Ensuring value for money through governance

Last year HEFCE announced that the submission of a Value for Money report, previously only an optional element of a provider’s annual accountability return, would be made mandatory for HEFCE-funded higher education institutions.

Since then, UCAS announced that there were 30,000 fewer full-time undergraduate applicants to UK higher education courses at the January 2017 deadline, a 5 per cent decrease on 2016. While there are some obvious explanations, this decline potentially serves as notice of an impending squeeze on the higher education market, with continuing falls in the 18 year-old population forecast in coming years.

Increasingly competitive forces arising from government policy – to establish a market in higher education based on student choice – are also likely to intensify further. Even in light of recent defeats in the House of Lords, it is likely that the Higher Education and Research Bill and the introduction of the Teaching Excellence Framework (TEF) will bring a sharper focus on value for students.

And these pressures are not just related to teaching. Data from the Transparent Approach to Costing (TRAC) tells us that, on average, those in the sector who carry out research only recover around 70 per cent of their full economic costs for this activity – a significant spur to consider different approaches.

Any provider that wants to thrive in this environment must ensure that it achieves value for money. This means pursuing its mission and objectives:

  • economically – minimising the use and cost of resources, such as staff, goods, services, equipment and buildings, with regard to quality
  • efficiently – maximising the volume and/or quality of teaching and research delivered for the resources invested
  • effectively – maximising beneficial outcomes for graduates and research.

These three elements, taken as a whole, encompass a definition of value for money that is about the optimal use of resources to achieve intended outcomes. It is not simply about cutting costs but about enhancing the sector’s ability to transform lives and create new knowledge.

VFM reports

As well as making the Value for Money report a mandatory requirement, we also required that it be presented to the governing body (or delegated sub-committee) because the accountability this provides is hugely valuable; we weren’t prescriptive about content but did suggest some sources of evidence that might be used.

We are grateful to all HEFCE-funded higher education institutions for submitting their Value for Money reports. Our initial review of them identified some good practice. For the majority of submissions, however, there is room for improvement. Many reports did not give governors a broad view of how, or how well, the provider is achieving value for money. Nor did they provide governing bodies with the tools that they might use to improve value for money.

We will be publishing an in-depth review of these reports later in the year. This will assess the extent to which the reports provide valuable information to governors and how they might be improved in this regard. Following this we will update our guidance for the submission of the 2017 reports.

Guidance for governors on value for money and efficiency will also be the subject of a Getting to Grips guide published by the Leadership Foundation for Higher Education in the spring.

Please contact Matthew Davey (m.davey@hefce.ac.uk) if you have any thoughts on how governing bodies should address value for money and what information they need for this purpose.