2. Delivering HE Finances at the cost centre: good governance at the School level Mike Sutcliffe

3. Session will cover: Context – Accountability Management accounts Budgeting & forecasting Lessons learnt

4. Context: Financial Management in a Brave New World  Increased expectations of, and scrutiny by, the public  The quest for Value For Money  Government demands to know what has been achieved with money  Government now demands evidence of better planning - justification/ commentary required

5. Context (2): Financial Management in a Brave New World  Government also requires feedback and commentary on any deviations from plans - poor planning or inefficiencies?  The Government-dictated Planning Cycle now demands a broad planning horizon, with a more detailed (often 3 year) budget cycle and a very detailed budget for the next financial year

6. Accountability: checks and balances

7. MANAGEMENT ACCOUNTS

8. Management Accounts Monthly financial management information Comprises three headings: – Core – Research – Other Also details “contribution”

9. Core: income Teaching fees – Flow University Level  School – Initially predicted, subsequently 1 December actuals HEFCE T – Flow University Level  School – Set by budget Load transfer – “Service Teaching”

10. Core: income (2) HEFCE QR – RAE – Number of PhD students – initially budget, then 1 December actuals – Flow University  School

11. Research: income Direct – In/Out – no impact on bottom line Sustainability – E.g. fEC – Impacts on bottom line – Different funding sources give different levels of sustainability – HoS must ensure appropriate returns

12. Other: income “Catch all”, includes: Consultancy – HoS must ensure appropriate returns – Remember colleagues are not self-employed CPD – Need detailed business plan Doctoral Training Accounts (DTAs) Access charges

13. Core: expenditure Pay Non-pay – Running costs of School – Only bit School has direct control over – Best to use zero base budgeting – Also bit that takes “hit” in hard times

14. “Contribution” Difference between income and expenditure Covers running costs, including: – Professional Support Services – Library – IT infrastructure – Space – Utility bills

15. BUDGETING & FORECASTING

16. Budgeting Important to get targets in Management Accounts as accurate as possible Achieved through budget Large variance – either negative or positive – “destabilises” budget Need detailed information behind headline numbers

17. Case Study Sustainability Direct £ M

18. Case Study Sustainability Direct £ M

19. Case Study Sustainability Direct £ M Already set!

20. Case Study Sustainability Direct £ M Already set! Adjusted for next- year- but-1 & beyond

21. Case study Need to know why this is happening Engage with finance team Look through records

22. Case study Causes: Budgets not set for each grant Similar problems with sustainability Joint grants with other Schools Net result: £ 800k written off in year 1 £ 200k written off in year 2

23. Budgets & 5 year forecasts Need strategy Underpinned by: – Teamwork – Buy-in – Delivery to target Where to disinvest? Where to invest? – Need strong business case

24. SOME LESSONS LEARNT

25. Above all – enjoy the challenge Some Lessons Learnt Invest time early on to understand finances – it will pay dividends in the long run Have right processes and procedures in place Can be daunting Work closely with finance team Don’t be embarrassed about asking questions Don’t let colleagues put you under undue pressure to “cut corners”