An Insider's guide to finance

This link has been circulated by Lucy Hodson of the National Planner's Group, so genuine insiders will have seen it already.

It's an interesting and useful guide to reading a financial statement, and not too long. there are some issues that get much less coverage than I would expect, though. One key metric I always look at is the proportion of staff costs to all costs. the average in the sector is very high - 58% staff costs - and in institutions with poorly-controlled staff costs the figure can be much higher than that. Staff costs tend to increase faster than inflation due to incremental drift, even when headline pay rises are low. The combination of a below-inflation increase in funding and an above-inflation increase in staff costs when staff costs are already very high can create a continual erosion of funds for non-staff costs. As staff costs are so difficult and painful to remove from an organisation, this can be a very difficult cycle to break out of once it is established and it eats up any freedom to act at the strategic level.

By contrast the level of surplus generated in my view tells you less. When there is lots of money around, you can (and accountants do) change your depreciation policy or make provisions to hide the money, and you can also (more positively) increase your investment in maintenance and so forth; so sustained high surpluses are rare. Equally when cash is short you can change your accounting policies back and cut the maintenance budget to avoid posting a deficit or minimise the size of the deficit.

Select Committees again

I've posted links to select committee testimony before (see also here). At this link, the Business Innovation and Skills Committee are questioning David Willetts and Simon Hughes.

I've read that people don't follow links from blogs, so I am going to excerpt a big chunk:

Another blogging milestone

Mid-morning today I had my thousandth page view. As I've now got 59 posts up on the blog, the average post is getting me around 17 views, which is three times the level I used to get but still low enough to keep me modest.

I'm not sure how long this blog has to live - I've been offered a new job and my next employer may be less accommodating than my current one - but if it does have a life beyond the three months of my notice period I think I need to do more audience building work. I'm under no illusions that this blog is more than a vanity project, but a vanity project that keeps you humble has missed the mark somewhere. 

David Willetts at the Westminster Education Forum

I heard David Willetts speak - briefly - at the Westminster Education Forum yesterday afternoon. He set out quite clearly the three issues currently at the top of his agenda:

1. Research. His words were "I fully recognise that we have to set out the Government's thinking on research and innovation". He later clarified in response to a question that this would include a statement about Research degree Awarding Powers 
2. Arts and Humanities. Not so much a policy objective here as a desire to communicate to the Arts and Humanities community how much the Government loves it. 
3. Keeping a close eye on any developing PG issue, as students start to graduate under the new financial arrangements.

This list is chiefly interesting for what it leaves out. Although he later openly confirmed that a chapter on internationalisation was included in earlier drafts of the White Paper, there was nothing about internationalisation here. Nor was there anything about core/margin or AAB. Obviously the Minister knew perfectly well that there were journalists in the audience even if this wasn't a set-piece policy speech, and therefore his words can't be taken simply at face value, but this suggests to me that the Minister has moved on from the implementation issues that will affect so much of the White Paper settlement. I took this to confirm my view that HEFCE are really in the centre of the picture now.

It was also interesting to hear Rajay Naik speak on behalf of the OU (where he is now Director of Government Relations). He gave an impassioned plea for Government to amend its approach to student support in order to fit more easily into the OU's current delivery model. As I've already come to the view that the OU has decided to preserve its existing business model rather than seize the opportunities of the new system, I was obviously pleased to hear this. I didn't hear anything in what David Willetts said that led me to think the OU will be able to achieve the changes to student support Rajay was asking for, but of course that isn't my expertise.

A link worth following

Andrew McGettigan calls this 'Ten things everyone working in or studying art should know about the White Paper for Higher Education in England', but I think it deserves a wider audience than that.

I'd particulary emphasise his point about John-Lewis style spinoffs. With universities taking 10% student number cuts (and more to come), then there is substantial mutual gain if some parts of an institution are willing to be spun out in this way. Thanks to the VAT exemption they could continue to take advantage of existing econiomies of scale in estates, finance and other cetral services. I would have thought the very strong demand areas, such as (performing) arts, were the obvious place to start.

The OU fee is £5,000

I was surprised that the OU didn't secure an Access Agreement with OFFA, and now see that they have announced a fee of £5,000 for full-time students, so an Access Agreement was not required. This will allow the OU to bid for substantial numbers of the sub-£7,500 places available via core/margin, as reported by the Higher.

But the key question is, can they recruit the students? OU students, even if studying at a  full-time rate, will not be regarded as full time by student finance regulations, and therefore living cost grants and loans will not be available, only fee loans. See http://www3.open.ac.uk/contact/faq.aspx?t=S&cat=1-BC803F

This looks to me (why beat about the bush?) like a massive own-goal.

Twitter

I've wondered previously why when someone tweets about my blog I also get a spike in direct traffic.

http://blog.awe.sm/2011/07/14/twitter-drives-4-times-as-much-traffic-as-you-think-it-does/

Now I know.

Core/Margin: HEFCE publish some more data

HEFCE have now published some more core/margin data here. This is an annex to the circular they had already published here, and which I have already discussed in too many places, but principally here. This post builds on David Kernohan's post here, now that we have some more data.

I'm going to take SOAS as a case study. SOAS is a 1994 Group institution, if perhaps not a very typical one, but it is also small, making the data rather more tractable. From the Unistats data you can see that the breakdown of students' qualifications across different subjects is like this:

Was this the world's most pointless press release?

They aren't even trying...

http://www.hefce.ac.uk/news/hefce/2011/offa.htm

Yet another post on core and margin: HEFCE's salami problem

Can there possibly be more to say about core/margin? I'm afraid there is. The good news is that at least I have moved on from the AAB element to the 20,000 low-cost places.

The White Paper establishes that in 2012, 20,000 places will be withdrawn from existing providers pro-rata to their existing student number cap (this will be roughly an 8% cut) and will be redistributed via bids to HEFCE. Only institutions charging less than £7500 (net of discounts) can apply. As there are only about 20 HEIs in this category, and some of those are rather small, the majority of these numbers will have to go to FE colleges. None can go to private providers because the legislation to allow HEFCE to deal with private providers is not yet in place.

Core/Margin again: Yet more on AAB

I'm afraid I want to write yet more on core/margin, having already covered the issues here, here and here. Managing this system so as to bring the greatest benefit to my employer is likely to be a big part of my job for the next few years, so please excuse me this obsession.

This post is about the AAB exemption. HEFCE have yet to publish their institutional model, but the Higher has provided some roughly indicative data. These exceptionally well-qualified individuals are not widely distributed in the sector, they are concentrated in elite institutions.However even the most elite of the elite don't have a 100% AAB intake. The non-AAB component is made up partly of slightly less well-qualified people (ABBs, say) and partly of very well-qualified people with qualifications that can't be returned within the HESA Qualifications on Entry entity (for instance European students will mostly have foreign qualifications which HESA don't provide codes for). So all institutions will be left with at least a small quota of non-AAB places, and (where it is a very small number) the management of these places will likely become a critical issue for them.

Late to my own funeral

I now see that David Kernohan covered the ground in this morning's post about 6 months ago, and with better graphics.

Giving up the block grant principle

I posted last week about the language in the HEFCE funding consultation indicating an end to the block grant principle. This is the principle under which HEFCE has provided large sums of money to universities and colleges for them to spend broadly as they wish on supporting their teaching and research. This principle has two immense benefits (1) it protects academic freedom, because institutions aren't bound to spend it in particular ways on particular projects and (2) it massively simplifies administration. Usually it is pretty simple for us to show auditors that we have spent the money on teaching or research broadly defined. By contrast, convincing a European auditor that you have spent ERDF money in accordance with the rules can be very challenging.

The Edexcel degre is here

As reported in the Higher, Royal Holloway has reached agreement with Pearson, the parent company of Edexcel, to develop a Business Studies degree. The degree will be delivered through FE colleges and other providers.

This is another demonstration that the relaxation of Degree Awarding Powers criteria set out in the White Paper isn't really necessary to achieve the Government's goals for higher education, a point I made at excessive length here, but which (IMHO) bears making again.