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Financial and Legal Services Financial Regulations, Policies and Procedures

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C. Financial Management

C1 - Overview
C2 - Budgets and Resource Allocation
C3 - Accounting Arrangements

C1 - Overview

C 1.1 Sources of Income

Universities obtain their funds from various sources including: 

  • Student Loans Company
  • grants from the National College for Teaching and Leadership
  • tuition fees and support grants for students
  • The Higher Education Funding Council for England (HEFCE)
  • research grants and contract income
  • investment income
  • income from services rendered
  • funds in the form of endowments and donations. 

C 1.2 HEFCE Grant Conditions

Payment of grant to the University by the HEFCE is governed by the terms of the Memorandum of Assurance and Accountability between HEFCE and Institutions. This document establishes that the payment of grant is in support of: 

  • the provision of education and the undertaking of research
  • the provision of any facilities and the carrying on of any other activities which the Board of Governors considers it necessary or desirable to provide or carry on for the purpose of, or in connection with, education or research.

The Memorandum also lays down conditions concerning: 

  • the financial management of the University
  • risk management, control and governance
  • the achievement of value for money
  • management and quality of data
  • internal and external audit
  • financial commitments
  • the provision of financial statements
  • the provision of information by the University
  • failure to comply and repayment of grant by the University

 

C2 - Budgets and Resource Allocation

C 2.1     The Budget Process

The Director of Finance is responsible for preparing annually a rolling five-year financial plan for approval by the Board of Governors on the recommendation of the Finance and Resources Committee and for preparing financial forecasts for submission to HEFCE.  Financial plans are consistent with the strategic plans and estates strategy approved by the Board of Governors. 

The Director of Finance is also responsible for preparing each year an annual revenue budget and capital programme for consideration by the Finance and Resources Committee before submission to the Board of Governors.  The budgeting process requires the production of monthly cash flow forecasts for the year and a projected year-end balance sheet.  The Director of Finance ensures that detailed budgets are prepared in order to support the resource allocation process and that these are communicated to heads of department as soon as possible following their approval by the Board of Governors. 

During the year, the Director of Finance is responsible for submitting revised forecasts to the Finance and Resources Committee for consideration before submission to the Board of Governors for approval. 

C 2.2     Budgetary Control

The control of expenditure within agreed budgets for University funded and externally funded activities is the responsibility of the designated budget holder who should ensure that appropriate records are maintained.  Budget holders are responsible to their head of department for the expenditure appropriate to their budget.  It is the responsibility of the dean of each faculty to ensure that the expenditure of each department within their faculty, whether for University funded or externally funded activities, is within agreed allocations and that appropriate records are kept.

The budget holders are assisted in their duties by management information provided by the Director of Finance on a routine and regular basis.  This will be supplemented on request with more detailed information as required. The advice of the Director of Finance must be sought regarding any proposed financial commitment that cannot be met from within the budget allocation. 

Significant departures from agreed budgetary targets must be reported immediately to the Director of Finance by the head of department concerned and, if necessary, corrective action taken. 

The Director of Finance is responsible for supplying budgetary reports on all aspects of the University’s finances to the Finance and Resources Committee on a basis determined by that Committee but subject to any specific requirements of HEFCE.  These reports are presented to the Board of Governors, which has overall responsibility for the University’s finances. 

C 2.3     Treatment of year-end balances

At the year-end, there will be no automatic carry forward of core recurrent pay underspends. 

For professional services (non-academic areas) there will be no carry forward of non-pay unspent balances.  

For Faculties, non-pay unspent balances will be automatically carried forward subject to the production and approval of a plan for spend as part of the annual planning and budget setting process.    

Unspent balances must not be used to supplement or fund core recurrent (continuing) pay and non-pay budgets and expenditure, and should not accumulate over time, except for the purpose of approved non-recurrent projects and commitments that are material, suitably time-framed, and capable of being delivered.  The normal expectation is that funds carried forward will be spent by the end of the following financial year. 

C 2.4     Capital programmes

The capital programme includes new buildings construction, major refurbishments, acquisition of land and/or buildings, and disposals. A separate process is in place for minor capital and estates works that form part of the annual strategic planning and revenue budget cycle. 

The Director of Finance will establish protocols for the inclusion of capital projects in the capital programme.  These will set out the information that is required for each proposed project as well as the financial criteria that they are required to meet.  

The Director of Finance will also establish procedures for the approval of variations, including the notification of large variations to HEFCE. 

The Director of Finance is responsible for providing regular statements concerning the capital programme to the Finance and Resources Committee with an individual project value in excess of £1 million. 

Individual investments of up to £1 million can be approved by the Director of Finance and the Vice-Chancellor.  All projects between £1 million and £5 million are approved by the Finance and Resources Committee, and projects in excess of £5 million are approved by the Board of Governors. 

 

C3 - Accounting Arrangements

C 3.1     Basis of accounting and format of the annual financial statements

The University’s financial year will run from 1 August until 31 July the following year.  The consolidated financial statements are prepared on the historical cost basis of accounting, as modified by the valuation of land and buildings, and in accordance with applicable accounting standards. 

The financial statements are prepared in accordance with the current Statement of Recommended Practice: Accounting for Further and Higher Education (SORP), subject to any specific requirements of the funding body, and in accordance with the provisions of the Companies Act 1985, if that is appropriate. The accounting policies used in the preparation of the University’s financial statements are based on the Statement of Recommended Practice: Accounting for Further and Higher Education. 

C 3.2     Accounting records

The Director of Finance’s Office will make appropriate arrangements for the retention of electronic and paper records. 

The University is required by law to retain prime documents for six years.  Retention may be longer in the case of some areas.  Members of staff should ensure that retention arrangements comply with any specific requirements of funding organisations.  See the Records Retention and Disposal Schedule 

C 3.3     University Companies

The financial statements of companies wholly owned by the University or in which it has a controlling interest are consolidated, where material, into the University accounts. Details of interests in the companies are required to be provided in the Notes to the Accounts

C 3.4     Taxation

The Director of Finance is responsible for advising heads of department on all taxation issues, in the light of guidance issued by the appropriate bodies and relevant legislation as it applies to the University.  The Director of Finance, or their nominee, will issue instructions to departments on compliance with statutory requirements including those concerning VAT, PAYE, National Insurance, corporation tax and import duty. 

The Director of Finance is responsible for maintaining the University’s tax records, making all tax payments, receiving tax credits and submitting tax returns by their due date as appropriate.

Article last updated: Friday, October 30, 2015

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