Going private …

The BBC today reported what sounded a little like outrage at the news that University of Central Lancashire is offering a medical degree to overseas students only. The timing plays right into the ‘b****y foreigners coming over here getting our jobs/benefits/houses’ narrative which, unfortunately in my view, seems to have become part of the UK’s political culture. It’s worth looking in detail at what’s going on.

UCLan make the point – fairly – that they don’t have permission to recruit home students – student numbers in Medicine and Dentistry remain capped. See, for instance, this note by HEFCE explaining its role and the caps which apply at England’s medical schools. (nb that there are similar controls in the other UK nations). The devil is in the joint funding by HEFCE and the NHS.

Within the NHS there’s an element of funding – called Service Increment for Teaching (SIFT) – which covers the costs of clinical placements for medical students. These are the costs of having consultants supervise groups of trainee doctors (firms on rotations, if you want the jargon) and are allocated by the relevant medical school to the hospitals and GPs who offer clinical placements.

HEFCE and the NHS see the value in having some overseas students, and so the placement cap includes capped places for overseas students – at about 7.5% of the total cohort. This means that on funded medial programmes, there’s absolutely no crowding out of home students – medical schools simply cannot trade off home for overseas. Look again at the HEFCE note and see the number controls.

UCLan has therefore, in all likelihood, come to a separate deal with the hospitals and GP surgeries where its overseas medical students will undertake their clinical practice. The fee levels quoted suggests that UCLan won’t be making much of a financial surplus on this programme. And for the NHS trusts it gives them a little more income in what will be challenging financial times.

So the anger is misplaced. UCLan aren’t taking away chances from homes students. And if we need more UK doctors, the answer is for the government to fund them.

On sustainability

Just to give you a break from HE election fever, some thoughts on sustainability.

We recycle in Wales too ...

A few years ago (2010-11 to be precise) HEFCE required English universities, if they wished to continue to be eligible for capital funding, to commit to carbon reduction strategies, and encouraged universities to aim for a 40%-50% reduction by 2020, based on a 2005 baseline. Brite-Green consultancy (with whom I have no connection) have published a report and league table at the mid-point in this process, highlighting progress or lack thereof. The Times Higher picked up on this story, and the underlying report is well worth a read.

I want to take the question a little further, though. The HEFCE action plans relate to direct carbon emissions by universities, and action plans concentrated on measures which would reduce universities’ direct consumption of energy. So more efficient lighting; insulation; new windows, combined heat and power plants and solar were all amongst the strategies. This is all good, and certainly to be applauded. But to me it is an approach aimed only at complying with a particular piece of legislation, rather than trying to address climate change in a joined-up way.

One significant omission, for instance, was the carbon emitted by travel by staff and students. Not only the day-to-day travel to and from work and study, but travel by staff to conferences around the world, or by international students to and from university at the start and end of the academic year. There’s no easy answer to this (and in fact one of the greatest benefits of university is that it exposes people to different cultures and practises, and helps one to see things in very different ways), but if the world stopped being such an easy place to travel within (either because of fuel costs, or conflict, or perhaps increasing unacceptability of plane travel) then universities do have a problem.

There’s a second dimension too. Universities which have funds to invest are coming under increasing pressure from students to disinvest from the oil and gas extraction industries – see for instance the pressure being put on Oxford in this regard. Will genuine action to reduce carbon emissions become more important to future cohorts of students (and alumni)?

One to puzzle on. But in the meantime kudos to the universities doing well in reducing their emissions, and a ‘try harder’ to those who aren’t. It does matter.

Inseparable

Two weeks into the election campaign and it seems that despite university and student funding being a matter for the devolved administrations, it’s becoming an election issue where Westminster policies will drive devolved decisions.

The headline issue is Labour’s £6k tuition fee policy. I’ve blogged on this before, and noted that, in my view, this will need an Act of Parliament if there aren’t to be quite significant unintended consequences. Looking at the impact of this on other administrations makes me doubly sure.

Take, for instance. English and Welsh fees policy. They are the two most similar in the four UK nations; universities are allowed to charge up to £9k per year Home/EU undergraduate fee, subject to a test around fair access. The difference is that the Welsh Government pays some of the fees for Welsh domiciled students (that is, students who come from Wales, wherever in the UK they study).

Suppose there’s a Labour Government, and it caps English universities at £6k fees. This creates four different scenarios.

For an English university, there’s two policy worries. Firstly, will HEFCE actually make up the £3k difference? Maybe in the first year, for forms sake, but it would be a brave bet that said it would carry on as a ring-fenced spending item in perpetuity. And secondly, will they be allowed to charge £9k for a student from Wales?

For a Welsh university, slightly different worries: will the Welsh Government continue to fund undergraduate education for Welsh domiciled students at a rate about £9k, regardless of where the funds come from? That’s a question for the Diamond review, but a dramatic change in English arrangements would be bound to have an impact. And secondly, would they be allowed to charge English students £9k? And, perhaps more pertinently, if they did, would any come?

The market for higher education and UK politics intrude inexorably on the devolved administrations. There’ll be similar dilemmas for universities and governments in Scotland and Northern Ireland. Even when we’ve understood, as a political culture, how to do devolution, there’s still the unavoidable reality that England is by far the largest of the four home nations, in population and economic terms. That reality won’t be changing any time soon.

Most of the answers to the questions above require both political consensus and amendments to Acts of Parliament. If there’s a government with a small majority HE funding might become a touchstone issue. Again.

Higher Education KPIs #2 – EBITDA

I posted a couple of weeks ago about staff costs as a proportion of income. Another performance indicator which has become common in Universities over the past few years is EBITDA.

No, not an obscure Scrabble word (although BAITED for 9 points is do-able with the same letters), but an acronym for a financial indicator, which helps you understand the underlying financial strength of a university.

Earnings
Before
Interest,
Tax,
Depreciation and
Amortization

There’s some jargon in there. Let’s unpack it a little.

Earnings is just what it sounds like. Total income minus total expenditure.

But, accounting isn’t as easy as looking at what’s in your wallet at the end of the day. It’s about keep track on real cost and values of assets and income, and recognising that there’s a difference between what you use once and once only and what keeps being usable. (So, I’ve just had a cup of coffee. The coffee granules are gone and used; the mug I can wash and use again.) And that‘s where some of the other terms come into play.

Interest means interest that is payable on debts owed. It’s a cost, for sure, but it’s a cost that can vary because of decisions taken by the borrower (how long do you borrow for? Fixed or variable interest rate? Secured or unsecured? Wonga or the Co-op?). So interest payments don’t necessarily tell you much about financial strength – but they might tell you a lot about the financial acumen of the management team.

Tax, sad to say, is similar. Not for universities – there isn’t often a university tax scandal (but see here for an exception!) – but remember that EBITDA is from the commercial world. And then think of Starbucks and Amazon and realise that tax, if you’re rich and powerful enough, is optional. So tax costs measure the skill of your accountant.

Depreciation and Amortization are both accounting concepts.

Depreciation is a way of measuring the value that’s left in an asset which is reusable. Imagine a whiteboard in a classroom. The lecturer can write on the whiteboard, get value out of it for teaching, and then wipe it clean at the end. It’s got value, but it hasn’t been used up by the class. But over time, it becomes less clean: people use the wrong marker pens; the shiny surface dulls with being cleaned too often. After a few years you need a new one.

This gives a problem if you want to measure how much the whiteboard costs for a particular class. If you put all of the cost against the first class in which it is used, that class seems expensive, and the continuing value of the whiteboard isn’t recognised. If you only charge the cost to the class where it finally needs a replacing, then again it isn’t right: the wear and tear occurred over years, not in one hour. And so you take the cost of the whiteboard and allocate it, a bit at a time, to the activities for which it is used.

Now in accounting this is done over time, so if the whiteboard cost £50 and is estimated to have a lifetime of five years, then you charge £10 per year, for five years, as the accounting cost. (You still need to pay up front, of course – as I said, accounting isn’t about what’s in your wallet but about true costs and values.) Critically, there is judgment involved in how depreciation works. And every university will have accounting policies which set out the rules of thumb applied.

Amortization is a similar concept, but refers to the cost of intangible assets. (A white board is tangible – you can see it, and if it drops off the wall onto your foot it will probably hurt. A university’s reputation is intangible: it can fall without hurting anyone straightaway: the pain take a while to appear.) Universities do have intangible assets – intellectual property, for instance. Again, there’s judgment involved in identifying how much specifically to allow for amortization.

(As a cheery footnote, the mort in amortization is the same as the mort in mortgage, and both come from the medieval French mort=death.)

So EBITDA is a measure of earnings which is free of financial and accounting wizardry. It’s a very Gradgrindian measure, for fans of Dickens. Or for fans of twentieth century politics, it’s like Sir Alec Douglas Home and his matchsticks.

For universities it has become a favourite of funders and regulators. HEFCE use it to decide whether a university needs to get permission to borrow (take a look at Annex C): if a university’s total financial commitments are more than five times its average EBITDA then written permission from HEFCE is required for the borrowing. And so it has a practical consequence, which helps to explain why university governing bodies are interested in it. EBITDA is defined for HEFCE’s purposes by BUFDG (link downloads a word document). Quite a technical subject!

EBITDA can be a cash amount (useful if you want to see if you’re over the HEFCE ratio) or it can be expressed as a percentage of income. An EBITDA of £1m might be brilliant if your turnover is £5m, but if your turnover is £100m then perhaps you’re running a little close to the wire.

Disclaimer: I'm not an accountant. If you want to understand EBITDA then the above might help. If you want to pass a CIPFA exam read a CIPFA textbook!

QAA? Armageddon outta here!

Yesterday’s announcement – on the HEFCE webpages but on behalf of HEFCW and DELNI and in parallel with the Scottish Funding Council – has caused more than a few ripples of excitement.

What’s the news? A request for feedback from the sector, to inform the specification of a tender for quality assurance for higher education. If that doesn’t sound significant, let me tell you that it is. First, some background.

The 1992 Further and Higher Education Act provides (para 70) that the Funding Councils “shall … secure that provision is made for assessing the quality of education provided in institutions for whose activities they provide, or are considering providing, financial support …”. Each Funding Council has a Quality Assurance Committee, comprising people with sector experience, to advise on how to undertake this work.

If my memory serves me right*, in the early stages HEFCE did some assessment of standards work in-house (the Academic Audit Unit), and a sector body – the Higher Education Quality Council (HEQC) – developed methodology for assessing and assuring quality at a subject level. And in 1997 the QAA was established to bring it all together.

An opportunity for a new logo?

And so the consultation and tender exercise is giving notice that the status quo is up for renegotiation. No doubt with pressure from some such as the Russell Group for a ‘risk-based’ approach (‘leave us alone, the metrics show that we’re fine!’) and, with an equal lack of doubt political pressure from different quarters to address perceived issues such as contact hours and value for money

And so this is a fight about university autonomy and about marketization. Part of the rationale for establishing HEQC and QAA (both bodies owned by the HE sector, like UCAS and HESA) was that if the sector didn’t do something, government would impose an OFSTED style inspectorate. And since one of the crowning glories of UK higher education is that our academic standards are high, this would be a problem. Universities need autonomy to set and maintain these standards, so the argument goes.

And marketization? Well, applicants to universities, almost by definition, don’t know much about the content or value of the programme they’re seeking to join. In the OFT’s view, they are much less sophisticated as consumers than the universities with which they are making a contract. So an assurance regime which is more like consumer protection – guarding against rogue traders – might be considered appropriate. There’s a lot of public money and private individual debt at stake, so these aren’t concerns which can be dismissed flippantly.

There’ll be a lot of debate and discussion. The Wonkhe post by Mark Leach is a good resource with links to various statements and also in the comments. Which is where, by the way, the Armageddon word came from: #QAmageddon being the hashtag of choice …

It pays to read the legislation carefully: “assess the quality of education.” Who defines quality and its indicators, that’s the question. And the outcomes will matter for the sector.

*Edit 9 October. My memory didn't serve me right! Academic Audit Unit became HEQC; HEFCE continued with TQA until QAA took over. Thanks to Mike Ratcliffe @Mike_Rat for the correction. We need the equivalent of rock family trees ...

Masterful guidance

The four UK higher education funding bodies have been working together on guidance for PGT recruitment teams on information for prospective applicants. Published so far by HEFCE and HEFCW; no doubt coming to Scotland and Northern Ireland soon. PGT, by the way, is Post-Graduate Taught – Master’s degrees by any other name.

The guidance looks very sensible, and is grounded in comprehensive research into the views of current prospective taught postgraduate students. What surprised me is how very basic some of the guidance is. For example, “Prospective PGT students are often balancing a broad range of commitments so information regarding expected attendance and assessment periods, if any, will help them assess whether study is possible for them”. Although obvious, this is a really important point, and I know that it needs making.

It also, I think, makes us ask a question about the role of PGT programmes in universities. (The guidance, that is, not the specific point about teaching times).  And that is, what are PGT programmes for? To a student, they can be the natural extension of an undergraduate degree, either for interest or as a stepping stone to research study. Or they can be a means to learn specific skills and knowledge for career development – either immediately after a first degree or later into a career.

And universities of course cater for both types. Sometimes both at once. But there are definite splits, with some university departments or research groups seeing a Master’s programme as a long and self-financing (sometimes!) interview process for a PhD, or as a means of creating acolytes for the professor’s research topics. To my mind the published guidance is giving a clear steer away from this type of approach – coaxing universities into more uniform ways of presenting PGT programmes, and thereby normalising and regularising the market.

Is this just the funding councils seeking something to do, now that undergraduate programmes are far more obviously subject to market rigours? That sounds a trifle paranoid, I agree. But there is a worry that, come September 2015, debt-laden new graduates will seek employment rather than further study, and a UK student on a full-time PGT programme may become a rarity. And if the sector is to try to seek government funding to support PGT provision at that or a later point, it won’t hurt to have got our house in order.

So there’s a bigger picture to the guidance: if the sector does all it can to make PGT provision readily available, then there’s a stronger case to government for supporting an important part of the UK offer.

Don't tell him, Pike

A couple of wise souls I follow on Twitter observed last week that there was a lot of activity from HEFCE and on Higher Education generally:

@registrarism: There really are a lot of #HigherEd posts being pushed out today

@SophieBowen1: Are staff at HEFCE about to go on hols? Large number of reports out today ...

And it seems to be true. One recent HEFCE post that caught my eye – but not picked up by the twittersphere that I could tell – was Circular Letter 06/2016 – Supporting Public Accountability: presenting income and expenditure income to current students.

This is the outcome of some work done by HEFCE, BUFDG and the NUS on students’ desire to know more about what universities spend their money on, and a finding that

of 2,400 current students conducted by NUS Research Services ... there was significant interest in this type of information but that:

• Of the students who looked for this information, 40 per cent were unable to find it.

• Once the information was found, 44 per cent of students reported that the format it was presented in was difficult to understand.

Not a surprising finding – I have often wondered at the number of staff in universities who aren’t familiar with financial statements, so why should the students fare better?

The guidance is clear enough:

The research identified several priorities for improving the presentation of financial information for students:

• It needs to provide a useful but not overly complex level of detail.

• It needs to be accessible to students who may not have expertise in interpreting financial information.

• It needs to be up-to-date.

• It needs to be clearly signposted on institutional web-sites (which are where students look for it), with technical language clearly explained.

And the actions also admirably clear:

Institutions are asked to identify their solution by the end of October 2014, ready to publish information from their 2013-14 audited financial accounts by January 2015. 

It’s unquestionably a good thing that universities are encouraged to work with their students’ unions to agree an approach. But I found the examples interesting.

Four approaches were suggested:

• Actual numbers and a narrative
• A pie chart of expenditure, by category (no figures)
• A bar chart of expenditure
• An infographic

These range from minimal data but really clearly presented for accountability (that is, the actual numbers and narrative) through to confusing presentation (the infographic) but with a lot more detail and granularity in there. I’m not clever enough with pdf to export the contents to the blog post, but have a look and see what you think. To me, the guidance presents clarity and content as if there’s a trade-off between these two aims.

Why are students interested? Well, my guess is that it isn’t idle curiosity but all because students want to understand the value that they’re getting. A Sir Humphrey quote from Yes Minister is apposite here:

We should always tell the press freely and frankly anything that they could easily find out some other way

It’s all in the annual accounts anyway. My message to universities would be, work sincerely with your students’ unions, agree a format which makes sense, but don’t try to conceal anything with a fancy chart. Authenticity and transparency with your students will be better in the long run, even if you don’t like it now.