Wednesday 26 November 2014

Countering terrorism in universities

The Government has now published the Counter Terrorism and Security Bill which includes provisions that enable the Home Secretary to require universities to take steps to counter radicalism.  I'm just commenting here on what the Bill seems to mean for universities - there's lots more in it than this!

Three relevant powers are in the Bill.

Firstly, the bill places a general duty on "specified authorit[ies]" (which includes universities) in the exercise of their functions, to "have due regard to the need to prevent people from being drawn into terrorism."

Secondly, the Bill gives the Secretary of State the power to "issue guidance to specified authorities about the exercise of [this] duty"

Thirdly, the Bill gives the Secretary of state the power to "give directions to the authority for the purpose of enforcing the performance of that duty" which "may be enforced, on an application made on behalf of the Secretary of State, by a mandatory order."

So, the Home Secretary gets to tell universities what to do.  With a power to seek a court order to do so.

There's two angles to this.

In practice, it means that the Home Secretary is likely to instruct universities to ban certain speakers from campus; and instruct them to report students about whom they have concerns.  Neither of these is uncontroversial.

It is also, of course, an encroachment on universities' autonomy. I couldn't fined a clause that limited the range of matters on which the Home Secretary could give guidance. Is the curriculum out of bounds?

The relevant clauses, by the way, are in Part 5, Chapter 1, sections 21, 24 and 25,. And the usual disclaimer: I'm not a lawyer: this is offered as commentary.

Friday 21 November 2014

All of the blogs that I've written so far ...

I thought an index of posts it might be useful – I haven’t really got the archive sidebar working as well as it should, and over the months there have been some posts which people tell me they’ve found quite interesting.

The ‘Sweeping leaves’ metaphor explained
The impact of social media on teaching practices
On scale and professional service costs in UK higher education, using HESA data.
How to get more from the data you already have, without spending a fortune
Three ways to stop the future sneaking up on you unnoticed
A history lesson, plus the Manchester economics students and their demanding behaviour
Or, things I wish I’d known when first I started managing staff
About the OFT reviews of competition in UK higher education
About information for applicants and students, and how to get it right
About how to make shared services work
About management information and student numbers, and not getting confused
On the funding of higher education in the UK
What UCAS data tells us about the rise of alternative providers
Idealism and free higher education
On frameworks for information about taught postgraduate degrees, and why this might matter more than you think
How lean thinking and Standard Operating Procedures can make a big difference
Ructions in higher education governance and funding in Wales
Capital spending by UK universities
On MOOCs and how they might be challenging existing models for higher education
How to make a collaboration work
Analysis on the dependency of UK universities on overseas student fee income
Further data and analytical work on this topic, with a link to a download
On contextual admissions to universities, and two things to do to really help widening participation
On student power and remuneration committees
A really whizzy technology which might help free up space in universities
On gender balance (or in fact, the lack of it) in University senior management teams
Problems with plans to sell student debt to universities
Patterns of doctoral study in the UK, and why it’s like the Football Premier League
On the adoption by UK universities of US style academic job titles
How competition law changes mean a change to the nature of the student contract
Do universities forget that motivating students is part of their brief?
Patterns of student movement within the UK – or why England and Scotland have sustainable HE systems, and Wales and NI do not
How alternative providers are, and are not, challenging ‘traditional’ universities
Tips for dealing with a student occupation
The impact on research of Scottish independence
Globalization and language skills in university management teams
A rebuttal of a cheap article in the Telegraph
How university governance and management has lessons for the post-referendum UK political scene
Universities and sports sponsorship
All about the consultation on future QA arrangements
How graduation explains (almost) everything about university administration
Explaining KPI’s, and why staff-costs-as-a-percentage-of-income is so important
On the University of Sheffield’s abolition of library fines
EBITDA – Earnings Before Interest, Taxation, Depreciation and Amortization - demystified
On proposed Scottish legislation about university governing bodies

In compiling this I remembered the range of subjects I’ve covered. I hope you’re finding them useful. Let me know if there’s a topic you’d like to see!

Friday 14 November 2014

Scottish Governance

Recently the Scottish Government released a consultation document on University Governance. The BBC and other media picked up on this, headlining the proposals for elected chairs of governing bodies. (You can see the BBC story here, and the Scottish Government consultation document here.) The proposals are interesting and worth a bit of reflection. And certainly exciting for policy and governance wonks.

There are six specific proposals for consultation.

The first is the replacement of Privy Council functions, in respect of university governance, by a committee accountable to the Scottish Parliament, and comprising the same individuals who are consulted by the Privy Council currently on university governance matters.

The rationale is that this will speed things up and introduce an element of public scrutiny. In university folklore the Privy Council is very slow indeed and a reason often cited why universities can never change their charters and statutes or instrument and articles of government. In practice the Privy Council is now pretty quick on straightforward changes, but it’s a fair observation that previous changes in approach have not been subject to the same scrutiny. (My recollection is that the relaxation of regulation which enabled universities to slim down their charters was as a result of ministerial fiat, and not legislation, but I may be wrong).

The second proposal is for an expanded definition of academic freedom, building on the current UK definition (academic staff shall have freedom within the law to question and test received wisdom, and to put forward new ideas and controversial or unpopular opinions, without placing themselves in jeopardy of losing their jobs or privileges) by adding that academic freedom includes “the freedom to encourage the exploration of new ideas”.

I find this a little odd. Is this a bid to make enterprise feel a bit more normal as part of the academic endeavour, and encourage income from inventions, patents and the like? That might be a fine thing, but it's hardly an issue of academic freedom. If the Scottish Parliament really wanted to secure academic freedom then they could look at the legislation in New Zealand. I'll post on academic freedom another time.

The third proposal seeks to confirm the role of the Principal as Chief Executive Officer. This looks like a tidying up provision, bringing clarity to who should be accountable for public funds. But it also asks what title should be used, if not Principal, for this role. To my mind, if it looks like a Vice-Chancellor and sounds like a Vice-Chancellor, then it probably is a Vice-Chancellor. Are they hoping to make Principals into Presidents on the US model? Or is this just a distraction?

The fourth proposal is what got the headlines. And it isn't half as exciting as it sounds: the idea is not for popular (or in fact unpopular) election, like Police and Crime Commissioners. It is for a process of job description, search, shortlisting by interview and then election by academic staff and perhaps external stakeholders. Having been involved in the appointment of chairs of governing bodies, I know that it's tough to find the right person and persuade them to do the job. I'm not sure that adding a public election will lead to better outcomes.

The fifth proposal is for governing bodies to include two students, two staff members, two members nominated by Trades' Unions (one from academic and related staff; one from administrative, technical or support staff);and two alumni. The Trades' Union category is, I believe, novel; it will be interesting to see the reaction to this.

Finally, the sixth proposal is for academic boards to be confirmed as the supreme academic decision making body in a university (echoing the bicameral approach typical of chartered universities); that other than the Principal and Heads of School, all other members should be elected from amongst the university’s staff; that elected members must be a majority; and that the total size should not exceed 120.

This is, I think, quite radical. Combined with the other measures, it makes the Principal the CEO but builds in an academic check-and-balance against a university drifting from an academic mission as perceived by its academic staff. This might be seen as a move to reinforce standards, but could also be a way to guarantee conservatism within a university. Universities have found many ways to resist change. Read the Microcosmographia Academica if you need convincing of this.

FM Cornford - he of the Microcosmographia Academica
How will these proposals go down? Universities Scotland is against them:
We urge careful appraisal of whether government action now will enhance universities' implementation of the principles which are at the heart of our autonomy and success.
Which I read as a circumlocutory way of saying 'get stuffed'.

Whereas Ferdinand von Prondzynski, Principal of Robert Gordon University and chair of the 2012 Review of Higher Education Governance in Scotland welcomed the report, according to Chris Havergal in the Times Higher, as completing the work of the review.

Watch this space for next steps.

Friday 7 November 2014

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.

Depreciation and

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!