higher education
provision in England or Wales.
Taught Degrees
• HEIs with a proven track record of successful validated
provision.
Research Degrees
• HEIs with existing taught degree awarding powers.
Understanding Higher Education: The One Day Nutshell

4. Some Relevant Legislation
• The Education Reform Act 1988 makes it an offence to offer a
‘degree’, ‘bachelor’, ‘master’ or ‘doctor’ award unless offered
by a degree‐awarding body as recognised by Secretary of
State, Act of Parliament or Royal Charter.
• The Business Names Act 1985 states only bodies properly
approved can use the name ‘university’.
• Under the Further and Higher Education Act 1992, the Privy
Council was also responsible for approving the use of the
word 'university' (including 'university college') in the title of a
higher education institution.
Understanding Higher Education: The One Day Nutshell

5. What is a University?
An organisation wishing to apply for approval to use the title
‘university’ must:
• have been granted powers to award taught degrees
• normally have at least 1,000 full time equivalent higher
education students, of whom at least 750 are registered on
degree courses (including foundation degree programmes),
and the number of full time equivalent higher education
students must exceed 55% of the total number of full time
equivalent students
• be able to demonstrate that it has regard to the principles of
good governance as are relevant to its sector

6. What is a Business?
Wikipedia
• A business, also known as an enterprise or a firm, is an
organisation involved in the trade of goods, services, or
both to consumers.
• Businesses are prevalent in capitalist economies, where
most of them are privately owned and provide goods
and services to customers in exchange of other goods,
services, or money.
• Businesses may also be not‐for‐profit or state owned.
• A business owned by multiple individuals may be
referred to as a company.

7. Is a University a Business?
• A business, also known as an enterprise or a firm, is an
organisation involved in the trade of goods, services,
or both to consumers.
• Businesses are prevalent in capitalist economies, where
most of them are privately owned and provide goods
and services to customers in exchange of other goods,
services, or money.
• Businesses may also be not‐for‐profit or state owned.
• A business owned by multiple individuals may be
referred to as a company.

8. • Universities straddle the public/private sector.
They must try to operate like a business, such
as having business processes , whilst
remaining loyal to what a University actually is
• The word "university" is derived from the
Latin universitas magistrorum et scholarium,
which roughly means "community of teachers
and scholars.“
What does business‐like mean to
Universities?

9. What do you think the role of an
academic is within a university?

10. • Teacher
• Researcher
• Consultant
• Leader
• Senior Manager
What do you think the role of an
academic is within a university?

11. What does business‐like mean to
Universities?
• Universities are business‐like in that we need
to produce a ‘surplus’ each year in order to
remain sustainable.
– HEFCE says so!
– Recommends 4‐5% surplus
– Surplus is turned into cash
– Funds working capital and capital expenditure

12. What does business‐like mean to
Universities?
• Universities have become much more business like in
recent years, for example, adopting more
commercial processes and techniques, including
– P2P
– O2C
– Workflow systems

13. Business Like – changes in personnel
• The sector has seen a move over the last few
years to professional finance staff running the
business rather than academics.
– Director of Finance, rather than an academic bursar
• This leads to more clarity of what is required and
allows the business like industry processes to be
introduced.
• Better understanding of funding and cost control

14. How are Universities Funded?
• HEFCE Funds
– Teaching/ QR/Other
• Tuition Fees
– UG, PGT, PGR – Home and Overseas
• Research Income
– Industry, RC’s, Europe, Other Overseas etc
• Other Income
– Consultancy, Residences, etc.

15. HEFCE Funding 2012/13
Teaching
Research
HEIF
Other
£m
Teaching 3,231
Research 1,558
HEIF 156
Other 442

16. HEFCE Funding 2014/15
Teaching
Research
Knowledge Exchange
Other
£m
Teaching 1,582
Research 1,558
Knowledge Exch 160
Other 583

17. HEFCE Teaching Funding
• HEFCE’s Teaching funding allocation
methodology
₋ Student numbers in subject
groupings
₋ Various rates of grant by subject
₋ Scaling factors to keep within budget
₋ ‘old regime’ and ‘new regime’
categories

18. HEFCE Research Funding (QR)
• HEFCE’s Mainstream QR income based on:
– Quality profile of each Unit of Assessment (UoA) in last
RAE
Weightings:
4*(world leading) 7
3*(internationally excellent) 3
2*(recognised internationally) 1
1*(recognised nationally) 0
– Volume of research activity
• Category A generally funded staff FTE in last RAE
– Unit funding in each UoA (variable)

19. HEFCE Research Funding (QR)
• Charities funding
– Unweighted for quality
– Based on HESA returns
– Normally averaged over 2 years
• Business Research Element (BRE) – introduced in 2007‐08
– Unweighted for quality
– Based on HESA returns
– 2014‐15 allocations based on average of 2011‐12 and 2012‐13
Research Income from UK industry, commerce and public corporations
• Research Degree Programme student supervision funding
– Home/EU students in years 1‐3 only
– Returned annually in RAS

20. • The major costs of any university are the pay
costs (that is the cost of staffing)
– These are often the hardest costs to manage!
• Non Pay
– Difficult to forecast
• Deprecation
– Cost of investing in equipment and buildings
• Interest and Charges
The costs of running a University

21. • Cost Control is different from Cost Cutting!
– Ongoing process
– Strategic focus
– Long term efficiency
– Investment in the future
• Decisions made now affect future cash and
operating results
Cost Control is vital to the running of
any institution!

22. Planning and reporting cycle
Budget
Mid Year
Forecast
Monthly
Results
Five Year
Forecast
Full Year
Results
Future
Present
PastFinancial
Statements
(Annual Report)
Management
accounts

23. Accounting policies
• Normally set by Finance Director and approved by
Board of Governors
• Comply with UK Generally Accepted Accounting
Practice (GAAP)
• True and Fair view
• UoM uses ‘Historical cost convention’
• Institution should judge the appropriateness of
accounting policies to its particular circumstances
against the objectives of:
– Relevance
– Reliability
– Comparability
– Understandability

24. Accounting Concepts
Going
Concern
Accountants assume, unless there is evidence to the contrary, that a
company is not going broke. This has important implications for the
valuation of assets and liabilities.
Consistency Transactions and valuation methods are treated the same way from
year to year, or period to period. Users of accounts can, therefore,
make more meaningful comparisons of financial performance from
year to year. Where accounting policies are changed, companies are
required to disclose this fact and explain the impact of any change.
Prudence Profits are not recognised until a sale has been completed. In
addition, a cautious view is taken for future problems and costs of
the business (the are "provided for" in the accounts" as soon as their
is a reasonable chance that such costs will be incurred in the future.
Matching (or
"Accruals")
Income should be properly "matched" with the expenses of a given
accounting period.

25. Financial statements
• Income and expenditure account
– Results of operations for year ending 31 July
• Balance sheet
– Financial position as at 31 July
– Shows assets and liabilities of institution
– ‘Snapshot’
• Cashflow statement
– Movements in cash during year ending 31 July

26. Differences between financial statements
and management accounts
Financial Statements
• Used for external reporting
• Reporting to External stakeholders
and Board of
• Formats strictly controlled by law,
accounting requirements
(Statement of Recommended
Practice – SORP)
• Prepared at institutional level –
include items which are only
considered at that level, eg
pension liabilities
• Used for internal reporting and
decision‐making
• Reporting to Heads of School,
Deans, Senior Management Team,
Finance Committee
• Formats more flexible and
management led
• Prepared at school/faculty level
Management Accounts

27. Business‐like Financial Processes
• Government Funding cuts increase pressure to
understand finances
• Prepare Financial Statements but follow sector
specific guidance
• Better Management Accounting information
• Understand the academic roles

28. Social Value!
• Not everything that is profitable is of social
value and not everything of social value is
profitable
• HE’s are important to the UK Economy,
working in Research, SME engagement etc.