Last year, I wrote about 2020 being the most challenging year ever to be a finance director at a university. 13 months later, ahead of a budget and comprehensive spending review, I am asking the same question (or should it be “is there ever a good year to be a university finance director?”) and reviewing some of my initial thoughts.
- Managing a team – many finance teams are starting to come back into the office but persuading people who have happily worked from home for the last 18 months isn’t easy for everyone. There are arguments for productivity both ways – the save on the journey which means an earlier start time for some and almost certainly more flexibility for most vs the random conversations which solve a problem in 5 minutes that might never have even surfaced let alone get solved.
- Budgets and forecasts – even more difficult than we expected. I don’t think many people thought that 18 months after the first lockdown, we would still not be back to business as usual in many cases. This meant budgeting for a change to ways of working, but that’s difficult when you don’t really understand what that change will be. And many of the measures that were put in meant that costs were controlled, but for some institutions, students still applied and came to campus – like schools, no university or college was fully closed at any point in the last year and a half. Well-controlled spend meant an improved bottom line in some places and the stopping of capital projects, for even a short period of time, meant that cash balances where healthier than many of us expected. But in many cases, those capital projects still need to happen, especially those which are student related – for students who have had a difficult year, the experience they have now is more important than ever.
- Audits and going concern – with the changes to the auditing rules and regulations, getting auditors happy with going concern, something which was not really an issue previously for a sector generally seen as strong, was one of the challenges last audit season. Even for institutions with strong balance sheets, the uncertainty around student numbers and the budgets and forecasts which had been worked up in the early days of the pandemic when we didn’t know what we didn’t know, made this a more complex area than it had been before. And of course, no-one was on site – not finance teams or auditors (and for some juniors it was their fist job!). The ability to hand over a box file of invoices or expense claims had all but disappeared. I think we all learnt a lot last year and certainly our audit is going much smoother this year (although I would advise not getting new auditors in the middle of a pandemic, with your financial accountant on maternity leave and for your first year end as CFO).
And then we add in the outcome of the USS 2020 valuation and the Comprehensive Spending Review (where the outcome for government departments might well impact funding from April 2022, part way through the financial year).
- USS 2020 valuation – while the JNC has come to an agreement which means that we are implementing significantly lower increases to contributions than the initial valuation suggested, it comes with institutional restrictions (exits from the scheme, debt monitoring and pari passu proposals) and a reduction in benefits to members. The employee consultation will be happening in the next month or so and the unions are not in agreement with employers about the way forward. This is still a major risk for many of the employers.
- Comprehensive spending review – with the COVID-19 response needing to be paid for and a promised review of everything the government spends to be announced with the month, everything and anything could be up for grabs. The Augar Review has been talked about again, not forgotten after all. Could this mean a double whammy of government funding and student fees both potentially decreasing at the same time? And let’s not forget about the REF which seems to have been going on for the longest time.
So back to my original question – is 2021 the most challenging year ever for university finance directors?*The views expressed are the author’s and not ICAEW’s.