Review of the financial data collected from higher education institutions for 2015/16
This circular sets out a number of proposals for revision to the Finance Statistics Return (FSR) for implementation for 2015/16. Colleagues should respond to this consultation by email to [email protected] using the consultation response template by no later than 1 July 2014 to respond to specific proposals. Please provide one response for your institution, consulting with all necessary colleagues.
The documentation includes an overview aimed at senior colleagues setting out the principles of each of the proposals. There is also some additional technical information and some questions for a number of these proposals aimed predominately at those responsible for completing the FSR. Click on the plus buttons in the text below to see the technical details.
HESA has coordinated a fundamental review of the financial data collected from higher education institutions. The intention has been to look at streamlining requirements and aligning definitions across collections currently made by a range of organisations, thereby improving efficiency and reducing the burden for institutions. Additionally the review has addressed the implementation of FRS 102 and a new FEHE SORP (Statement of Recommended Practice: Accounting for Further and Higher Education Institutions) which will be introduced for 2015/16.
An initial strategic discussion was held with relevant stakeholders (Funding Councils, government departments and other organisations that have an interest in finance data) to discuss the scope of the review and assist in setting the agenda for the review group. This was followed by a number of technical review group meetings which worked on the details. A further strategic discussion considered the emerging proposals. Following this sector-wide consultation the announcement of changes to specifications and data collection arrangements will be made in summer 2014. Detailed guidance notes will follow.
The FSR is collected annually from all UK institutions by HESA, in December. It is submitted in an Excel workbook, along with the Higher Education – Business and Community Interaction (HE-BCI) Survey. Currently the FSR provides the primary financial statements from published accounts (Tables 1-4), cost centre-based data (Tables 5a, 5b, 6b and 7), tuition fees (Table 6a) and capital expenditure (Table 8). The figures recorded in the FSR must be consistent with those recorded in the audited published accounts.
All institutions prepare their annual financial statements in accordance with the FEHE SORP, and comply with the financial reporting requirements contained in any UK legislation relevant to their constitution. The FSR uses the principles in the SORP to analyse the financial statements in greater detail than is required for published accounts.
The Higher Education Funding Council for England (HEFCE) collects two returns from institutions in England. The Annual Accountability return, collected in December, includes data for the latest two years of actuals (the prior year being restated figures if appropriate) and one year of forecasts. The second return in July requires an update to the December forecasts and collects another three years of forecast data.
Until recently HEFCE has collected finance data from institutions in Northern Ireland, but this will now be collected by Department of Employment and Learning Northern Ireland (DELNI).
The Scottish Funding Council (SFC) collects an Annual Accounts return from institutions in Scotland in December, and the Strategic Plan Forecast in June. The Strategic Plan Forecast contains the current year plus three years forecast data, and is in a similar format to the Annual Accounts return.
The Higher Education Funding Council for Wales (HEFCW) collects Financial Forecasts from institutions in Wales in July; which includes data from the current year and subsequent four years forecasts. HEFCW also receives the institutions’ financial statements in December each year to check against the original forecasts.
HEFCE also collects the Transparent Approach to Costing (TRAC) return on behalf of all UK Funding Councils. This is collected from all UK institutions in January each year. TRAC is the standard method now used for costing in higher education in the UK. TRAC aims to provide high-level aggregate information for government.
TRAC includes three separate but related costing processes: Annual TRAC (an annual retrospective attribution and reporting of costs), TRAC fEC (the forecast and accounting for full economic costs at a project level) and TRAC(T). TRAC(T) is a separate return submitted in February each year which includes total teaching costs as reported in Annual TRAC re-analysed to produce SUBJECT FACTs.
A SUBJECT FACT refers to the Subject-related Full Average Costs of Teaching a Student and is a categorisation of cost that is used in the TRAC(T) process. It is defined as the subject-related average annual cost of teaching a FTE funding council-fundable student in a HESA academic cost centre based on TRAC costs. The cost totals are those attributed to HESA academic cost centres, excluding those for Non Publicly Funded Teaching provision, non-funding council fundable provision and non-subject related activities (i.e. costs that would otherwise have been incurred irrespective of and separate to the costs associated with teaching the subject).
An outcome from the consultation during the TRAC review, announced in April 2013, was to work with HESA and others to secure harmonisation, efficiencies and utility from TRAC and HESA datasets. This is the subject of continuing work.
The stakeholders in the collection and use of financial data about the higher education sector, are many and varied. In many cases each stakeholder is collecting its own data to a timetable and set of definitions to suit its own requirements.
The demand from all stakeholders, including higher education institutions themselves, are broadening as the desire to make best use of resources, identify efficiencies and understand impact of changes increases. This review has considered opportunities for streamlining current collections (definitions, timing etc.) and addressing new requirements so as to make the data more useful and powerful for all while reducing the burden of collection on institutions.
The proposed FSR template for 2015/16 is available for reference.
Content of record: Tables 1 - 4 and 8
Tables 1 to 4 (the primary statements) have been redesigned in the same format and using the same headings as the model financial statements in FEHE SORP. In a few cases Tables 1 to 4 require additional detail that is usually disclosed in notes in the financial statements. More details on the specific changes are available on the SORP website. These changes are reflected in the new template, and will be consistent with institutions’ published accounts from 2015/16.
All HESA outputs (publications, heidi etc.) will change to report on the new data formats. One expected consequence of the changes to the SORP is that year on year comparisons will be more volatile than before.
Funding Council returns
This review has explored ways to reduce the burden on institutions. One are discussed was the possible opportunity to align the FSR and Funding Council returns thus reducing the requirements for return of data on institutions, and the need to cross-check between returns which currently takes significant effort and time. The majority of content returned to HEFCE, DELNI and SFC in December is the same as the first four FSR tables (HEFCW does not require a December return). Following discussions with the review group and Funding Councils it has been agreed that:
- The Funding Council returns and the FSR should be combined into one return. Institutions will be required to send in one single return in December which will be sent to HESA with data being shared with the relevant Funding Council. This return will need to be made on 1 December to satisfy all Funding Council requirements, which is earlier than any current requirements for institutions in Scotland and Wales. The current FSR return date is 13 December, and the SFC and HEFCW return dates for approved financial statements is 31 December.
- The FSR template to be submitted to HESA will output a sheet of Key Financial Indicators (KFIs) to assist institutions in quality assuring the data. Institutions in Scotland will be required to provide commentary on significant variances as currently collected in the SFC return.
- Funding Councils will still require forecasts, which they will collect directly from institutions in June (SFC) and July (HEFCE, HEFCW and DELNI). No forecast data will be collected in December.
Q 1.1 Colleagues are invited to comment on the intention to combine the FSR and Funding Council returns and any likely issues.
Q 1.2 Colleagues from institutions in Scotland and Wales are invited to comment on any issues they foresee with moving to the earlier submission date of 1 December.+ -
There has been a change in the way joint ventures should be recorded in the FSR. Institutions are now required to report only their own share of the income and expenditure for joint ventures or as part of a collaborative project. This has resulted in removal of rows in Tables 5a, 5b and 6b.
Funding Council returns
Various items have been added to the FSR to reflect Funding Council requirements in existing annual returns such as:
- two columns have been added in the capital expenditure table (Table 8) to record “Leasing” (which includes all assets funded by finance leases) and “PFI” (which includes assets funded by the private finance initiative or similar arrangements which are on balance sheet)
- additional breakdown in the Consolidated Statement of Comprehensive Income
- additional breakdown in the Consolidated Statement of Changes in Reserves
- additional breakdowns in the Consolidated Balance Sheet
- additional breakdown in the Consolidated Statement of Cash Flows
- details about borrowing (institutions in Scotland only)
Seperate tabs have been added to the FSR template for each administration to record specific information that each Funding Council requires. This was intended to allow consistency in the main tables and allow easy identification for the administration specific items. The Funding Councils may add or remove items from these tables in the future depending upon changes in government policy and requirements. These changes would be introduced in the same way and with the same degree of consultation as the Funding Councils would have done with the tables in their own return.
Q 1.3 Colleagues are invited to comment on the additional items required from amalgamating Funding Council returns into the FSR template.
Content of record: Tables 5 - 7
Cost centre-based tables
Currently the HESA Student, Staff and FSR records all contain a cost centre dimension which is intended to allow meaningful comparisons between different types of data at a more granular level than the total institution. Historically, the specification of academic cost centres was considered a part of the FSR and the definition of a cost centre was driven by the notion of grouping together of staff whose activities had a similar cost.
In the Student record, cost centres are recorded in the Module subject entity to capture cost centres for the member of staff most closely associated with the module. In the Staff record cost centres are collected to identify where a staff contract is assigned. In both cases these are used by the Funding Councils. In the FSR the income (research) and expenditure tables are split by cost centres. The Institution Profile now collects academic cost centres, mapped to local academic departments to provide contextual information for cost centre analysis.
HESA performs cost centre checks across records – for example checking that the cost centres in which institutions have indicated they have staff also have money spent in them. However the differences in timing of collection of the records means this can never be perfect.
Currently, cost centre expenditure data in Table 7 are used to inform the cost factors in HEFCE’s research funding methodology. In the absence of an alternative data source HEFCE requires that cost centre information in Table 7 be retained in the FSR.
The alternative data source that is being investigated is the TRAC Research Cost Relativities (RCR) return. HEFCE need to give further consideration to the outcomes of the TRAC RCR returns before deciding whether to introduce TRAC RCR across the sector on a periodic basis (e.g. every five years) to inform the cost factors for research funding methodologies or continue to use the FSR Table 7 data for this purpose.
If Funding Councils were to decide not to continue to use the FSR Table 7 data then there no longer would be a statutory requirement for cost centre-based expenditure data in the FSR. There is a statutory requirement for cost centre-based research income data (Table 5) for institutions in Scotland as the information is used by SFC for the purposes of evaluation and monitoring of research. SFC would therefore prefer to retain this table.
During the review group meetings there has been discussion about whether or not the current cost centre-based expenditure tables are useful to the sector. Although Funding Councils currently require this data for funding as set out above, they are keen to understand if the reporting of data by cost centre creates significant burden on institutions, as it may be that this does not justify the costs of collection.
What are the arguments for and against collection of data disaggregated by cost centre?
Representatives from some institutions have stated that the cost centre-based tables are used internally; mainly by planning departments and predominantly for benchmarking. This benchmarking feeds in to the assessment of performance at the institution, faculty and department levels. Typically the FSR is used for benchmarking performance in research funding, assessing spend by student, assessing total spend per staff member and assessing academic and non-academic staff costs as a proportion of total expenditure.
Many institutions will be setting targets for approval by their governing body that explicitly refer to a position relative to others in the sector. In order to design appropriate objectives towards the achievement of these targets, it is important for institutions to be able to identify which of the constituent parts of an institution are performing well relative to peers and which are not. Being able to access comparable data for peer institutions at a more granular level then the whole institution is critical.
Representatives from some institutions have stated that they do not find cost centre-based data useful. For some institutions, mapping local departments to the cost centres and allocation of expenditure is not straight forward which means that comparisons are not necessarily meaningful although the data is used, for example, in league tables. Others institutions have no interest in comparisons set out above and would prefer to concentrate available resources on other benchmarking activities.
The academic cost centres were reviewed ahead of the 2013/14 HESA collections and updated to reflect more accurately current academic structures though it is recognised that a centrally defined list will never match those of all institutions.
What would happen if cost centre-based data were to be removed?
While there continues to be a statutory requirement for cost centre-based data for 2015/16 this may not be the position further into the future.
If the decision was to be taken to remove cost centre-based data from the FSR, then Tables 5 and 7 would no longer be collected in the current format.
It has been suggested that the Research Excellence Framework Units of Assessment (REF UoA) which are very similar to HESA cost centres, could be used to benchmark research income (and costs), replacing the current Table 5.
Removing Table 7 would mean less FSR preparation time for institutions, but would also mean a loss of data used by some institutions for benchmarking purposes. Many institutions already undertake more detailed analysis in addition to Table 7. The accuracy and the relevance of all benchmarking data would need to be considered.
Currently the TRAC(T) return collected by HEFCE also splits out costs by cost centres. The future structure of the TRAC(T) return would need to be considered. Currently cost centres or some other subject dimension would continue to be required for TRAC(T).
There also needs to be consideration about to whether or not cost centre-based data should continue to be recorded in the other HESA records - Staff and Student. Should HESA continue undertaking checks across records? If cost centre-based data is no longer collected then the related part of the Institution Profile could also be removed.
What would be the options for continued collection of cost centre-based data?
HEFCE require the cost centre data for the time being to inform the cost factors in the research funding methodology. However Table 7 could be improved so that it becomes more useful to institutions, whilst maintaining the data required by the Funding Councils. There are a number of proposals for improvement to Table 7 which are listed in the technical detail of this documentation.
Q 2.1 Colleagues are invited to indicate whether or not cost centre-based data should continue to be included in Table 5 of the FSR if there was no longer a statutory requirement.
Q 2.2 Colleagues are invited to indicate whether or not cost centre-based data should continue to be included in Table 7 of the FSR if there was no longer a statutory requirement.
Q 2.3 Colleagues are invited to indicate whether Table 7 should be kept as it currently is, or whether Table 7 would be more useful if it was different in some way.
Following the outcome from the HEFCE Review of TRAC, the FSR review group have discussed the options for aligning the TRAC return with the FSR. Whilst good practice options were identified for compiling some of the FSR return on a TRAC basis, the group concluded that currently there is not substantial overlap between the two returns and therefore combining them may not provide significant benefit to all institutions in the sector. The group also acknowledged that there are some concerns with the timing of the submission of the FSR relative to the submission deadline for the TRAC return.
However, the group has noted that the sector is making greater use of a wider range of data and information and therefore anticipate that there may be a need to revisit the scope for combining the TRAC and the FSR returns in due course.
One suggestion was that there could be some pre-defined populations extracted from the HESA Staff and Student returns that institutions could use to validate the cost driver data used in the TRAC return. This is being explored separately to the FSR review process.
Q 2.4 - To reduce the time taken to finalise historic data returns and provide enhanced opportunities for greater utilisation of TRAC data, colleagues are invited to consider whether a process of transition to an earlier submission of TRAC should begin with voluntary submission alongside the submission of the FSR?
Procurement data - institutions in England only
Universities UK has been undertaking some work relating to procurement. The Diamond review of efficiency in the higher education sector set a challenge for 30% of non-pay-spend to be addressed through collaborative purchasing. This would help to increase efficiency savings by maximising the purchasing power of the sector. The review estimated the level of collaborative spend to be 10-12%. However, this estimate took as the baseline total non-pay-spend. Working with the regional procurement consortia and other representative bodies it has been established that a more robust measure would assess the level against a baseline calculated from a sub-set of total non-pay spend. This revised measure would remove legitimate elements of institutional spend that cannot be addressed by procurement professionals.
It has been proposed that if the “Other Operating Expenditure” figure (in Table 7) in the FSR was split between items that are or are not influenced by procurement, a more accurate baseline figure could be calculated. A single figure for Other Operating Expenditure influenceable by Procurement would be included in the return. A number of items would need to be split out and the taxonomy for this has been provided by Universities UK.
Institutions in Scotland would not be required to complete this part of the FSR as data is already collected by Advanced Procurement for Universities and Colleges (APUC). Institutions in Wales also already complete this as part of a return to HEFCW.
Q 2.5 Colleagues are invited to comment on the principle of returning the “Other Operating Expenditure” figure split by items that are or are not influenced by procurement.
Cost centre-based tables
What would be the options for continued collection of cost centre-based data?
If your institution has indicated in question 2.3 that it would prefer to collect cost centre-based data in an alternative way, there are a number of proposed approaches for how Table 7 could be structured. These are:
|i) As currently in Table 7 - Split the Research Grants and Contracts spend by individual income sources||Allows comparison of research income and expenditure by source of income|
|ii) Analyse the Research Grants and Contracts figures across cost centres||Allows comparison at cost centre level between research income and expenditure|
|iii) Analyse the Administration Support costs across academic cost centres||Allows more meaningful comparisons where institutions have different approaches to centralisation or devolution of administrative arrangements|
|iv) Split out the Staff costs by ‘Teaching’, ‘Research’ and ‘Other’||Allows more meaningful comparisons between research or teaching-based institutions|
Mock-ups of these options are available in the proposed FSR template for 2015/16
Q 2.6 Colleagues are invited to indicate which of the above suggestions (i – iv) they would find useful to include in Table 7 of the FSR and why, or suggest any alternatives?
Procurement data – institutions in England only
It has been proposed that if the “Other Operating Expenditure” figure (in the Type of expenditure Table 7) in the FSR was split between items that are influenced and are not influenced by procurement, a more accurate baseline figure could be calculated. A number of items would need to be split out and the taxonomy below has been provided by Universities UK:
- Costs associated with University subsidiaries
- Payments to other institutions, charities, schools, NHS (e.g. franchises, placements)
- Payments to banks, interest charges, etc.
- Payments to individuals (e.g. staff costs included under the Op Ex category)
- Payments in relation to research council grants, doctoral training, research bodies etc.
- Provisions relating to pension costs and bad debts
- Payments to HMRC
- Membership and affiliation fees (including payments to professional bodies)
- Conference fees
- Rent and rates and planning fees to local authority
- Payment to students’ union and trade unions
- Cost of student placements
Q 2.7 Colleagues are invited to comment on the items included in the list above, and whether or not they see any issues with returning the procurement split of “Other Operating Expenditure”?
Residences and catering operations
The “Residences and catering operations (including conferences)” figures in the FSR currently feed directly into the Estates Management record (EMR). It is proposed that these figures are split into "Residences" and "Catering operations" to allow a more accurate figure to be reported in the EMR. This figure is reported in the income and expenditure tables.
Q 2.8 Colleagues are invited to comment on whether or not they would be able to return this split of "Residences" and "Catering operations", and whether or not they would find this helpful.
Other sources in Table 5
In the Research grants and contracts – breakdown by research grant and cost centre tables (Table 5) the column heading “Other sources” has been renamed to “Other UK sources”. It was assumed that anything being included here should be of UK origin only, as there are “EU other” and “Non-EU other” columns already.
Data collection and timescales
Timing of collection
Currently institutions in England and Northern Ireland are required to make returns to HEFCE for 1 December, much (but not all) of the content of which is repeated in the FSR. Institutions in Scotland do similarly but to a 31 December deadline. Institutions in Wales do not provide an additional return but submit financial statements to HEFCW by 31 December.
One of the areas HESA has been exploring is how to reduce burden on institutions. As part of this work it is proposed that Funding Council returns be amalgamated into the FSR and the return date moved forward so that it aligns with HEFCE’s return date of 1 December. Moving the FSR return date earlier means that institutions would no longer be required to submit another year-end financial data return to Funding Councils (other accountability information such as a commentary on significant variances, and internal and external audit reports would still be required by the Funding Councils).
Data collection processes
HESA was asked to explore alternatives to Excel for data submission; there is an application of XML for finance data called IXBRL, which is already used for tax returns, and will shortly become mandatory for Companies House returns. However institutional representatives in the review group do not consider this to be possible for the sector at the moment but this may be reconsidered in the future.
HESA has also been asked to consider ways to streamline the data quality process. This could be achieved by providing templates pre-populated with the previous year’s data. This would enable greater checking to be undertaken locally, before data is submitted to HESA, thus significantly reducing the number of validation checks and queries usually raised in the post-submission phase. HESA pre-populates the EMR web forms. Each institution would be required to download their personalised copy of the FSR template for completion prior to submission.
Q 3.1 Colleagues are invited to comment on the proposal to pre-populate the FSR template.
Timing of collectionThe proposal is to move the FSR return date forward. The following data collection schedule is proposed for 2015/16 onwards:
From August 2016
|Institutions' local preparation|
|September 2016||C15031 preparation guide|
|1 November 2016||C15031 data collection opens|
|1 December 2016||Institutions send electronic copy of signed published accounts to HESA|
|1 December 2016*||Return date for HESA Finance Statistics Return|
|1 December 2016 to very early January 2017||Data quality checking period|
|Early January 2017||Late submission|
|Early January 2017||Sign-off deadline|
|Mid-January 2017||Delivery of full data to Statutory Customers|
* HEFCE would receive the data from 1 December to start using, on the understanding that this data had not yet undergone data quality checking by HESA. HEFCE would be kept informed as HESA completed its own checks and institutions signed off their data.
A diagram showing the new data flows and timescales has been produced.
Q 3.2 Colleagues are invited to comment on the above timescales proposals.
Currently the FSR uses data from Staff and Student records to perform checks across the cost centres. However if the collection timescale is moved forwards, HESA would have to use the Institution Profile to perform checks across cost centres.
Q 3.3 Colleagues are invited to comment on the proposal to use the Institution Profile to perform checks across HESA records.
Data collection processes
HESA will be reviewing all the data quality checks it and Funding Councils perform, particularly to avoid duplication, and would welcome any comments from institutions relating to this process.
Q 3.4 Colleagues are invited to comment on the data quality checks.
Currently the HE-BCI Survey is collected in parallel with the FSR. This was implemented at the time when HESA became responsible for this return as it was hoped that the linking of the financial data contained in both returns would allow for significant cross checking between them. However, in practice the cross-checking has been quite limited and the staff preparing the two parts of the return are normally in different parts of the institution, creating an adidtional overhead. Furthermore, there is no pressure to collect HE-BCI data earlier than currently and so it may well make sense to divorce the returns as part of these changes.
As SFC will be using HE-BCI data to inform the allocation of the Knowledge Transfer Grant an earlier submission data would be welcomed.
Q 4.1 Colleagues are invited to comment on the proposal to split HE-BCI and the FSR, and to indicate their preferred date to return HE-BCI between 1 December and the current date.
One-off implementation issues
In addition to the on-going impacts of change set out above, there will be significant change management issues in implementing the proposed changes in preparation for the first collection.
In order to meet the requirements for the new FEHE SORP it will be necessary to collect the opening balance for 2014/15 as a one-off. HESA will also need to collect a converted set of statements for 2014/15.
Q 4.2 Colleagues are invited to indicate when they would be in a position to return the restated 2014/15 accounts and opening balance sheet. Suggested dates have been 30 June 2016, 30 September 2016 or 1 December 2016.
Income for research studentships and fellowships
The current guidance states that:
- Income for research studentships associated with a research grant or contract should be returned as research income, but income for general research studentships should be returned as tuition fee income.
- Income for research fellowships should be returned as research income whether they are associated with a research project grant/contract or not.
HEFCE's preference is for all income for research studentships returned as tuition fee income, and would like to know whether institutions will find it difficult to split out income for research studentships that is allocated as part of a research project grant or contract.
Q 4.3 Colleagues are invited to indicate any issues they foresee with returning income for research studentships awarded within a research grant or contract separately.
Following this review HESA is planning to rewrite the guidance documentation for the FSR generally, and would welcome comments on any specific items which institutions feel needs to be addressed.
Q 4.4 Colleagues are invited to comment on areas for improvement within the guidance documentation.
Key Financial Indicators
Due to the changes in the FEHE SORP and within the FSR template, HESA may need to amend or recreate the Key Financial Indicators (KFIs) and Ratios. This work will start once the FSR template has been agreed. If institutions would like to contribute to these discussions please indicate as part of your response.
Q 4.5 Colleagues are invited to comment on the current KFIs.
If you have any queries regarding this circular please contact the Institutional Liaison team on 01242 211144 or email [email protected]