A blog by Margaret Monckton, Chief Financial Officer, University of Nottingham:
“Our University finances have never been more sustainable and yet have never been more under threat.
Nottingham now has an annual turnover of £660 million that contributes more than £1 billion of value each year to the national economy, and a world-leading research portfolio worth £600 million.
We generate a healthy annual surplus that is reinvested each year on the things that are important to us all – our teaching, research and services for students.
Our University does not, and will never seek to make a ‘profit’ but we do need to be financially sustainable and to ensure that every pound spent is spent wisely in the achievement of our ambitions for research and teaching.
But we face unprecedented challenges to that financial sustainability.
The financial landscape has changed radically in just a decade. Currently, in excess of 50% of the University’s income is now secured from student fees, 18% from research grants, 17% from fundraising and investments, and just 14% from central government.
Ten years ago, the picture was almost reversed with 30% of our income from government, 30% from student fees, 20% from research grants and 20% from fundraising and investments.
The government’s Augur Review on fees and funding is likely to come up with some sensible recommendations that will lead to some insensible politics. We may have to prepare for a political cut in the student fee from £9,250 to £7,000 (Conservative) or even £0 (Labour) – with no compensation for a loss of income ranging from £0 million to £60 million.
We want to do the right thing on the USS pension scheme and meet the Joint Panel recommendations to increase employer contributions to more than 20% – but this will cost an additional £4million every year.
In excess of 50% of our income comes from the student fee and all universities are operating in an increasingly competitive recruitment context for UK undergraduates – with the 18-year-old demographic continuing to drop significantly, at least until 2020.
And no one – least of all government it seems – can yet quantify the financial impact of Brexit on our research funding, EU and international student income and staffing costs.
This is why we have introduced a new financial strategy and medium-term financial plan to ensure we can prepare to weather the storms ahead and ensure income continues to exceed expenditure so we can continue to invest in our staff, our students, our teaching and our research.
The medium-term financial plan is not concerned with ‘budget cuts.’ It is concerned with generating more income from our student recruitment, our research base and our self-generated income such as charitable fundraising, investments and business activities such as ‘spin-out’ companies.
Over the next five years, the plan aims to increase income from student fees by £75 million through a small and sustainable increase in overall student numbers, and a change in the balance of international students – developed and agreed with each faculty.
It also asks us to continually improve how we work – our processes and systems – to save £24 million per year, again not to cut costs but to reinvest in our University and its community.
The medium-term financial plan also sets out a massive programme for investment – close to half a billion pounds over the next five years to spend on the things you have told us need spending on, such as our digital infrastructure, our research, our laboratories, classrooms and offices, and not least our people.
If we are to invest this money then we need to generate this money – our medium term financial plan is based on the premise that the £100m net debt position that we are currently in will remain over the life of the medium term financial plan i.e. we are not going to try and pay this debt off, but neither do we want to increase our debt position. So we are planning on investing every pound that we generate right back into the University.
This is why, if our income is reduced as a result of the Augur review or Brexit or if costs increase for USS – the continuous improvement plan targets will need to be increased and our planned investment will need to be reduced.
The financial strategy and medium term financial plan is not the work of the Finance team, it is the work of colleagues across the university from our academic and professional services community, and as such it is the responsibility of us all as that community to deliver it together.
That said, the Finance community is changing to become better at supporting all of us in investing and stewarding our resources to get the most from our shared income.
Across this term we will be tendering for a new University procurement card which will make purchasing easier and more efficient, we are revising our purchasing frameworks so that you can obtain the goods and services you need to achieve your ambitions, and we will be offering e-learning modules to help you make the most of your budgets.
We will also be making changes to our teams and how they work so that for example your Finance Business Partners can better understand your priorities and advise you on your strategic financial planning to maximise your budgets, and your Procurement advisers become Commercial advisers to help you make the best purchases you can.
Meeting our financial challenges together will require imagination, ambition and engagement from all of us at Nottingham. Our collective wisdom and experience will mean that we can navigate the challenges ahead. I will be visiting academic schools and professional service departments over the next few months to answer any questions you might have about financial matters and listen to your ideas about how you can contribute to our continuing financial sustainability that will sustain our academic success.”
Details of these visits will be confirmed by faculties and departments.
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