Category: finances

  • We are living through the legacy of unrestrained borrowing

    We are living through the legacy of unrestrained borrowing

    On 1 January 2018 the Office for Students took over the regulation of higher education in England from its predecessor (the Higher Education Funding Council for England (HEFCE)).

    One little discussed impact of this change was an avalanche of university borrowing that has dramatically shifted the priorities and risk profile of English higher education.

    Terms and conditions

    As late as the 2017 memorandum of assurance and accountability between HEFCE and higher education providers, the regulator had the right of veto over university financial commitments over a certain level. If you wanted to borrow money, and you were talking “serious money” in relation to the size of your provider, the regulator needed to sign it off.

    That year written approval was required where total financial commitments exceeded six times the average adjusted net operating cashflow (ANOC) from July – or where the provider was assessed as being “at higher risk”. The year before, it was required when borrowing crept above five times the (six year) average EBITDA. And back in 2006 it was required for borrowing over 4 per cent of income.

    The levels may have shifted over the years but the principles remained the same – to ensure that providers in receipt of public funds offered value for money, and were fully responsible for the use of these funds. These broader requirements were set out in detail:

    HEIs must apply the following principles when entering into any financial commitments:

    a. The risks and affordability of any new on- and off-balance sheet financial commitments must be properly considered.

    b. Financial commitments must be consistent with the HEI’s strategic plan, financial strategy and treasury management policy.

    c. The source of any repayment of a financial commitment must be clearly identified and agreed by the governing body at the point of entering that commitment.

    d. Planned financial commitments must represent value for money.

    e. The risk of triggering immediate default through failure to meet a condition of a financial commitment should be monitored and actively managed

    At some point during the transition from HEFCE to OfS, all this was scrapped.

    The missing consultation

    If “at some point” sounds uncharacteristically vague that’s because the decision was murky even by higher education policy standards. The requirement was in the 2017 memorandum – it wasn’t in the OfS 2018 “terms and conditions” of funding, or any of the registration or information requirements, or the regulatory framework. The shift was never consulted on, it wasn’t in the Green or White paper, it was never discussed in parliament. It just kind of happened.

    In Wales, there are still requirements to get borrowing above a threshold signed off based on the 2017 Financial Management Code – however your (individual provider) threshold is built into the formulae of your financial forecast template. Thresholds are never published, but Medr may occasionally drop you a note to tell you what yours is. Which is nice.

    In Scotland things are (slightly) more straightforward: there is a threshold over which SFC’s formal consent is required. It’s not a concrete figure but a calculation to determine whether the total annualised cost of the borrowing exceeds 4 per cent of total income (according to a university’s last audited statements) or would exceed by 4 percent the estimated total income for the year in which the borrowing begins – whichever one is the lower.

    As things currently stand in England the explanatory sections on the D conditions of registration set up definitions of financial viability and sustainability. Viability is the interesting one here – for OfS purposes it means there is no reason to suppose the provider is at a “material risk of insolvency” (being unable to pay debts as they fall due) for the next three years. This clarifies that OfS does expect to know about borrowing (“have regard to” in fact) – and even suggests OfS would expect to be able to speak directly to lenders:

    It will be for the provider to ensure that the OfS is fully informed as to its financial facilities, and it will be expected to consent to the OfS making direct enquiry of the finance provider if requested to do so. The OfS may draw inferences from a failure to provide such consent.

    This approach to university borrowing can also be seen in the transition provisions that existed as OfS effectively carried on as HEFCE while it began to register existing providers – a commentary to the required audited data included the need for universities to include information on:

    Whether the provider is planning to take any loans from a bank, shareholders, directors or anyone else and, if so, information about these plans (how much is it planning to borrow, when will this be taken out, when will it be paid back, what will it be used for) and whether it will affect the provider’s viability or sustainability.

    A very good year

    This shift did not go unnoticed by universities, so 2017-2018 became a bumper year for university borrowing – with banks, private funds, and the bond markets all displaying an appetite for access to (then) underleveraged, secure, and low risk UK higher education.

    The 2017 HEFCE financial health publication noted that:

    At the end of July 2017, the sector reported borrowing of £9.9 billion (equivalent to 33.1 per cent of income). This is £980 million higher than the level reported at the end of 2015-16, which was £8.9 billion (30.7 per cent of income).

    By 2018 OfS as reporting that borrowing would reach £12bn by “year 2” (2017-18).

    At the end of Year 2, the sector reported aggregate borrowing of £12.0 billion (equivalent to 36.8 per cent of income), a 21 per cent rise of £2.1 billion compared to Year 1. Forecasts show that borrowing is projected to continue to rise in absolute terms over the four forecast years, reaching £13.3 billion by the end of Year 6.

    In the last quote, “year 6” is 2021-22 – the projection of aggregate borrowing was (as usual) on the low side. That year’s financial health report pegged it as just over £14bn.

    OfS, of course, could have decided to apply specific conditions of registration if it was concerned about borrowing at a particular provider. It still gets information on what universities are borrowing, and on what they plan to borrow in future, via the annual financial return (and there have already been rumblings about an increase in the amount and frequency of provided data). It could have stepped in to moderate the boom in borrowing since it took regulatory control of the sector – it did not.

    The morning after

    But the time of plenty has clearly passed – affordable finance is simply harder to come by, and the terms of existing borrowing (set during a more confident era) have often been renegotiated. The 2024-25 aggregate external borrowing is projected to be £13.3bn, and this for a much larger sector. And even the sector’s own (generally optimistic) forecasts suggest that it will drop further in years to come.

    This is very much the hangover after the party. The easy money simply isn’t there for the sector to borrow – all that remains is the improvements it paid for (hopefully in useful, tangible, things like estates and infrastructure), the repayments, and the interest.

    You can see that in the data (Based on what I know about what has happened so far I don’t think this includes stuff like bonds, so the figures are illustrative rather than precise) – the big peak in unsecured loans was in 2017-18, the academic year that restrictions came off (the smaller peak in 2020-21 represents the government backed Covid loans).

    [Full screen]

    You can also see a peak in repayments in 2018-19: clearly many providers decided that with the brakes off, the easiest way to proceed was with short-term revolving credit. More worryingly for sector finances, interest repayments remain at 2018-19 levels even though borrowing has declined sharply – an impact of a rise in interest rates following a long period of near zero inflation.

    A legacy of loans

    In essence some of the blame for the current financial crisis faced by the sector can be attributed to this little-scrutinised decision to remove borrowing safeguards. Though estates (especially) benefited from this gold rush, the entry of UK universities into the world of private placements and bonds has left a legacy that will take decades (and hundreds of millions of pounds cut off the top of sector finances, and increasingly arduous restrictions on university activity within covenants) to reckon with.

    And these controls on university activity hit in numerous ways. As Philip Augar’s review noted, way back in 2019:

    Universities’ expansion has been partly funded through debt and financial arrangements known as ‘sale and leaseback’. The former includes bond issues and bank borrowing; the latter involves universities selling student accommodation for cash upfront, sometimes committing to provide specified numbers of rent-paying students to the new owner.

    A failure to meet challenging recruitment targets has a multiplier effect if you factor lender requirements into the equation.

    Was the removal of controls over borrowing the single most important regulatory act of the modern era? For those able to raise money in this way, it supported huge improvements in university estates and infrastructure. It provided the capacity that has underpinned recent growth – though not as much growth as we saw in the 90s and 00s, when a far greater proportion of capital came from the state.

    It’s at least arguable that for many larger and better known providers the amount of indirect control over their actions that has been ceded to investors via covenants linked to borrowing. has driven the dash for growth at all costs. If you’ve worked in a university during this period and feel like things have changed, this could be why.

    And it gets worse if you think about the aggregated risk across the whole sector – not least because the arms race of expansion forced the majority of the sector to seek private finance at roughly the same time. The numbers in the chart above are indicative – but even so show a sizable liability that could have a huge impact on the way providers behave. It’s the roots of the sector-wide dash for growth that the regulators have expressed concern about – but thus far the impression has been given that it is just empire building. It is survival.

    The next few years

    There is no easy fix. Though I think most of us believe that the government would step in in the event of provider failure – to protect the student interest certainly, and possibly to protect the local interest – what would happen to outstanding debts across multiple providers in these circumstances is less clear. It is entirely likely that a loan becoming due for full payment due to a breach in covenant conditions would itself be the cause of provider failure.

    In the bad old days, when the government was a significant source of both capital and recurrent funding for most universities in England, there was a thing called exchequer interest – a complicated and little-discussed aspect of public funding that means that assets purchased with public funds should revert at least in part back to the public. Exchequer interest as a consideration for capital investment has largely been replaced by lender interest – in the event of a provider collapsing large parts of abandoned campuses (which, of course, have been paid for by public funds in the sense that it is income from fees that has funded repayments) would revert to lenders.

    These buildings and this equipment would immediately lose a lot of value, which is one reason why lenders like to renegotiate rather than repossess. If you think about it, a large teaching block in the middle of a thriving campus is a clear asset – without the campus it is a liability that needs to be repurposed and maintained.

    So if you ever see the government stepping in to save an anchor institution, recall that private finance has an interest in seeing campuses continuing to throng with students. It’s a funny way to preserve the future of the sector, but we live in peculiar times.

    Source link

  • An early look at 2023–24 financial returns shows providers working hard to balance the books

    An early look at 2023–24 financial returns shows providers working hard to balance the books

    In most larger UK providers of higher education, the 2023–24 financial year ended on 31 July 2024.

    Five months and two weeks after this date (so, on or before 14 January 2025) providers are obliged to have published (and communicated to regulators) audited financial statements for that year.

    I’ve got a list of 160 large, well known, providers of higher education who should, by now, have made this disclosure – 43 of them are yet to do so. Of the 117 that have, just 15 (under 13 per cent) posted a deficit for that financial year (to be fair, this includes eight providers in Wales, where the deadline – for bilingual accounts – is the end of the month). This was as of the data of publication, there’s been a few more been discovered since then and I have added some to the charts below.

    If you’ve been aware of individual providers, mission groups, representative bodies, trade unions, regulators, and politicians coming together to make the case that the sector is severely underfunded this may surprise you. If you work in an institution that is curtailing courses, making staff redundant, and undergoing the latest in a long series of cost-cutting exercises, the knowledge that your university has posted a surplus may make you angry.

    But these results are not surprising, and a surplus should not make you angry (there are plenty of other reasons to be angry…) Understanding what an annual account is for, what a surplus is, why a university will pull out all of the stops to post a surplus, and what are the more alarming underpinning signals that we should be aware of will help you understand why we have what – on the face of it – feels like a counter-intuitive position in university finances.

    Why are so many results missing?

    There’s a range of reasons why a provider may submit accounts late – those who are yet to publish will already be deep in conversation with regulators about the issues that may have caused what is, technically, a breach of a regulatory condition. In England, this is registration condition E3. which is underpinned by the accounts direction.

    If you are expecting regulators to get busy issuing fines or sanctions for late submissions – you should pause. There’s a huge problem with public sector audit capacity in the UK – the big players have discrete teams that move on an annual cycle between higher education, NHS, and local government audit. You don’t need to have read too much into public finances to know that our councils are under serious pressure right now – and this pressure results in audit delays, hitting the same teams who will be acting as external university auditors.

    That’s one key source of delay. The other would be the complexities within university annual accounts, and university finances more generally, that offer any number of reasons why the audit signoff might happen later than hoped.

    To be clear, very few of these reasons are going to be cheerful ones. If a provider has yet to publish its accounts because they have not signed off their accounts, it is likely to be engaging with external auditors about the conditions under which they will sign off accounts.

    To give one example of what might happen – a university has an outstanding loan with a covenant attached to it based on financial performance (say, a certain level of growth each year). In 2023–24, it did not reach this target, so needs to renegotiate the covenant, which may make repayments harder (or spread out over a longer period). The auditor will need to wait until this is settled before it signs off the accounts – technically if you are in breach of covenant the whole debt is repayable immediately, something which would make you fail your going concern test.

    We’ve covered covenants on the site before – a lender of whatever sort will offer finance at an attractive rate provided certain conditions are met. These can include things like use of investment (did you actually build the new business school you borrowed money to build?), growth (in terms of finances or student numbers), ESG (are you doing good things as regards environment, society, and governance?) and good standing (are you in trouble with the regulator?) – but at a fundamental level will require a sense that your business is financially viable. If covenant conditions are breached lenders will be keen to help if they hear in advance, but your cost of borrowing (the interest rate charged, bluntly) will rise. And you will find it harder to raise finance in future.

    This is an environment where it is already hard to raise finance – and in establishing new borrowing, or new revolving credit (kind of like an overdraft facility) many universities will end up paying more than in previous years. This all needs to be shown in the accounts.

    Going concern

    When your auditor signs off your accounts, you would very much hope that it will agree that they represent a “going concern” – simply put, that in most plausible scenarios you will have enough money to cover your costs during the next 12 months. If your auditor disagrees that you are a going concern you are in serious trouble – all of the 117 sets of accounts I have read so far have been agreed on a going concern basis.

    This designation tells everyone from regulators to lenders to other stakeholders that your business is viable for the next year – and comes into force on the day your accounts are signed off by the university and external auditor. This is nearly always for a specific technical reason – additional information that is needed in order to make the determination. For some late publications, it is possible that the delay is a deliberate plan to make the designation last as far into the following financial years as possible. This year (2024–25) is even more bleak than last year – anything that keeps finance cheaper (or available!) for longer will be helpful.

    Breaking even and beyond

    So your provider had a surplus last year – that’s good right? It means it took in more money than it spent? Up to a point.

    In 2023–24 we got the very welcome news that Universities Superannuation Scheme (USS) has been revalued and contributions reduced for both members and employers. From the annual accounts perspective, this will have lowered staff costs (very often one of the most significant costs, if not the most significant cost, for most) in USS institutions. Conversely, the increase in Teachers Pension Scheme (TPS) contributions will have substantially raised costs in institutions required by law (yes, really!) to offer that scheme to staff.

    That’s some of the movement in staff costs. However, for USS, the value of future contributions to the current calculated scheme debt (which is shared among all active employers in the scheme) has also fallen. Indeed, as the scheme is currently in surplus, it shows as income rather than expenditure This is not money that the university actually has available to spend, but the drop shows out in staff costs – though most affected separate this out into a separate line it also shows up in the overall surplus or deficit (to be clear this is the accounting rules, there’s no subterfuge here: if you are interested in why I can only point you to BUFDG’s magisterial “Accounting for Pensions” guidelines).

    For this reason, many USS providers show a much healthier balance than accurately reflects a surplus they can actually spend or invest. This gives them the appearance of having performed as a group much better than TPS institutions, where the increase in contributions has made it more expensive to employ staff.

    Here I show the level of reported surplus(deficit) after tax, both with and without the USS valuation effect. Removing the impact of valuation puts 35 providers (including big names like Hull, Birmingham, and York) in deficit based on financial statements published so far.

    [Full screen]

    And here I show underlying changes in staff costs (without the USS valuation effect). This is the raw spend on employing staff, including pay and pensions contributions. A drop could indicate that economies have been sought – employing fewer staff, employing different (cheaper) staff, or changes in terms and conditions. But it also indicates underlying changes in TPS contributions (up) or USS contributions (down) with respect to current employees on those schemes.

    [Full screen]

    Charts updated 11am 27 January to remove a handful of discrepancies.

    Fee income

    For most universities the main outgoing is staff costs, and the main source of income is tuition fees. Much has been made of the dwindling spending power of home undergraduate fees because of a failure to uprate with inflation, but this line in the accounts also includes unregulated fees – most notably international fees and postgraduate fees. The full name of the line in the accounts is “tuition fees and educational contracts”, so if your provider does a lot of bespoke work for employers this will also show up here.

    Both of these areas of provision have seen significant expansion in many providers over recent years – and the signs are that 2023–24 was another data point aligned with this trend for postgraduate provision. For this reason, the total amount of fee income has risen in a lot of cases, and when we get provider level UCAS data shortly it will make it clear that just how much of this is due to unregulated fees. International fees are another matter, and again we need the UCAS end of cycle data to unpick it, but it appears from visa applications and acceptances that from some countries (China, for example) demand has remained stable, while for others (Nigeria, India) demand has fallen.

    Here I show fee income for the past two years, and the difference. This is total fee income, and does not discriminate between types of fees.

    [Full screen]

    One very important thing to bear in mind is that these are figures for the financial year, and represent fees relating to that year rather than the total amount of fees per student enrolled. For example, if a student started in January (an increasingly common start point for some courses at some institutions) you will only see the proportion of fees that had been paid by 31 July shown in the accounts. If you teach a lot of nursing students who start at non-traditional times of the year this will have a notable impact, as will a failure to recruit as many international students as you had hoped to do in January 2024 (though this will also show up in next year’s accounts).

    And it is also worth bearing in mind that income from fees paid with respect to students registered at the provider but studying somewhere else via an academic partnership, or involved in a franchise arrangement (something that has seen a lot of growth in some providers) shows up in this budget line.

    Other movements

    Quite a number of providers have drawn down investments or made use of unrestricted reserves. This is very much as you would expect, these are very much “rainy day” provisions and even if it is not actually raining now the storm clouds are gathering. Using money like this is a big step though – you can only spend it once, and the decision to spend it needs to link to plans not to need to spend it in the near future. So even if your balance looks healthy, a shift like this speaks eloquently of the kinds of cost-saving measures (up to and including course closures and staff redundancy) that you may currently see happening around you.

    Similarly, a provider may choose to sell assets – usually buildings – that it does not have an immediate or future use for. The costs of running and maintaining a building can quickly add up – a decision to sell releases the capital and can also cut running costs. Other providers choose to hang on to buildings (perhaps as assets that can be sold in future) but drastically cut maintenance and running costs for this reason. Again, you can (of course) only sell a building once, and a longer term maintenance pause can make it very expensive to put your estates back into use. I should note that the overall condition of university estates is not great and is declining (as you can read in the AUDE Estates Management Report) , precisely because providers have already started doing stuff like this. If the heating seems to be struggling, if the window doesn’t open, that’s why.

    In some cases we have seen decisions to pause capital programmes – not borrowing money and not building buildings as was previously planned. Here, the university makes an on-paper saving equivalent to the cost of finance if it was going to borrow money, or frees up reserves for other uses if it was using its own funds. Capital programmes don’t just include buildings – perhaps investment in software (the kind of big enterprise systems that make it possible to run your university) has been paused, and you are left struggling with outdated or unsuitable finance, admissions, or student record systems.

    Where we are talking about pausing building programmes it is important to remember that these exist to facilitate expansion or strategic plans for growth. The “shiny new building” is often perceived as a vice chancellor’s vanity project – in reality that new business school and the recruitment it makes possible may represent the university’s best hope of growing home fee income faster than inflation.

    What’s next?

    We see financial information substantially after the financial year ends – and for most larger providers this comes alongside the submission of an annual financial return to their regulator. We know for instance that the Office for Students is now looking at ways of getting in year data in areas where it has significant concerns, but financial data (by dint of it being checked carefully and audited) is generally historic in nature.

    For this reason what is happening on your campus right now is something that only your finance department has any hope of understanding, and there may be unexpected pressures currently driving strategy that are not shown (or even hinted at) in last years’ accounts. Your colleagues in finance and planning teams are working hard to forecast the end of year result, to calculate the KFIs (Key Financial Indicators) that others rely on, and to plan for the issues that could arise in the 2025 audit. The finance business partners or faculty accountants – or whatever name they have where you work – will be gathering information, exploring and explaining scenarios, and anticipating pressures that may require a change in financial strategy.

    The data I have presented here is drawn from published accounts – the data submitted to regulators that eventually ends up on HESA may be modified and resubmitted as understanding and situations change – for this reason come the early summer figures might look very different than what are presented here (I should also add I have transcribed these by hand – for which service you should absolutely buy me a pint) – so although I have done my best I may have made transcription errors which I will gladly and speedily correct.

    However scary your university accounts may be, I would caution that the next set (2024–25 financial year) will be even more scary. The point at which the home undergraduate fee increase in England kicks in for those eligible to charge it (2025–26) feels a long way off, and we have the rise in National Insurance Contributions (due April 2025) to contend with before then.

    There are a small but significant number of large providers looking at an unplanned deficit for 2024–25, as you might expect they will already be in contact with their regulator and their bank. Stay safe out there.

    If you are interested in institutional finances, I must insist that you read the superb BUFDG publication “Understanding University Finance” – it is both the most readable and the most comprehensive explanation of annual university accounts you will find.

    Source link

  • Universities want more money upfront. DfE wants proof students are really there

    Universities want more money upfront. DfE wants proof students are really there

    When students get their student maintenance loans, they get the first instalment a lot earlier than their university gets the corresponding tuition fee payment.

    That might help explain the curious case of disparities between pulldown – but there’s a sound theory to it. Students without savings could face a cashflow issue if it was any other way.

    It’s becoming a problem for universities too. The Office for Students’ (OfS) financial sustainability update report highlights low liquidity levels in the sector – especially during certain points in the annual cycle.

    That matters because universities have to meet minimum liquidity requirements in the registration conditions in England. A failure to maintain those levels can also impact “going concern” status and breach some lending covenants.

    In the past, cash flow imbalances tended to be offset by other income sources, borrowing, or cross-subsidies, such as from international student fees.

    But given how universities operate and the demands on cash before those SLC payments come in, there is in some providers a disproportionate reliance on arrears payments from SLC-funded students compared to other funding sources.

    For non-SLC funded students, universities typically charge fees upfront (or at least in front-loaded advance instalments) or get payments for stuff like government-funded apprenticeships monthly. Research funding streams also match payments to incurred costs.

    But the SLC’s payment profile for undergrads is 25:25:50 – so universities face significant upfront costs in the first two terms and then wait longer than standard 30-day payment terms to receive funds, forcing them to bridge the gap using other resources.

    So the University Alliance has a proposal – switch those payments to 40:40:20 to improve the sector’s funding position:

    Even if the move was phased first to 33:33:33 and then to 40:40:20 it would have an immediate impact on the current situation which has been adversely impacted by the previous administration’s approach to international student recruitment through restrictive visa policies.

    The current system is going to have to undergo change anyway, given the potential implications of the LLE. I note in passing that one of the most common student leader manifesto goals this year is better, less front-loaded instalments – surely the principle (and the issue in terms of cashflow) cuts both ways.

    But UA’s proposal might not land in quite the way intended – partly because the Student Loans Company is under pressure to increase yield.

    Leakage

    DfE’s “Tailored Review” of the Student Loans Company back in July 2019 talked of the rapidly increasing size of the student loan book, and the increasing importance and value of having a robust, well-resourced and effective repayment strategy which actively seeks to maximise yield.

    That said that the SLC is hamstrung by IT systems which do not “adequately facilitate the use of smart diagnostics for effective modelling, proactive use of data analytics and more precise customer segmentation” to minimise repayment leakage:

    Indeed, unverified customers account for c. £7bn of uncollected repayments (although many of these would not be in a position to repay)

    September’s SLC board minutes noted that its CEO had been along to DfE’s Audit and Risk Committee, where the department led an item on the student finance loan book, with an emphasis on its “scale and yield potential”.

    And its newly published Business Plan for 2024-25 says it will work with partners in DfE to progress proposals to “improve repayment customer verification rates”, “improve data quality to increase verification and yield” and look at options to apply stronger sanctions to customers not adhering to the terms and conditions of their student finance repayments.

    Some of that is about the SLC’s systems – but one of the problems noted in the National Audit Office’s report into franchising is that there is often “insufficient evidence” that students are attending and engaging with their courses:

    In determining a student’s eligibility for loan payments, and before making payments, SLC uses lead providers’ data to confirm students’ attendance. Lead providers self-assure their own data… there is no effective standard against which to measure student engagement, which attendance helps demonstrate, and there is no legal or generally accepted definition of attendance. Providers themselves determine whether students are meaningfully engaged with their course.

    So in a set of circumstances where the NAO and the Public Accounts Committee (PAC) are already worried about attendance and engagement, and providers are worried about their own cashflow, it seems unlikely that DfE is going to be receptive of a proposal to give providers more of the money early – especially if, in the case of franchised provision, it can’t just claw it back from the lead provider if there’s a problem like the Applied Business Academy.

    As we noted back in October, the government’s response to the NAO and the PAC was that it published guidance on attendance management in May, against which providers can be held to account “in relation to the release of SLC tuition fee payments”.

    That said that there is an “understanding and acceptance” across the sector that providers should have in place published attendance and engagement policies, so that students understand the commitment expected of them and the respective process a provider follows if attendance expectations are not met.

    It also said that in any circumstance where a provider does not have a published policy, the department “expects” that one will exist from the 2024-25 academic year – but it’s pretty clear talking to people around the country that that goal hasn’t been meaningfully met in large parts of the sector, at least in terms of a policy that both covers home students and is “auditable”.

    And part of the difficulty there is what is or isn’t meant by “attendance”.

    Attending isn’t always in person

    The Attendance Management guidance says:

    Attendance means participation in a course by a student, including, but not limited to, teaching face-to-face or blended study, in line with a provider’s published attendance policy. A provider should communicate its policy to a student and have an auditable process in place to support the action it may take when a student does not meet attendance expectations.

    It goes on to say that providers have flexibility to ensure every student engages with a course, and that the student and/or the course may require greater or less attendance than another due to circumstances or content.

    SLC told me that there is no difference between “attendance” and “engagement” – the definition of “attendance” for student finance purposes is active and ongoing engagement. Crucially, it said that “attendance” doesn’t have to mean “in person”, or “studying on campus”.

    But the conflation of “attendance” and “engagement” doesn’t seem to apply when a course is designed and designated. Noting that “blended learning” combines traditional classroom teaching with online learning and independent study, it says that there has been some confusion as to whether these courses should be coded as distance learning courses:

    Courses of any teaching method are distance learning if the students only attend occasionally, for example once a term. If students attend regularly, for example once a week, and follow a structured timetable, the course is not distance learning and you should not add it to CMS as such.

    That paragraph draws a clear distinction between attendance and engagement. Its two scenarios also appear to draw a distinction between (physical) attendance and “engagement”:

    • Scenario 1: Thomas is studying a BA Hons in sports coaching. His course hours are 30 weeks online study including lectures and tutorials, 2 days per week physical attendance at sports academy, 6 days per year attendance at university. As Thomas needs to attend the sports academy regularly rather than occasionally, this is an in-attendance course.
    • Scenario 2: Kate is studying an HND in Musical Theatre. Her course hours are 30 weeks online study including lectures and tutorials, 3 days per year (1 day per term) attendance at college. As Kate only needs to attend college occasionally rather than regularly, this is a distance learning course.

    The difference between Scenario 2 and the patterns of attendance being seen by many providers around the country this term is that in that scenario, the course is designed not to include regular physical attendance.

    A two-stage process

    SLC told me that whether it’s distance or in-person, engagement on a course is required and confirmation of that engagement is therefore required for SLC to make a fee loan payment on the student’s behalf.

    Ongoing engagement is not part of the definition of in-person or distance learning. That distinction relates to the attributes of the course that is supplied by the provider, as to whether the course has elements of in-person learning or if the student is not required to be in-person.

    But the obvious question is as follows. Notwithstanding codified exemptions for disabled students, if a course is designed as blended, would an acceptable “attendance management” policy for a course of that sort allow a student to engage all term, but only occasionally physically attend?

    If yes, and Kate’s HND wasn’t designed as blended, and her mate Kathy was on a course that was designed as blended, that would seem to mean that they could both have exactly the same attendance and engagement pattern, but Kathy would get a maintenance loan while Kate wouldn’t.

    If, on the other hand, a course was designed as blended and requiring regular in-person attendance, and SLC would expect an attendance/engagement policy to enforce that regular in-person attendance, there’s plenty of providers right now falling foul of those expectations.

    So you end up with three categories:

    1. Providers who’ve never really had a proper policy on any of this for home students – let alone enforce one – beyond noticing if a student doesn’t submit what can often be end-of-year summative assessment.
    2. Providers who designed a course as blended where students are in reality engaging in a “distance learning” kind of way – which, while confirming engagement in accordance with the rules, seems hugely unjust to tens of thousands of OU students if nothing else.
    3. Providers who are heavily auditing and requiring physical attendance – partly to achieve parity with international students – at just the point that students are struggling to attend in-person given wider demands on their time.

    It may well be the case that SLC is stuck with the definitions it has – which in part date back to the Teaching and Higher Education Act 1998.

    But if it’s the case that it’s OK for an attendance policy to not actually require regular in-person attendance, it’s hard to believe that whatever size and shaped-problem that DfE and the SLC have with student loan fraud is going to get anything other than worse.

    And in the end, this all comes back to an old problem – not knowing what’s going on underneath headline non-continuation.

    How far in?

    Remember those risks that OfS identified in its insight brief on subcontracting:

    • Data of extremely poor quality has been submitted in relation to students at some subcontractual partnerships, leading to payments being made to, and on behalf of, students who are not genuinely entitled to them.
    • Delivery partners have lacked clear attendance policies, making it almost impossible for lead providers to submit accurate data to the OfS and the SLC in relation to these students.
    • Students have been encouraged to register for courses that they do not genuinely intend to study, to access public funding through maintenance loans. In some cases, students have withdrawn from courses shortly after receiving these funds; in others there are grounds to doubt that they are continuing to study, despite their termly attendance being confirmed.

    Whether we’re looking at a select group of partnerships as OfS published data on last week or directly taught provision, while we know what percentage of UG students don’t make it to the second year, we don’t know what proportion:

    • Got instalment 1 of the maintenance loan but didn’t get as far as “engaging” enough for the provider to claim instalment 1 of the tuition fee loan (they don’t show up at all in non-continuation)
    • Engaged enough to enable the provider to claim instalment 1 but not enough to enable the provider to claim instalment 2 (and what proportion of them claimed maintenance instalment 2)
    • Engaged enough to enable the provider to claim instalment 2 but not enough to enable the provider to claim instalment 3 (and what proportion of them claimed maintenance instalment 3)
    • Engaged enough to enable the provider to claim instalment 3 but then failed and was withdrawn
    • Engaged enough to enable the provider to claim instalment 3 and was eligible to progress but then self-withdrew
    • And we don’t know any of the above for subsequent years of study.

    In many ways, what we have here is (yet) another iteration of the stretch involved in a single level playing field. There have been endless tales down the years of Russell Group alumni not really “engaging” at all for entire years, and in some cases entire degree courses – only to pull it out of the bag at the end. It’s an adult environment, after all.

    On the other hand, with another part of the sector now under close scrutiny over ghost students of differing definitions – just as the FE sector saw scandals over in the 90s – it doesn’t feel like that kind of legend is to be allowed.

    In terms of the cashflow thing, if DfE and the SLC are going to push more of the money upfront, they’re surely going to want to know the percentages and numbers in each of the above categories.

    And the accuracy of those percentages and numbers involves providers being sure about “enough” engagement – in an auditable way across the diversity of programmes and reasonable adjustments – to tick the box in the data return to SLC three times a year.

    It does feel like there’s some distance to go on all of that as it stands.

    Source link