Shaky finances of 30 providers being monitored by OfS

More than one in 10 higher education providers in England were subjected to formal monitoring after their finances were assessed by the sector regulator.

The Office for Students (OfS) said its job is not to “prop up a university or college which is not financially sound” as it outlined its legal powers to intervene when concerns arise.

The organisation has published a range of case studies to show how it has been working – mostly under the radar – to ensure financial sustainability is taken into account by providers so they “protect students’ interests”.

All 250 universities and other higher education providers were required to complete an annual financial return for the 2020-21 financial year, the OfS said, with 47 per cent of them subjected to further assessment after an initial triage process, and 20 per cent given informal engagement and monitoring.

A further 31 institutions (12 per cent) were subjected to formal monitoring, which includes more extensive or more frequent bespoke reporting requirements, reviews of particular issues or the initialisation of student protection directions.

Three such directions have been imposed since their introduction in April 2021, with the drama school the Academy of Live and Recorded Arts (ALRA) the only registered provider to cease operating because of financial failure since the OfS’ formation. 

The OfS said it does not generally comment on these issues in real time for fear of increasing the chance of a disorderly closure.

All universities and colleges registered with the OfS must demonstrate they are financially viable and sustainable to stay on its register.

As well as taking regulatory action where appropriate, it monitors the financial health of individual institutions, gathers intelligence and publishes analysis on sector-wide trends and risks.

David Smy, director of monitoring and intervention at the OfS, said: “Students should be reassured that – despite the challenges of the pandemic – the higher education sector as a whole is in good financial shape.

“There are, though, differences between individual providers, and greater financial pressure can be expected in the coming year, in part due to the pressures of inflation.”

One provider highlighted by the report saw its financial performance weaken over recent years because student fees income did not keep up with staff costs, creating a negative operating cashflow.

But the OfS said that after increased monitoring and a number of interventions, the provider was able to demonstrate significant progress in achieving its target for cost savings in a recovery plan.

The regulator also revealed the actions it took in response to financial concerns at ALRA, with all its students offered places to continue their studies at Rose Bruford College.

“It’s not the job of the OfS to prop up a university or college which is not financially sound,” said Mr Smy.

“Instead, we work to ensure that students are able to continue their studies elsewhere, receive credit for their attainment, as well as high-quality advice and guidance about their options.”

Another provider – which had recently delivered a planned capital project and suffered a shortfall in student recruitment – notified the OfS that it would have insufficient cash to meet its immediate costs within three months.

Its financial plan left “little margin for error”, so the organisation imposed bespoke regulatory requirements to monitor its performance.

patrick.jack@timeshighereducation.com